Vacation rentals likely to benefit from new scrutiny on OTAs

A recent campaign to reduce Online Travel Agency (OTA) dominance has had the beginnings of success in Australia, getting the attention of the consumer regulator. This is likely to have more wide ranging benefits for vacation rentals.

The growth of OTAs in recent years has been so strong that a hotels industry spokesman claims 80% of Australian hotel bookings are done through a few OTAs, and commissions of 12-25% are common.  The figures for vacation rentals (VRs) would be similar.  The OTA dominance from bidding up Google ads and spending huge amounts on TV ads leaves little room for small VRs to compete.

It has prompted a fierce 8 minute online video by  prominent Australian businessman Dick Smith urging consumers to boycott the large listing sites and contact accommodation providers direct.  Smith doesn’t mince words in his provocative video, accusing the large companies of extortion-like behaviour.

He appeals to fairness, pointing out that the 20-30% in OTA fees take profit out of businesses in small towns that can least afford it. He points out that the money goes to the wealthy owners of the OTAs in the USA.  One town – Port Douglas had $180m taken out of their local economy over 10 years and this is repeated in thousands of small towns all over Australia, and all over the world

Smith also singles out the price parity clauses in contracts with the big companies that prevent small accommodation providers from advertising a lower price on their own websites than the price on the OTA websites.  While pitched at hotel and motel providers, the same applies to vacation rentals.

The Smith video went viral and put pressure on the ACCC the Australian consumer watchdog to comment.

ACCC chairman Rod Sims admitted to allowing the price parity clauses in 2016, but also has clarified that while the 2016 deal blocked businesses from advertising lower prices on their websites, businesses were free to offer lower prices for loyalty schemes or when called directly.  This ‘discount when called’ is news to most accommodation providers, who understandably would have liked to have known about it way back in 2016.

Sims in his all powerful consumer role has admitted in a Guardian interview that “At first they [OTAs} were good. They gave hotels a wider audience than they would otherwise get. But they have become so universal now that a lot of hotels and motels believe that they won’t get any business unless they are signing contracts with these entities.”

Sims confirmed that the ACCC would now look into allowing hotels to advertise cheaper prices online. “We are looking at whether the rest of the agreement, in terms of online parity, is anti-competitive,” he said.

The ACCC might also do well to look into the wording of the huge spending Trivago TV ads which imply that Trivago will get you lowest price accommodation at a destination, when in fact it only provides prices for entities advertising on the Trivago website.

So what does this mean for vacation rental providers?

  • In Australia, vacation rentals will benefit from any review done on OTAs by the ACCC consumer watchdog for hotels, as the principles for VRs are identical.
  • The #bookdirect movement will continue to get publicity as small towns realise  millions are being taken out of their local economies and forwarded to OTA headquarters. This will be repeated all over the world as the voice of the small providers continues to be heard and the OTAs are placed under more scrutiny.
  • Small providers like VRs all around the world should have their own website presence so consumers can find them and contact them direct. This way discounts will go to consumers and owners will benefit from savings in commissions.

Thank you to Brett Carnell for passing on the Dick Smith video.

Comments on this entry are closed.

  • Nick Marshall September 25, 2018, 11:14 am

    Great post Rex. As you and others keep pointing out, every owner who is serious about this business should have their own website. Unfortunately, the attitude seems to be that “there is no point because we would not be able to get on page 1 of Google”. That may be true in some destinations but if you don’t have a website then no one will be able to find you if they do a search. Which means that you need a website of the name of your property – the same name as you use on your listings. That way you should be found in a search.
    Another thing that was not mentioned by Dick Smith (what a passionate plea!) is the way payments for AirBnB go straight to Dublin. Perhaps I am wrong but my understanding is that in NSW any local listing site has to lodge payments for bookings in a trust account with an Australian bank which basically means that the listing site has to be run by either a solicitor or a RE agent. Yet AirBnB (and I guess the other OTAs) whip the payment offshore before you can blink.
    Any comment on that?

    • Rex Brown September 25, 2018, 11:46 am

      You are right Nick. I think there will be growing awareness over time of the way the big tech giants are exploiting our naive business practices!