The Dynamics of Online Hotel Prices and the EU Booking.Com Case

Abstract

This paper analyses the dynamics of hotel prices listed on Booking.com in the period 2014-16. This period is characterised by the most important antitrust decisions regarding the use of price parity clauses by online travel agencies (OTAs) in the EU. First, we document the dynamics of hotel prices on Booking.com in tourism regions of three EU member states: France, Italy, and Spain. The evidence suggests that prices decreased in 2015, the year in which the major antitrust decisions took place, whereas they bounced back in 2016. Second, we provide both a comprehensive explanation of the previous evidence and a rationalisation based on a theoretical model of the OTAs sector. Overall, our overarching analysis of the price dynamics on Booking.com allows to explain both the impact of removing price parities and the possible response of the OTAs.

Hotel Reservations via Online Travel Agency BOOKING.COM. Eu Dimensions of the “Best Price” Clause

“…Adopting the antitrust measures of the EU evoked a set of new consumer and partner services that smoothened the effect of the removal of the best price clause. As shown in surveys by Mantovani, A., Piga, C., Reggiani, C., (2017) and Hunold, M., Kesler, R., Laitenberger, U., Schlütter, F, (2017) it is evident that the price drop and delisting from Booking.com was just a temporary solution. Hotels need to use an OTA that gives them confidence and last-minute web exposition to attract consumers.…”

“…The Booking.com Extranet platform lets property owners increase sales and promote their accommodation units to the global public. Booking.com provides analytical tools and dashboards for accommodation providers that help them to increase their visibility and their business (Mellinas et al, 2015;Mantovani et al, 2017;Martin-Fuentes et al, 2018). The "Best price" clause Booking.com offers a broad choice of accommodations for a good price.…”

“…A "narrow" price parity clause is less rigid, as it allows the hotel to charge a lower price when selling through other OTAs; however, the hotel cannot charge a lower price when selling directly. This practice has raised serious antitrust concerns, given the fact that in most countries the OTA sector is already highly concentrated (Mantovani et al, 2017). Booking.com was investigated for infringing the EU competition law Article 101(i) in the years 2014-2016 in many EU countries.…”

“…In 2015, the French, Italian and Swedish national competition agencies, after investigating Booking.com, accepted its commitment to switch from wide to narrow price parity clauses (Caccinelli et al, 2018). The French Parliament passed the "Macron Law", according to which all price parity clauses were banned which came into force from January 2016 (Mantovani et al, 2017). The Austrian parliament passed a law in November 2016 that prohibits BPCs of OTAs from January 2017 onward (Hunold et al, 2017).…”

Substitution between online distribution channels: Evidence from the Oslo hotel market

“…However, in their search setting, delisting from a platform is never a profitable strategy for suppliers: Because all sales are made through the most efficient platform in equilibrium, a supplier would lose all of its consumers by not listing on this platform. 4 in this industry by using scrapped price data from metasearch engines (see, e.g., Hunold et al (2018), Mantovani et al (2017) and de Nijs and Larrieu (2018)), we use a large dataset of actual bookings and use it to estimate a nested logit demand model that allows us to evaluate substitution patterns between online distribution channels. Our results suggest that, while a substantial share of consumers seem to be loyal to the OTAs, and would switch to the other hotels (i.e., our "outside good") in case of the hotel chain's decision to delist from a platform (or after a substantial price increase by the hotel chain on the same platform), the chain's direct sales channel appears to be a credible alternative to the OTAs.…”