Removal of price parity clauses between online travel agent (OTA) Booking.com and contracted accommodation providers in South Africa has been lauded as a landmark decision that will help enhance price competition and drive direct online bookings.
The global booking giant – which commands a more than 50% revenue share of the OTA market in South Africa – this week agreed to comply with remedial actions recommended by the Competition Commission.
The actions comprise removing the wide and narrow price parity terms from all contracts with accommodation providers in South Africa and from any criterion for participation in Booking.com’s incentive programmes (Genius, Preferred Partner and Preferred Plus) or other membership programmes.
A wide price parity clause is a contractual clause that requires accommodation providers on Booking.com to publish or offer prices that are no higher than any other online travel intermediation platforms.
A narrow price parity clause requires accommodation providers listing on Booking.com to publish or offer prices that are no higher than their own direct online booking channel such as its own website.
The Competition Commission said: “Removing both these clauses effectively enhances price competition between OTAs and allows accommodation providers, such as hotels and guesthouses, to price lower on their own websites for online bookings. These changes will also benefit consumers by providing lower price options online and will allow accommodation providers to innovate and develop their direct sales channels”.
Wayne Neath, Resort Sales and Tribal Chief at Dream Hotels & Resorts, said: “The removal of wide and narrow price parity clauses marks a significant shift in how accommodation providers, especially smaller establishments, can compete and operate in the online travel market. For Dream Hotels & Resorts, the settlement is not just a legal adjustment but a pivotal moment to reimagine how we engage with our guests and promote our properties. It’s an invitation to rethink our digital strategies, invest in our direct booking platforms and leverage this newfound flexibility to offer even more value to our customers. It paves the way for fairer competition, greater innovation and a more vibrant and inclusive tourism sector”.
Graham Wood, COO of Sun International, said the ruling would allow hotels to regain control of their rate strategy and pricing.
“If a hotel wants to sell the lowest/best rate possible on their own website, they should be able to do so and this ruling allows that to happen.”
Associations voice approval
FEDHASA said this was a significant win for fair competition within the tourism industry and a major relief for hotels and guesthouses across South Africa.
“For too long, there were rules in place that were non-competitive, exclusionary to SMEs and detrimental to accommodation providers. The price parity clauses placed undue pressure on accommodation providers, forcing them to maintain consistent pricing across all platforms, regardless of the significantly higher commissions charged by some online platforms.”
The platform’s terms have, until now, disadvantaged accommodation providers by obligating them to advertise prices on their own platforms no higher than on Booking.com’s platform while servicing Booking.com fees ranging from 10-25% (averaging 15%). The commission rate varies according to property type, location and cancellation policy.
“This levels the playing field and empowers accommodation providers to offer more competitive rates through their direct booking channels, ultimately benefitting South African consumers. Accommodation providers will now be able to offer fairer prices on their own advertising platforms, which will improve profit margins and benefit tourists,” FEDHASA added.
The hospitality association also applauded Booking.com’s agreement to support historically disadvantaged SMEs in the tourism sector with initiatives that help them grow their hospitality and tourism businesses. “This commitment aligns with the industry’s goals to foster inclusivity and sustainability in the hospitality market.”
The Tourism and Business Council of South Africa has also come out in favour of the move. CEO Tshifhiwa Tshivhengwa pointed out that it would help businesses with operational sustainability.
“The strict rules, along with high commissions and VAT, meant that establishments were not able to take advantage of dynamic pricing or were spending significant amounts of time trying to negotiate with Booking.com. A room not filled per night is a room lost and this agreement will allow businesses to price for higher occupancy rates.”
Tshivhengwa said investment and entrepreneurship in local OTAs was needed to compete with global tech giants and keep money circulating within South Africa’s economy.
“We need to develop our own technologies on the ground and get more investment in technology to scale up and be able to compete with the capabilities of global players in the market.”
