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.

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.

Going Above & Beyond – What Makes A Great B&B

What makes a B&B outstanding? 

Carly Menken from Direct Line for Business shares her advice on how to go above and beyond: 

Get to know your guests

Want to delight your customers and be the perfect host? Be prepared from the outset. Send your guests a quick email after they’ve booked to ask if they have any food preferences, require a parking space, or if there’s anything else they’d like on arrival.

On arrival day, first impressions count, so make sure your guests feel welcome and at ease straight away. Give them a quick tour if they’ve not stayed with you before and offer them a welcome drink. You can really make a lasting impression for your regular guests by throwing in something special for them, like their favourite snack or a bottle of wine in their room.

When it comes to check-out, don’t miss the opportunity to find out how you could improve your guests’ experience. Ask them to fill out a quick feedback form – they’re more likely to give you their honest opinion if these are anonymous. And feedback doesn’t have to be one way – let your guests know what great customers they’ve been, and remember to thank them for staying with you.

Find your unique selling point (USP)

To really impress your guests, you need to give them something they can’t get elsewhere. Research your competitors and get to know what they offer, so you can do things differently or better. For example, if a rival B&B owner leaves newspapers out for guests during breakfast, go one step further.  Ask your guests what newspaper they'd like before they arrive.

If there’s something that makes your B&B different, make the most of it. Perhaps you have a unique location or an interesting history? Promote your uniqueness to stand out from the competition.

Stock up on the essentials

When you’re running a B&B, you’ll quickly realise that guests forget things. So be prepared and stock up on basics like toothpaste, toiletries, new toothbrushes and cotton buds. Choose luxury items to really treat your guests, and make sure you have extras of everything, like towels, so they don’t feel awkward about asking for more.

It’s also nice to leave a guest room basket or pack, with maps, local taxi numbers and restaurant recommendations. Other welcome tray ideas include tea making facilities, snacks and bottled water.

Manage expectations

The easiest way to make sure you don’t disappoint guests is to be honest and upfront about your accommodation. If the rooms are a bit small don’t exaggerate their size – some guests will be perfectly happy with a cosy bedroom if the breakfast is great. Make sure you plan for worst-case scenarios; make a list of things that can go wrong (or have before) and come up with an action plan for each.

Guest expectations managed? Now you can exceed them. Always offer a bit more than your website or listing says you do. It’ll be a lovely surprise for your guests (and something your competitors won’t be able to nab!). A small gift on departure, for example, goes a long way.

Don’t forget the basics

It’s easy to get carried away with ways to wow your guests, but don’t forget about the B&B staples.

You can be in the most rural location but guests will still expect good Wi-Fi. So, do your best to find an internet provider that can make this happen.

At breakfast, try to provide a wide selection of foods – or, even better, ask your guests in advance what they’d like to eat. Try to be flexible about check-in and check-out times – a rigid early check-out can put a slight dampener on an otherwise great stay.

When it comes to the rooms, the two things that can really affect your guests’ comfort are temperature and noise, so do what you can to get these right. It goes without saying that rooms should always be spotless and decorated tastefully.

Have fun!

To be a great host, let your guests get to know the real you.

Remember why you started hosting in the first place. Chances are you enjoy meeting and interacting with new people, so set aside time to do this – whether that’s stopping to say hello over breakfast or inviting your guests for an early evening drink before they go out for dinner.

If you’re stressed, others will notice. Find the balance between enjoying yourself and providing a great service – your guests will thank you for it.

Being a good bed and breakfast host

In summary, it’s often the simple things, which don’t take much time or money, that take a B&B from being good to great. Being smart about what you offer your guests and how you communicate with them will have a big impact on their stay.

Thanks to: Direct Line for Business.

MPs call for "level playing field", and more responsibility from "Sharing Economy" platforms

 We welcome the publication today (18 July 2018) of a report on the so-called “Sharing Economy” by the All-Party Parliamentary Group (APPG) on Tourism, Chaired by Gordon Marsden MP (left) . The Report calls for “a level playing-field for all tourism businesses”, and calls for Airbnb-type properties and similar small B&Bs to be treated the same way. 

