Regulators vs. online travel agencies - a level playing field coming for hotels?

The announcement earlier this month that hotel booking sites are committing to changing their ways must be considered a small victory for hoteliers and travelers alike.

It is the latest development in what often feels like a David vs. Goliath-scale tussle to own the direct booker.

The U.K.'s Competition and Markets Authority (CMA) had been investigating the selling habits of some of the major online travel agencies for potential infringement of the Consumer Protection from Unfair Trading Regulations, 2008. 

This piece of regulation specifically addresses unfair commercial practices, misleading actions, misleading omissions and aggressive commercial practices.

The CMA has not concluded whether the OTAs were operating illegally, and their "voluntary" agreement to change their behavior by September 1 does not constitute any admission to that effect. 

However, that they’ve committed to change has the potential to be a milestone within the hospitality industry.

So, what will be the long-lasting impact on hotel distribution? Will things really change? Can it help hoteliers win back direct bookings?

Let’s break down some of the specific rulings to prophesize what the future may hold.

Search results: making it clearer how hotels are ranked 

Let’s take Booking.com as an example. Its "top picks" algorithm ranks hotels by a “multitude of criteria including the popularity of a provider among their customers, the prices, the customer service record, certain booking data, the commission percentage and the on-time payment of commission.”

Certain booking data seems questionably vague, but it’s ultimately the latter points – especially commission percentage - where they (and other OTAs who work on a similar basis) must be more explicit under the new ruling.

In an age where personalization is paramount, to present results that may appear to be personalized but are, in fact, affected by commission levels works against the traveler.

There are parallels to the paid search industry here, where platforms like Google must provide clarity on what’s an ad and what’s organic. 

Previous studies have shown that up to 40% of millennials will actively avoid clicking on what they perceive to be a paid advertisement in search; that same audience is believed to be swayed by OTAs and metasearch channels for their ease, convenience and price comparison.

Ultimately, the transparency of any ranking is key to consumer understanding and trust.

Pressure selling: giving false impressions of availability or popularity 

OTAs have always excelled at employing urgency selling tactics to increase conversion.

Messages such as “don’t miss out,” “last few rooms remaining” and "five people are looking at this hotel right now” have become commonplace, imploring travelers to hasten their decision making. 

Playing upon our fear of missing out (FOMO) is believed to have a negative influence on psychological health and well-being; hardly conducive to a relaxed travel booking experience.

One could theorize that less urgency will lead to a more relaxed and considered booking experience for travelers. 

However, it’s questionable whether this messaging will disappear altogether due to the hyper-competitiveness of our industry.

If OTAs (and hoteliers) want to continue using this messaging they must provide absolute clarity. 

For example, if other customers are looking at the same hotel as you, make it clear they may be searching for different dates. 

Another example cited by the CMA is showing hotels that are already sold out within results, presumably in an effort to misrepresent a period of high demand.

Other elements to watch out for

These items can be split into two parts:

• Discount claims: being clearer about discounts and only promoting deals that are actually available at that time
• Hidden charges: displaying all compulsory charges such as taxes, booking or resort fees in the headline price

These final two cited rulings could well be the most impactful for hoteliers. 

The CMA notes that misleading discount claims are no longer acceptable. Specifically, it references two of the most common (and frustrating) occurrences:

• Comparing a higher price that was not relevant to the customer’s search criteria
• Only promoting deals and offers that are available and displaying all applicable charges, such as taxes, in the headline price

Revenue managers have long battled to maintain rate parity, often to see it broken by misleading tactics such as the above. 

In theory at least, this represents a step forward from a revenue management perspective.

It should also help to avoid the negative connotations of someone not being able to book a rate that he or she perceives to be available at your hotel – increasing trust in your brand, OTAs and the industry as a whole.

This industry-wide "parity win" could very well help to improve the performance of channels such as metasearch advertising resulting in hoteliers attracting incremental clicks and all-important direct bookings.

But what about the wholesalers - those who showcase corporate rates in consumer markets, those who unbundle rates, who always appear a penny cheaper?

Well, the good news is the CMA appears to have them on its radar, too. 

Although so far Expedia, Booking.com, Agoda, Hotels.com, Ebookers and Trivago have agreed to make changes, the CMA has stated that “it will also write to other hotel booking sites including online travel agents, metasearch engines and hotel chains setting out clear expectations for how they should be complying with consumer protection law.”

They’re expected to make the necessary changes by September 1, too.

Time to make up ground

Of course, the obvious limitation to the new rulings is that they apply within the U.K. only.

According to Expedia, 55% of U.S. travelers say they would consider booking an entire trip on an OTA.

The potential for around half of hotel bookings to be affected by similar regulatory changes in the U.S., and of course globally, means there is still work to be done.

However, with everyone playing by the same rule book come September 1, now is the time for hoteliers to take action. 

How can you further improve your branded digital offering, refine your website to better showcase the experience and ensure your campaigns are optimized, especially in channels such as metasearch advertising?

The changes upon the horizon are a victory for travelers, yes, but they can also be an instigator for industry evolution. 

As Suzie Thompson, vice president of marketing, distribution and revenue management at Red Carnation Hotels, notes: “Any ruling that results in greater consumer trust and builds brand integrity for suppliers, partners and the industry as a whole is a positive action.

"With a fairer approach to the presentation of hotel price and availability, there is a greater opportunity for hoteliers to engage with their guests (past, present, future) through authentic content and intuitive customer service."

Hoteliers should capitalize on the rulings to regain a little ground, at least in the U.K., to own the direct booking and build deeper connections with their guests.