The GVH continues to monitor the hotel booking market after closing its sectoral inquiry
The Hungarian Competition Authority (Gazdasági
Versenyhivatal, GVH) prepared its report on its sectoral inquiry on the online
accommodation booking market. Due to the positive changes that took place on
the market during the sectoral inquiry, the GVH does not foresee intervention
this year. However, as a member of the Monitoring Working Group in the
framework of the European Competition Network it continues to monitor market
the summer of 2013 the GVH launched a sectoral inquiry into the hotel online
booking market due to the identification of phenomena in the contracting
practices of the online intermediaries which indicated that the competition
between online travel agencies (OTAs)/online booking portals offering the same
hotel rooms was restricted.
inquiry focused on the so-called ‘price parity clause’ which could be found in
the agreements of both international and large domestic OTAs. Pursuant to such
a clause a hotel binds itself not to offer its rooms for prices that are lower
than those given to the website of the OTA on other distribution channels.
to the online intermediaries the use of parity clauses served the protection of
their investments. Considering that a significant part of the services provided
in the course of the hotel intermediary activity (search, comparison, views of
pictures and ratings) is free of charge and available also prior to the
booking, the investments of the intermediaries in the supporting IT systems
might easily be abused (free-riding).
to the conclusions of the sectoral inquiry, the benefit of the price parity was
seen in the form of a reduction of the searching costs (searching time) of
consumers. In contrast, price parity had a negative effect on hotels, as they
would only be able to make larger profits if they could apply favourable prices
on their own distribution channels and on platforms applying lower commission
order to better understand the consumer side of the market the GVH also
commissioned market research. The aim of the research was to gain insight into
the preferences of consumers in Hungary in relation to travelling, specifically
concerning the gravity and role of intermediary portals and consumers’ behaviour
when using hotel booking portals.
GVH found that through the appearance of OTAs, the market had become more
transparent as several accommodation offers could be compared even on the
website of just a single OTA. This transparency led to an increase in price
competition among hotels and in capacity utilisation of the hotels; however,
there was no substantive price competition among the OTAs on the market and the
prices of accommodations were roughly the same in all sales channels in the
first half of the period affected by the sectoral inquiry.
position of the GVH is in line with the conclusions of international procedures
on the topic, according to which the wide parity clauses (i.e. comprising all
sales channels) may restrict competition by standardising market prices and
increasing barriers to entry. It may give raise to particular competition
concerns with regard to the market concentration in Hungary. The application of
wide parity clauses does not result in efficiency benefits to such a nature and
to the extent and does not enhance consumer welfare to a degree that could
justify the total restriction of competition among the single sales channels.
2015 the larger international OTAs (Booking.com, Expedia) narrowed the
applicability of the price parity clause on the Hungarian market, too. As a
consequence, OTAs will only stipulate in the future that the hotels shall not
offer less favourable conditions to intermediaries than what they publish on
their own websites. Furthermore, the parity clause will not apply to other
intermediaries and to other booking channels (telephone, fax, e-mail, etc.), which
means that hotels will be able to provide discounts.
the opinion of the GVH, also taking into consideration the danger of the
free-rider phenomenon, the use of a narrow parity clause may be the correct
solution to the current market issues. A narrow parity clause may pave the way
for accommodation providers (hotels) to be able to freely apply different price
policies via certain sales channels. On the other hand, OTAs may announce
special promotional periods at the expense of their commission rates and may
also compete on prices.
the draft report of the sectoral inquiry was released, the largest Hungarian-owned
market player of the Hungarian online booking market, Szallas.hu, indicated to
the GVH that it plans to switch to the application of a narrow parity clause,
thus following the international market players. Consequently, in practice all
larger market players will apply narrow parity clauses, which will hopefully also
influence the conduct of players with smaller market shares. In light of these
changes, the GVH does not foresee intervention in the market processes this
year; however, it does not rule out intervening if market developments do not
show a strengthening of competition.
GVH – as a member of the Monitoring Working Group established in the framework
of the European Competition Network (ECN) aimed at observing the changes on the
online intermediaries market and the effect of the introduction of narrow parity
clauses –will also monitor any further market developments in this respect
subsequent to the termination of the sectoral inquiry.
full report on the sectoral inquiry and further information are available on
of the GVH.
8 June 2016
Hungarian Competition Authority
Alkotmány u. 5., H-1054 Budapest,
Tel: +36 1 4728902
Mobile: +36 30 6186618
Email: email@example.com , firstname.lastname@example.org
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