B&B Blog

News and updates from the Bed & Breakfast Association

Thursday 7 March 2019

Why ‘highjacking’ your name on search engines should be banned

The relationship between accommodation owners and giant online travel agencies (OTAs) is one of the hottest topics in our industry just now.

The big OTAs undoubtedly offer huge benefits to hotels and B&Bs, helping us to fill our rooms by marketing them globally on user-friendly apps and websites for a known commission rate, payable only when a booking is taken.

However, this great boon has come at a heavy cost – the dominance of especially the two biggest American OTAs who have 80% of that market, and the consequent reduced margins for accommodation owners and loss of cashflow, soaring cancellation rates, and a compromised relationship with their guests.

Profits have taken a big hit for accommodation owners, employers and risk-takers as the online intermediaries grab an ever-larger share of bookings (taking their 15-25% cut on those), and consequently prices have been driven up for consumers, and  the OTAs have been hugely enriched. The big two OTAs are now worth much more than the biggest four global hotel groups combined.

From the small accommodation owners’ perspective, this loss of control and profitability to the intermediaries has not been the result of free and fair competition. It has been at least partly driven by (a) some egregiously misleading marketing, (b) restrictive “rate parity” clauses preventing discounting by owners to their direct bookers, and (c) the dominance by the OTAs of internet search.

Back in July 2017, the B&B Association filed five formal complaints with the UK competition regulator (CMA) covering those three key areas.  Three of our complaints – on fake “discounts”, misleading availability statements and manipulated search rankings – were acted on by the CMA on 6th February this year, when they banned a raft of“misleading” practices by OTAs.

Our first complaint to the CMA had been about “rate parity” clauses, which we still want banned – and I wrote about that issue in Travel Weekly recently (“Why OTA ‘rate parity’ clauses should bebanned”, Feb 13th).

That leaves our fifth complaint to the CMA from 2017 (also still not addressed): against forced (non-optional contract term) bidding by OTAs on hotel and B&B names with search engines.

This practice enables the OTAs to colonise the top of search listings, even for searches of a B&B’s or hotel’s own brand/name, without the owner’s express permission. It is typically bundled with all the other T&Cs, so non-negotiable.

One of our members, Frank McCready, referred to this as “brandjacking”. He says: “The considerable investment I have made in a website that enables online realtime availability and booking is totally wasted. I am now invisible in web searches- lucky to appear on page ten!”  His requests to the OTA to stop bidding on his name were refused, and he was told by Google that only a spend of over £900 per month on pay-per-click would counter the OTA taking top place on Google searches for his B&B’s own name.

We agree that a hotel or B&B should be allowed to say to an OTA “yes, we’re happy to deal with you, happy to give you our availability, happy to pay you commission on bookings you bring us, BUT we don’t want you to undermine our own direct marketing by bidding on our own name with search engines”. That would make competition freer and fairer.

The way to achieve that is for the CMA to ban the OTAs from forcing their name-bidding terms on an accommodation provider. That must not be a non-negotiable item bundled into the OTA’s T&Cs on a “take it or leave it” basis as at present; it must be subject to separate express agreement.

We see this ‘ask’ as a modest and reasonable way of redressing the grotesque imbalance of power between global OTAs and tiny family businesses, and making competition a little fairer. So join me in urging the CMA to act.

CLICK here to read and sign Frank McReady's Petition

Sunday 10 February 2019

No "free ride": why OTA "rate parity" clauses must be banned

A landlord tells the authorities that he has just spent many millions building a five-storey, gold-plated store on Bond Street. But he is worried that his investment might not pay off - unless his merchandise suppliers can be prevented by law from undercutting his chosen markup. Otherwise, he says, they could "free ride" at his expense, by gaining promotion in his Bond Street windows, after which shoppers could buy direct from the producer without the Mayfair mark-up.

So the landlord (an American billionaire) asks the British competition authorities to allow him to legally prevent his suppliers from undercutting him.  Shoppers must always pay his Mayfair markup, even if they buy direct from the maker, not at the Bond Street shop.

Farfetched?  Ridiculous?  Not in the world of "Online Travel Agencies" (OTAs).  Because these global giants (including Booking.com, worth $88 billion, and Expedia, worth $22 billion) have used this "free riding" argument to convince the UK competition regulator (CMA) that their restrictive "rate parity" clauses on B&Bs and hotels are justified, and therefore legal.

