The disclosure is likely to anger millions of Britons who have flown off for
the Easter break this weekend. It follows similar scandals that have
embroiled the airline industry which has recently paid multi-million pound
fines after admitting price fixing.
Hotels and online travel agents – which now account for the majority of sales
– are suspected of secretly agreeing a system called “rate parity”. This
means rooms are sold for identical prices by different agents and the hotels.
The system is allegedly policed by travel agents and the hotels themselves,
who report any competitors selling rooms at below the “parity” price. The
discounters are allegedly then threatened with sanctions. An email to a
website from a senior executive at Radisson shows how hotels try to enforce
“rate parity” so that all internet sites offer the same price.
“Please REMOVE all Radisson Edwardian Hotel product from your site as you are
causing us online rate parity issues,” wrote Gail Jordan, a sales director
at the hotel company.
“We offer a best online rate guarantee, as do most brands,” Miss Jordan said.
“Same room type should be same price across all online distribution.”
Travel agents buy rooms from wholesalers, who block book hotels. Contracts are
suspected to be in place to ensure that those selling the rooms then charge
a fixed mark-up. For example, a wholesaler may buy a hotel room for £50 a
night, then sell it to an online travel agent for £75 who charges a consumer
£100.
In one email to a hotel discounter, an executive at Starwood, which runs Le
Meridien, Westin, W and Sheraton hotels, said: “Should a wholesaler decide
to sell the rooms on a room only basis, he has to make sure that the per
contract agreed minimum mark-up is guaranteed.”
The employee said the “violation” of Starwood’s Best Rate Guarantee was
“really serious” and the breach was reported to the Brussels headquarters.
An employee at Millennium and Copthorne Hotels, which handles establishments
around Europe, wrote an email to a website warning that rooms were being
sold at “rates which are not available for online distribution”.
However, the company would be “happy” for the website to sell at “public
rates”. The employee said: “These are the same rates we are distributing on
our brand website as well as all of our online partners.”
Ordering distributors to sell rooms at a minimum price could be a breach of
legislation under European and UK competition law. Cartels operate by
agreeing that all distributors fix a price and all charge the same amount.
“Price-fixing covers any agreement or conduct where competitors settle on
fixed prices or minimum prices. They don’t need to do this explicitly or
directly,” said Jason Logendra, a competition law expert at the
international law firm Watson, Farley and Williams. “It is enough that they
agree on maximum discounts.”
Last night, a spokesman for the OFT said the investigation into suspected
breaches of competition law in the hotel online booking sector was at “a
relatively early stage”.
“However, after a preliminary review of the evidence gathered to date, the OFT
continues to consider this matter as an administrative priority and is
pursuing the investigation further,” he said.
The impact of the secret hotel policies on consumers was clear last week.
For example, on the evening of Prince William and Kate Middleton’s wedding on
April 29, the London May Fair, a Radisson Edwardian hotel, offered a
standard room at £204 on its own website. Expedia, Opodo, Booking.com and
Travelocity all offered exactly the same price for the five-star hotel.
The OFT investigation is thought to have been sparked by Dorian Harris who
runs Skoosh, a website selling hotel rooms. Mr Harris contacted the OFT
after allegedly being bombarded by requests from hotels that he stop
offering their rooms on Skoosh.
Last night, hotel groups denied that they were breaking the law.
A spokesman for Starwood said: “Starwood Hotels & Resorts requires our
properties to adhere to all legislation and takes this matter seriously.
Starwood has not been contacted by the Office of Fair Trading but is willing
to assist with any information they require.”
Abode declined to comment.
Copthorne & Millennium refused to comment on the emails, but said: “Our policy
is to comply with all relevant legislation in all jurisdictions.”
A spokesman for Thistle and Guoman hotels said: “We are unable to comment on
enquiries relating to specific room rates but can confirm that Thistle
Hotels’ pricing policies are in line with UK and European competition law in
the hotel online booking sector.”
A spokesman for Expedia declined to comment.