Earlier this month, news broke that the European Court ruled Booking.com can no longer include price parity clauses in contracts with hotels across the European Union. This practice, for which Booking.com is well-known, often requires hotels not to offer lower prices on their official websites or competitors’ digital platforms. Discover the potential impact on hotels and explore what steps hotels should take to start acquiring guests directly through their official websites.
How does this in theory affect the hotel industry?
By offering lower prices on their official websites compared to Booking.com (and other OTAs), hotels present one of their strongest, if not the strongest, unique selling points. In other words, they provide a highly compelling incentive for guests to book directly through their official website. However, when prices are the same on both the official website and Booking.com, several factors often lead customers to choose Booking.com instead of booking directly with the hotel. The key reasons for this are the following:
The price is the same.
Brand power – Booking.com is a well-known, trusted brand, and people feel their reservations is secure when using the platform.
Loyalty program – Booking.com offers the Genius loyalty program, which rewards users for booking accommodations through the platform.
Mobile discount – if you book through mobile.
This makes it difficult for hotels to collect first-party data and build a customer database
In theory, a lower price on the official website means that hotels should be able to attract new guests more easily. Here are some things to consider:
Don’t put all your eggs in one basket. Distributing hotel reservations across various channels, such as an official website, OTAs, or other platforms, is less risky than relying on a single source, such as obtaining 100% of reservations from a specific OTA. What happens if this OTA is impacted by new regulations, causing the hotel to lose the majority of its bookings?
Assuming that people are price-sensitive, they are more likely to book through the official website.
By acquiring guests through their official website, hotels build a database of guests that can later be used for sales activities.
When factoring in customer lifetime value, hotels might be willing to invest more in acquiring new customers. For example, while Booking.com charges a 15% commission (CoS), acquiring customers through the hotel’s own website using channels like Google Ads or Meta Ads at a 30% CoS may still be more profitable in the long run. Consider this simple example: for a €1,000 reservation, a hotel pays €150 in commission to Booking.com. However, if the hotel spends €300 to acquire the same reservation through its official website, why is this a better investment? Because the hotel expects the customer to generate an additional €10,000 in revenue over their next 10 visits. Even though the initial cost of acquisition is 100% higher, having the customer in the hotel’s database and marketing to them directly later—via newsletters, for example—can result in a higher ROI. If the hotel continues to pay €150 to Booking.com for every reservation, their ROI would ultimately be lower.
By acquiring guests through official websites, hotels also create a habit for customers to book directly through their official site.
Opportunity for mid/small size hotels?
While bigger hotel chains may have different kinds of contracts with Booking.com, and thus this ruling might not affect them, it could be a golden opportunity for mid-sized and smaller hotels to acquire reservations through their own websites.
How does this in theory affect the advertisers in the hotel industry?
In theory, advertisers should see more reservations from both paid and organic channels, better conversion rates, and potentially a need for increased budgets. This also means that hotels that previously chose not to compete with Booking.com and were acquiring the majority of their guests through Booking.com, now have the opportunity to run paid campaigns via Google Ads or Meta Ads (or some other channels). Furthermore, this could mean that hotels which had unprofitable Google Ads or Meta Ads campaigns in the past may now find them profitable.
Open questions
The ideas presented in the previous texts are hypothetical, based on years of industry experience. It remains to be seen who will benefit from this change—whether it will be only small to mid-sized hotels (assuming larger hotel chains may have different contracts) or even larger players. Booking.com is a significant revenue generator for many hotel businesses, and the relationship between the two is well-understood. The big question is whether hotels will be willing to take the risk of embracing this change at all. However, it is expected that some hotels may cautiously experiment with this approach with a smaller portion of their capacity, while the boldest may take a greater chance on it.
There is also the question of whether this will apply only to hotels or to all types of accommodation, and how it will vary by market. For example, the German market regulator has forbidden price parity practices on both official websites and OTAs, while the European Commission has prohibited this practice only for official websites (meaning they will be able to offer lower prices). While the ruling currently applies only to Booking.com, it may create pressure for similar cases against other OTAs.
However, it will be interesting to see how things will play out and whether hotels will adjust their business and marketing strategies to align with the new rules that work in their favor.