The "rate parity" clauses (in competition law jargon, "narrow MFNs") are put by OTAs into their contracts with B&Bs and hotels, to prevent the accommodation owners from discounting their own prices to their own customers on their own websites. The OTAs demand a certain commission level (typically between 15% and 25%), and insist that the B&B or hotel must charge the full commission-inclusive price to customers on the B&B's or hotel's own website too.  Even when no commission is payable - for example, when a guest is booking a B&B direct from the B&B's own website.

The CMA recognises that such "rate parity" clauses are a restrictive practice, alien to most of today's commercial world - "retail price maintenance" was outlawed in Britain in 1964 as against the public interest.

Yet so far, the CMA has accepted the OTAs' "free riding" argument justifying their restrictive practice.

OTAs have said that the millions they spend on websites, apps, brands and advertising might not be viable if the merchandise producers (ie accommodation owners) were allowed to undercut the gross prices that include their hefty mark-ups to pay for that gold-plated virtual storefront.  That would, they say, be "free riding". They insist they must be allowed to keep prices high online.

Common sense would suggest that our fictional landlord with his Bond Street store would be sent packing by the authorities. Their answer would be simple: NO. No, you can't prevent the merchandise producers from selling elsewhere for less. No, you can't drive up the prices shoppers pay by forcing manufacturers to price in your Mayfair markup. No, you can't expect the legal system to underwrite what you have chosen to spend on your shop windows. If you chose to build that shop, that was your free choice and whether it is viable depends on the marketplace. If it isn't, you go bust. That is free competition in a free market.

We raised five formal complaints with the CMA back in July 2017. We are absolutely delighted that last week, they took action to ban a raft of the misleading and abusive practices we highlighted.

One of those complaints, though, its still outstanding: we asked the CMA to ban "rate parity" clauses here in the UK, as they have been in France, Italy, Austria and Germany.

We now repeat our call to the CMA to finally reject the OTAs' blatantly self-serving "free riding" argument, and ban "rate parity" clauses by OTAs.

What have giant global corporations to fear from tiny B&Bs freely setting their own prices to their own customers? Why do the online giants need to restrict small family businesses, and keep prices high for consumers? Let's have free and fair competition.

Over 18 months on, the CMA should act now and give the dominant global OTAs the answer that Bond Street landlord would have got: NO.

Sunday 13 January 2019

Did you know that "recommending" a supplier can now be illegal?

Be careful now when "recommending" a specific supplier to your guests, or when "adding value" to your stays (by including another element) - as both may now be illegal in certain circumstances, unless you have protected your guests' payments (for example, by taking out insolvency protection or arranging a financial "bond").

In July 2018 the Package Travel regulations (PTRs) were completely revised. Originally dating from 1992 and designed to protect holidaymakers from the risk of their tour operator going bust, the PTRs are now much wider and do affect B&Bs in certain circumstances. We and many industry bodies (especially the Tourism Alliance, of which we are members) tried vigorously over the last couple of years to persuade the Government to modify the UK regulations from the EU directive they are based on - but to no avail. So we are left with a ridiculously disproportionate set of laws that will be "honoured more in the breach than the observance". We regret that these laws now bind us - but as your trade association, it is our duty to inform you that this is now the law of the UK.

Penalties for "adding value":
If you "add value", by combining another element with a stay at your B&B - for example, by adding a local green fee to make a golfing break - that may create a "package", which means that you (as the package "organiser") must have insolvency insurance, a client "escrow" account or be "bonded" like a tour operator. Selling a package without such protection can make an organiser liable to criminal prosecution [sic]. 

The Government has been telling our industry that a priority should be to "add value" to innovate our product and increase our sector's productivity - yet the PTRs actively discourage adding value.

Penalties for "recommending":
If you "recommend" a particular supplier - for example, a local pub or restaurant - the PTRs may make you 100% liable for that supplier's performance, as if you were providing it yourself.

Detailed guidance is available for our members:
If you are a member of the Association, you will find new and detailed guidance documents on our member pages, which explain the full details of the PTRs and how they may affect your business.

If you are not yet a member, simply join us, then login to our member pages using your member password to view the full guidance documents.