It also calls for platforms to "ensure that hosts have, as a minimum, undertaken a fire safety assessment, a health and safety assessment and, where relevant, have Gas Safe certification. Accommodation providers should not be allowed to register properties without proof of these assessments". 

These recommendations echo what the Bed & Breakfast Association has been calling for since 2012, and our own evidence to the APPG given in February.

The APPG notes the scale of the issue, saying “PWC estimate that sharing economy businesses in the accommodation sector generated £3bn in sales during 2015 and that this level of revenue could rise to nearly £30bn by 2025 with around 50% of all rentals undertaken in the UK being conducted by peer-to-peer networks”. (Airbnb alone already has well over 168,000 listings in the UK, compared to 25,000 or so B&Bs.)

A key recommendation in the APPG Report is for the Government to consult on a “low-cost statutory registration scheme for tourism accommodation businesses”. In the past, the B&B Association has opposed registration schemes because of the added red tape and cost, but we are now prepared to consult constructively on the principle, because if a simple and low cost scheme could be devised (and the devil is, as ever, in the detail), the burden of registration could well be worth it for the overall benefits it would bring to our members in leveling the playing-field and reducing unfair and illegal competition.  It would also of course help to protect the public, by bringing the safety checks on Airbnb-type premises up to closer to the level of those on our members.

(Every business serving breakfasts to paying guests already has to comply with a national registration scheme in any case, as they have a duty to register as a “food business”.)

The Report emphasizes the importance of “Delivering a level playing field for all tourism businesses”, and says “considerable concerns have been expressed that hosts providing accommodation via sharing economy platforms do not comply with health and safety regulations”

The Report says: “All visitors are entitled to a minimum level of safety, regardless of the type of accommodation they use and method by which it is booked. It is responsibility of all agents, regardless of whether they are sharing economy platforms or traditional booking agencies, to ensure that the products they supply meet these minimum standards. We have found that the systems in place for informing hosts of their legal responsibilities are inadequate, to the extent that some even allow hosts to register properties if they confirm that they have no fire safety equipment installed.”

“The sharing economy has argued that regulatory requirements should be proportionately less for businesses listed on their platforms. The APPG for Tourism agrees with the principle of proportionality, but supports the Government’s view that existing legislation, especially that related to fire safety, is already based on proportionality. We also believe that there is no valid basis to contend that B&B accommodation provided via a sharing platform warrants different regulatory treatment to the same B&B accommodation not listed on sharing economy websites. Further, there is significant evidence to suggest that a large and growing number “professional” operators use sharing platforms to list properties, thereby making any attempt at categorisation a moot point.

“While finding that the legislation that applies to accommodation businesses is fit for purpose, we have identified significant issues regarding enforcement. Most sharing economy platforms do not reveal the address of the property until a booking is made. This, combined with sharing economy companies refusing to provide property details on the basis of DATA Protection and significant cuts to councils expenditure on enforcement, means that few, if any, sharing economy properties are ever inspected.

“The APPG for Tourism recommends that the Culture Secretary launch a consultation on using his powers under the Development of Tourism Act 1969 to establish a low-cost statutory registration scheme for tourism accommodation businesses. Such a scheme could be devolved to councils and would help resolve the main issues identified by this Inquiry. Namely, it would:

• Help ensure that all businesses complied with regulations
• Provide enforcement officers with a database of tourism accommodation properties so that they could target their resources to those properties they deem to be the highest risk
• Provide councils with greater ability to manage tourism in their area
• Provide HMRC with a means by which to ensure that all businesses pay the appropriate level of taxation.

“The APPG also recommends that the Government provide Local Authorities with powers to set rules regarding the use of residential properties for Tourism Accommodation so that local solutions can be developed that balance the benefits generated by sharing economy accommodation with needs of local residents. These powers include:

• The ability to set the maximum number of days per annum that a property can be used for tourism accommodation
• The ability to require the owner of the property to be present if a property is used for tourism accommodation”

Other recommendations by the APPG:

