ACCC PROBES ONLINE HOTEL MARKET

THE yawning gap between the commissions garnered by Australia’s leading online retailer of hotel rooms, Wotif, and those earned globally by multi-national giant, Expedia, is now under scrutiny by Australia’s consumer watchdog. The Australian Competition and Consumer Commission (ACCC) is concerned that a proposed Expedia takeover of Wotif could lead to Australians paying more for hotel accommodation. Australia has a singular online accommodation market because of the pioneering efforts of Wotif founders Graeme Wood and Andrew Brice. By the time Expedia and other global giants got serious about the Australian market Wotif had secured a dominant position. While the global companies have made inroads in recent years – aided by marketing campaigns of ferocious intensity – Wotif continues to hold a leadership position. A senior hotel industry insider recalls Wood – “an IT professional with the air of a research scientist mixing with hotel marketing types” – negotiating the company’s first deals. A key feature of those negotiations, according to this source, was that Wood committed Wotif to continuing with a commission rate of 10%. On the other hand, Expedia and others of its ilk typically extract global commissions of 18-22% depending on volume and other factors, he said. About 18 months ago, with its margins under pressure and attempts at broadening its presence into Asia lacking initial success, Wotif negotiated with Australian hotels for a commission increase to 11%, travelbulletin understands. That is still well below what Expedia demands – and gets – in global negotiations with hotel chains. Hotel aggregators have graduated from being handy outlets for hotels to unload distressed stock, and now wield considerable power in rate negotiations with hoteliers. Hotels have done what they can to direct traffic to their own websites with loyalty schemes and pledges that clients will secure the best rates by booking direct. But they are no match for the aggregators’ sites with grids displaying rates available from a range of competing properties. So the ACCC is wary about giving the green light to an Expedia takeover of Wotif. “Commission rates charged by Expedia and Booking.com in Australia are lower than the rates charged by those companies in other parts of the world. The presence of Wotif may be a contributing factor to this difference,” said ACCC chairman Rod Sims. He made the comment as the ACCC released a Statement of Issues (SOI) from its review of the takeover proposal. He pointed out that the proposed acquisition involves two of the three largest online travel agents (OTAS) in Australia. The other is Priceline (Booking.com and Agoda). “Market inquiries have indicated that Wotif is a major source of bookings for Australian accommodation providers and charges a lower commission rate than Expedia,” Sims said. “Market participants have expressed concern that the removal of Wotif as an independent competitor will allow Expedia to increase its commission rate.”