Hotel Monopoly

26 September 2018

Hotel Monopoly

This summer, many people organised their holidays using booking sites such as Trivago, Booking.com or Expedia. Behind the world of sun-kissed destinations and even sunnier price reductions, however, lies a harsh system dominated by a handful of concerns. SP Euro-MP Dennis de Jong has picked up the cudgels for a fairer system for small businesses and their travelling customers.

Dennis de Jong sometimes finds incidents related to this amusing. Recently a woman from the famed Hilton hotel chain came to see him to find out whether he could help. Her company could no longer defend itself from the booking websites. What was funny about that was that even the renowned Hilton with such a chic image had to come cap in hand to a MEP from the SP – to a radical socialist! What's not so funny is the reason for the urgent call: the powerlessness of even her firm in the face of the booking sites. “The internet platforms dictate the rules and even major hotel chains can't really go against them,” says De Jong. “They have names like Booking.com, Expedia, Trivago. One of the biggest, Booking.com, began as a Dutch website where you could find smaller, independent hotels,” De Jong recalls. “But it was bought out by an American firm which was planning to operate globally. It became an enormous market. At the same time all the booking sites fell into the hands of just three US concerns.” Is that a bad thing? “Yes, because they specify the conditions under which hotels operate, and often mislead the consumer.”

In practice this is how it works: in order to get as high and as visible as possible on the rankings of the internet platforms used by potential clients, hotels and other accommodation-providers pay substantial commissions – most of which are between 15% and 20% - to the booking websites. The hotels etc. are then banned from offering rooms on their own websites or elsewhere at a price lower than the rate given on the booking site. A hotelier can therefore no longer really manage his or her own business, being trapped in a stranglehold, because being excluded from the booking sites would mean far fewer customers. People now book overnight stays principally via the internet, encouraged to do so by TV ads from Trivago in which you are immediately offered the most spectacular discounts – the ideal hotel for the best price! Down from €110 to € 77! From €150 to €96! How is this achieved, when the hotels themselves cannot undercut the booking site? “Don't ask!” says Dennis de Jong, with dry humour. “All I can do is give you a tip: don't stare goggle-eyed at these so-called discounts. It's often a lot of hooey. Look at the net price. That's what you'll end up paying.”

In the wings sit a handful of mega-concerns, counting their profits. Because that's who run the booking sites, the hotel search engines and similar portals, whatever they call themselves. For example, Trivago was incorporated a few years ago into the US corporation Expedia, which had already taken over two other firms, Cheaptickets and Hotels.com, while Booking.com has since 2005 been in the hands of American travel giant Priceline.

Economies of scale, the enormous power of a few corporations whose practices cut out smaller operators, these are the things of increasing concern to Dennis de Jong. And this doesn't only involve the hotels and travel sector. Farmers dictated to by supermarket chains, delivery firms forced by companies to accept payment delays which are far too long, franchise holders cut off by their parent company: de Jong says that “there are countless examples of dodgy practices by big firms in their dealings with small and medium-sized companies. In the European Parliament Internal Market Committee we've spent a great deal of time on the question of how we can intervene in the market to prevent the exploitation of small firms. One thing we're working on is limiting freedom of contract, for example in relation to internet platforms. This freedom of contract means that bookings firms can use all sorts of provisions to prevent hotels from setting their own rates.”

The SP group in the Dutch national Parliament raised this kind of abuse with Economic Affairs Minister Henk Kamp, but he wasn't interested in limiting freedom of contract. According to the Minister, hotels decide for themselves whether they want a listing on one or another booking site. In this you can hear the neoliberal mantras of freedom of choice and self-regulation. Well, there's certainly freedom – just no choice. And the regulation is one-sided, top-down.

In Dennis de Jong's view, however, the problems don't stop at the limiting or banning of restrictive clauses in contracts. “The question that I'm really trying to get on to the agenda of the European Parliament is 'how can it be that in so many sectors the scale has grown so enormously that oligopolies of a handful of concerns have been able to form, oligopolies which have now more power than individual governments?' We should be asking ourselves at what point corporations grow so huge that they become 'too big to fail”. De Jong draws a link between this growth and the financial crisis that burst forth ten years ago. Banks which were said to be too big to fail were in reality so big and so interwoven that they could not be allowed to go bankrupt for fear that the entire world economy would collapse in on itself. Many had to be saved using state money. “The real problem lies with the EU's competition law,” De Jong continues. “That comes down to the fact that the European Commission does not see oligopolies as a problem in and of themselves, as long as they don't abuse their dominant positions. That they in fact do just that can be seen everywhere. And make no mistake, mega-concerns also like to play countries off against each other. If the laws in one country don't suit them, they simply hop off to another country. In short, it's high time that we demanded that a minimum be set for the number of firms competing on a specific market. And if that's not possible, there isn't really any longer a market at all, and we need to claim back the activities involved as public services. The number of meetings I've had with people from small and medium-sized firms who work hard for their businesses and then see those businesses forced out, exploited by one-sided contracts forms for me an additional stimulus to make a fist of this. Starting with that competition law.”

Which brings us back to the booking websites on the internet. “It's already noticeable that almost everything which takes place on line is in the hands of a few massive corporations in the United States,” says De Jong. “You can see all of this in Facebook and Google, but it applies too to the internet platforms in the travel sector which are also in American hands. This is despite the fact that making the internet accessible to all was once an initiative of idealists who wanted ordinary people to have such access.” In 2018, the internet has instead been pirated by big capital.

Adapted from a text in the original Dutch by Rob Janssen, whose article appeared in the September, 2018 edition of the SP monthly Tribune.

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