• “That the Government urgently assess whether local enforcement agencies have adequate resources to carry out safety inspections of tourism accommodation businesses. This has significant implications for large towns and cities were the provision of sharing economy accommodation in high rises and houses in multiple occupation is becoming more prevalent.
• That sharing economy companies take greater responsibility for informing hosts using their platforms of their statutory obligations, especially in relation to health and safety and fire safety.
• That sharing economy accreditation schemes such as those developed between Airbnb and Quality in Tourism, are rolled-out across all properties on all sharing economy platforms.
• That sharing economy companies develop and implement procedures that ensure that hosts have, as a minimum, undertaken a fire safety assessment, a health and safety assessment and, where relevant, have Gas Safe certification. Accommodation providers should not be allowed to register properties without proof of these assessments.
• That Sharing Economy companies explain to hosts before they register that having paid guests staying in their property will affect their home and contents insurance, mortgage, leasehold agreement and that they should purchase public liability insurance.
• That the sharing economy industry work with the insurance sector to help develop domestic Home and Contents Insurance products that are not invalidated if owners have paying guests for a set number of days each year.
• That the public liability insurance provided by sharing economy companies is of the same standard, with the same levels of cover, as commercial products.
• That far more attention needs to be given, and more research undertaken, as to the experiences of, and impact on, those living in close proximity, either as physical neighbours, or in the neighbourhoods of, properties being used regularly by sharing economy businesses.”

The Bed & Breakfast Association welcomes the report, and calls on the Government to use its powers to take action on areas highlighted in the report, including especially:

• Requiring peer-to-peer platforms to fully, properly and explicitly inform their “hosts” of their legal responsibilities;
• Requiring peer-to-peer platforms to refuse to list properties that do not fully comply with the law;
• Requiring peer-to-peer platforms to identify premises owners to statutory safety regulators (eg Fire & Rescue Authorities) on request (without demanding a Court Order), so the regulators can perform their duty to protect the public.

We also stand ready to play a constructive and positive role in consultation with the Government about a low-cost statutory registration scheme for tourism businesses.

For our part, we are also open to following the Report’s recommendation to “find constructive ways of working together” with sharing economy businesses “to generate new opportunities and enhance customer experiences”.  We are happy to co-operate, innovate and find ways of developing the UK’s hospitality offer (currently, as the APPG notes, worth 7.1% of  UK GDP and providing 9.6% of UK jobs) – but always in ways underpinned by trust and responsibility.

European Commission finds Airbnb's terms & condistions illegal, and orders it to change them

The European Commission today announced that Airbnb has been found in breach of EU consumer law on many counts – primarily for lack of price transparency as well as other unfair commercial practices. The decision will require changes to Airbnb’s business model and its "unfair" terms and conditions.

This is a very significant step, as such an action is rare and involves coordination of all 28 EU Member States (and Norway and Iceland) via what is called the Consumer Protection Cooperation Network (CPCN).
 
To comply with EU law, Airbnb will now have to denote on their site whether the ‘host’ is a commercial operator or an individual, present final prices upfront (ie inclusive of taxes and additional service fees etc), and change their host’s ability to cancel services at the last minute without having to indemnify the consumer. The EU's demands also free up the consumer to sue a host who has caused them harm, thus increasing the responsibility of the host (which has up to now been limited by Airbnb's terms and conditions). The full list of unlawful practices they engage in are extensive and are detailed officially here.

Airbnb now has until August to amend its business practices to ensure compliance, or potentially face a fine.
 
The European Commissioner for Justice and Consumers said: "More and more consumers book their holiday accommodation online and this sector has brought many new opportunities to holidaymakers. But popularity cannot be an excuse for not complying with EU consumer rules. Consumers must easily understand what for and how much they are expected to pay for the services, and have fair rules - e.g. on cancellation of the accommodation by the owner. I expect Airbnb to follow up swiftly with the right solutions.”

David Weston of the Bed & Breakfast Association said: "We are delighted that the European Commission has taken such strong and bold action today to protect EU consumers from Airbnb's unfair contract terms, its misleading pricing, and its illegal denial of their hosts' responsibility for their guests' safety. This will help move slightly closer to levelling the playing-field with B&Bs and small hotels".

Toprooms.com reduces commission to 5% to attract B&Bs and independent hotels

As part of their on-going support for the B&B sector, booking software supplier eviivo are reducing the commission on their exclusive toprooms.com website from 15% to just 5%.

