Are Travel Websites and Hotels Fixing Prices?
There are a host of online travel websites from which to shop for hotels. They proclaim the best deals at the lowest prices. But are they all in cahoots with the hotel chains to boost profits?
A new lawsuit brings that very price-fixing question into the spotlight. The suit alleges online travel sites such as Expedia , Travelocity and Orbitz have all agreed to sell the same hotel room for the same price, leaving no room for price wars, NBC News reports.
A class-action suit against many of the online agencies and major hotel chains claims this anti-competitive behavior is alive and well. Lawyers tell NBC News that, "this is the industry's dirty little secret. They're not offering the lowest price or the best price, they're offering a fixed higher price."
"The fact is that a consumer is led to believe that if he or she looks through a whole bunch of websites, you're gonna find the best deal," Mark Orwoll of Travel + Leisure magazine tells NBC News. "The fact is, that's a shame because there is really no best deal. It's all the SAME deal."
The hotel chains deny breaking the law and say they'll fight the suit, NBC News reports.
Does this mean the websites are price fixing?
In my opinion, absolutely not. I worked in the industry for more than a decade. Hotels offer blocks of rooms at a contracted price to third-party companies, such as online travel agencies. Each agency wants to make sure they're not charging more for the same room than their competitor, so they'll often match prices they see from industry competitors.
And third parties don't want to undercut the hotels directly because most hotels offer a "best price guarantee," whereby if you see an advertised price for the same room at a lower rate, they'll match it. The online websites still make money from bookings generated on their own sites, so why would they charge less than a hotel's direct rate and lose booking revenue? It's simple economics.
Based on my experience, I don't see this lawsuit going anywhere.
What do you think? Are online travel agencies secretly conspiring with hotels to boost profits and fix prices? Or is this simply smart business?