Showing posts with label Holidaymakers are being overcharged hundreds of pounds because of a suspected hotel price-fixing scandal. Show all posts
Showing posts with label Holidaymakers are being overcharged hundreds of pounds because of a suspected hotel price-fixing scandal. Show all posts

Saturday, 23 April 2011

Hotels are accused of secretly ordering travel agents not to offer discounted rooms, according to leaked documents. Those cutting the price of hotels beneath the secretly fixed prices are banned from selling rooms in future.
The scandal has allegedly stopped some agents reducing the price of hotel rooms at well-known properties around the world by up to 25 per cent.
The Office of Fair Trading has started an investigation into price-fixing by hotels and travel agents which could lead to the cost of family holidays falling by hundreds of pounds.
If they are found to have fixed prices, the hotel chains could be fined up to ten per cent of their turnover — which could run into tens of millions of pounds each.
The Daily Telegraph has seen key documents at the heart of the OFT investigation which purport to disclose how hotel chains including Radisson, Thistle and Starwood are ordering travel agents not to offer discount prices. This newspaper has also spoken to the whistle-blower who has exposed the questionable practice.

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, 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.”


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