Unlike regular booking sites, toprooms.com doesn’t feature big corporate hotels and budget chains.  Instead it lists thousands of independent hotels, B&Bs, pubs with rooms, cottages and apartments across the UK, making it the perfect website for travellers looking to book authentic and characterful properties with a story to tell.

From now, any booking on the site will attract the new, lower rate, which is intended to help properties make the most of what is looking to be a fine summer season.  The 5% commission is reinvested in its entirety to advertise the site and generate bookings for the community of eviivo users.

A further change will also see eviivo users able to take advantage of bookings via the eviivo Co-op channel, entirely commission free. This unique referral service allows properties in the eviivo community to receive referrals from other eviivo properties in their area when they are full, and vice-versa.

To find out more about the eviivo community or to book a demo visit eviivo.com or call 0800 422 0088

 

CMA Announce “Enforcement Action” against Online Travel Agencies

Competition regulator acts after B&B Association’s five formal complaints last July

 

The CMA today launched “enforcement action against a number of hotel booking sites” that it believes “may be breaking consumer protection law”.

As part of its ongoing investigation launched last October, the Competition and Markets Authority (CMA) has identified widespread concerns, including:

Search results: how hotels are ranked,

for example to what extent search results are influenced by factors that may not be relevant to the customer’s requirements, such as the amount of commission a hotel pays the site.

Pressure selling: whether claims about how many people are looking at the same room, how many rooms may be left, or how long

a price is available, create a false impression of room availability or rush customers into making a booking decision.

      

Discount claims: whether the discount claims made on sites offer a fair comparison for customers. For example, the claim could

be based on a higher price that was only available for a brief period or not relevant to the customer’s search criteria, such as comparing a higher weekend room rate with the weekday rate for which the customer has searched.

  

Hidden charges: the extent to which sites include all costs in the price they first show customers or whether people are later

faced with unexpected fees, such as taxes or booking fees.

The CMA will be requiring the sites to take action to address its concerns, where they are believed to be breaking consumer protection law. It can either secure legally binding commitments from those involved to change their business practices or, if necessary, take them to court.

Andrea Coscelli, Chief Executive of the CMA, said: 
“Booking sites can make it so much easier to choose your holiday, but only if people are able to trust them. Holidaymakers must feel sure they’re getting the deal they expected, whether that’s securing the discount promised or receiving reliable information about availability of rooms. It’s also important that no one feels pressured by misleading statements into making a booking.

“That’s why we’re now demanding that sites think again about how they’re presenting information to their customers and make sure they’re complying with the law. Our next step is to take any necessary action – including through the courts if needed – to ensure people get a fair deal.”

The CMA’s investigation was launched in October, and covers concerns raised by the Bed & Breakfast Association to the CMA last July and in a meeting with CMA officials in September.

David Weston, Chairman of the B&B Association, says: “The Bed & Breakfast Association are absolutely delighted that the UK competition regulator, the CMA, has today announced “enforcement action” against Online Travel Agencies (OTAs) that it believes are breaking consumer protection law. The areas covered are those we raised in our five formal complaints to the CMA last July - ie false “discounts”, false availability claims and other “pressure selling” techniques, manipulated search rankings influenced by payments to the OTAs, and false “Best Price” guarantees. The CMA’s very welcome action will help move the balance of power a little from these global tech giants – who are after all only intermediaries - back towards the small businesses that actually own the accommodation booked, and provide the hospitality.”

In addition to its enforcement activity, the CMA has sent warning letters to a range of sites, demanding they review their terms and practices to make sure they are fair and comply with consumer protection law.

It is also referring a number of concerns around online hotel booking sites’ price guarantees and other price promises to the Advertising Standards Authority (ASA). The CMA has asked the ASA to consider whether statements like ‘best price guarantee’ or ‘lowest price’ mislead customers and what conditions must be met for companies to make such claims.

The CMA continues to assess the evidence it has gathered on the practices of other online hotel booking sites and could launch further enforcement cases in due course.

Anyone wishing to provide further evidence on the issues being considered can do so at: https://www.gov.uk/cma-cases/online-hotel-booking