Hurtigruten takeover
Hurtigruten takeover

ACCC verdict sparks industry backlash

The Australian travel sector claims that, despite ACCC Expedia Wotif approval, the acquisition will drive up consumer prices.

The Australian travel sector claims that, despite ACCC Expedia Wotif approval, the acquisition will drive up consumer prices.

Yesterday the Australian Competition and Consumer Commission (ACCC) said it will not oppose the proposed acquisition by Expedia, Inc. of Wotif.com Holdings Ltd. The decision was made despite concerns that the removal of Wotif from the Australian market may result higher commission rates to online agents.

“The ACCC found that there has been considerable change in the competitive dynamics of the online accommodation distribution market in recent years. This has included new entry by a number of competitors and business models, including Booking.com, which has grown quickly to become the largest OTA in Australia,” they said.

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According to the industry, consumers will bear the burden.

However, the decision has done little to appease concerns among the travel industry sector.

The Australian Hotel and Accommodation Industry (AHA), the Accommodation Association of Australia (AAoA) and the Tourism Accommodation Association (TAA) have all voiced their concerns over the acquisition and its impact on the Australian accommodation industry.

“The acquisition may trigger major commission rate increases, flowing onto consumers and the Australia tourism industry,” Industry Spokesman, Bradley Woods, said.

The acquisition would mean an almost complete monopoly of the market. Currently, it is estimated that Expedia hold 10 per cent of the Australian hotel portal market. With the acquisition of Wotif, Expedia will grow to 45 per cent. Another major competitor, Priceline, is believed to have approximately 40 per cent. With a successful acquisition, the two companies may hold up to 85 per cent of the Australian market.

“This acquisition removes choice for accommodation providers between foreign and Australian operators and different commission models for selling their rooms online through third-party websites,” Woods said.

The ACCC also noted the increasing importance of metasearch sites such as TripAdvisor and Google Hotels Finder, which aggregate the offers of hotels and numerous OTAs in one place for consumers to choose from.

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Will only the wealthy be able to afford commission hikes?

Nonetheless, Woods claims that the growth in meta search engines, does not guarantee more competition or protection from massive commission rate increases, as OTA’s are already buying meta search companies and consolidation creep is already happening.

“The movement is definitely towards consolidation and that means that OTA’s may inevitably push up commission rates from the 11-12 per cent towards the 18 – 25 per cent that is more typical in the USA and Europe,” he said.

“The end effect of acquisitions and concentrations of market power into two or three companies will be that the consumer may end up bearing the cost of less competition.”

The hotel and accommodation industry is also concerned about the emergence of rate clauses into hotel and OTA contracts by which OTAs demand that hotels not be allowed to offer better rates to consumers through their own hotel owned websites or booking systems.

“We have already raised the issue with the ACCC and will now take the matter further with the Commonwealth government and ACCC as it is clearly contrary to Australia’s competition and consumer law principles,” Woods said.

What do you think of the Industry response to the ACCC verdict?