For those who have read any of my previous blogs you’ll be aware that I am quite keen to highlight issues with hotels, be it costs or service provision and it seems that I am not the only one. Hotels are coming under increasing pressure on the issue of costs and price fixing (or in this case ‘rate-parity’), which has – according to the article – cost holiday makers hundreds of pounds. The area not highlighted by the article is that, if found guilty, then this price fixing scandal has surely cost the Meeting and Events (M&E) industry a vast amount of money.
The thing is that there has been an opinion in the industry for years that the rates charged by different hotels are very similar despite, in theory, being in competition. Usually in a competitive market, which the hotel sector certainly is, the main players try everything to stand out and win the custom from their rivals; one way this is achieved is through costing less than their competitors. In the UK hotel sector, especially in London, this has never appeared to be the case, even during the recession.
Is there anything wrong with price fixing by hotels?! The use of the term rate-parity certainly makes it sound less illegal. Usually the idea of price fixing refers to competitors agreeing to charge certain or similar amounts but in this scenario it is slightly different. Basically the hotels are (allegedly) telling third party websites, i.e. lastminute, expedia, etc, the lowest rate they are allowed to charge for rooms at their hotel. Scenarios have occurred where chains have been emailing third parties to tell them they are no longer allowed to offer their hotel on the site due to ‘parity issues,’ in other words the site is offering rooms at the hotel for an amount that doesn’t provide the required profit margin. Although it pains me to admit, I tend to agree with the hotels – what’s wrong with this?!
Surely any business is entitled to set what they feel is fair in terms of how much their service / product is worth. At Connect we offer a range of event services for which we have a minimum price we can realistically charge, i.e. the profit margin. If a third party offered our services for a figure lower than this we wouldn’t be happy in the slightest. Therefore I have to ask, why should we expect hotels to not have the same principal?! My main issue with it is that they have not just come out and explained that’s what happens.
Hotels, especially those in London, do appear to have been relatively unaffected by the economic downturn and subsequent recession. It is frustrating when the majority involved in the M&E industry have had to make cutbacks (both financial and otherwise) but hotels continue to charge high accommodation and meeting rates. Without question I would like to see a greater sense of realism from hotels in terms of what they charge to use their properties (this applies equally to holiday accommodation). Does this mean I feel the hotel chains in question should be fined up to 10% of their profits should the allegations prove founded? The simple answer is no.
The hotels are not so much price fixing as guaranteeing their profit margins. The British public are very quick to show their displeasure at anything that is seen to unfairly increase their costs, especially in such a tough economic time but I am not sure this particular accusation is fair on the hotels – after all they are not being run as charities. Customers of hotels, both business and pleasure, have a wide ranging choice of hotels that offer a great difference in terms of quality and subsequently price. If the budget for accommodation is £150 per night or event is £60 per person certain properties, possibly the preferred option included, could be out of the required price range. This isn’t the hotels fault – there is a reason the hotel industry operates a star rating system – and there will be viable alternative options.
This rate parity / price fixing, call it what you want, from hotels is at worst a questionable practice. If, as mentioned already, they openly came out and explained that this is how rates on third party sites are agreed then, whilst you would have some who disagree, I think for the most part it would be accepted. There would definitely me a part of me that would enjoy seeing the hotel chains in questions being fined the figures being suggested but I wouldn’t agree with it. For many reasons pressure has been building on hotels over their costs and, for the most part, rightly so but I feel that in regard to these accusations the additional pressure is unfair.
http://www.connectevents.co.uk/