Hotel booking site Trivago has been caught lying to consumers.
The website, which compares hotel room prices from separate booking sites, has been pushing hotels which paid them more money to the top of the page. They got found out and slammed by the ACCC — oops.
Crikey spoke to some experts who said Trivago’s practice isn’t unusual — and the ruling may open up a can of worms for similar booking sites.
How does it work?
Every time you check out a hotel on most booking sites, you’re costing that boutique bed-and-breakfast cash. This model, called cost-per-click (CPC), is fairly standard according to Dr Rohan Miller, a senior lecturer at the University of Sydney’s business school.
“The idea is to attract traffic and sell ads,” he told Crikey. “Triavgo does a lot of promos to drive traffic. More traffic means more clicks, which means more money.”
An advertiser will negotiate with a company to determine how much they’ll pay for each click, Miller says.
“Everything is negotiable.”
Trivago is a “metasearch” site: it searches online travel agents and allows customers to compare prices. Online travel agents, such as Booking.com or Expedia, act as middle men between hotels and customers.
Most metasearch sites are owned by online travel agents: Booking.com owns Kayak and Hotels Combined, and Expedia owns Trivago.
In 2016, the ACCC reached an agreement with online travel sites, removing parity clauses from contracts with hotels. So it used to be that hotels had to agree to provide the cheapest price available to the site. But now, if you call a hotel directly, you’re more likely to get a cheaper price than online (though this does involve picking up the phone and speaking to a person — how much would you pay to avoid that?).
What are the legal consequences?
Trivago is likely to face a fine, Miller says, but not a large one.
“Fines are often at the lower end of the spectrum,” he said. The repercussions, he adds, are likely to be from a loss of traffic to the site.
“The cat’s out of the bag, and there’s a loss of faith — people may avoid Trivago for a while.”
Sharmila Pamamull, Plexus Legal senior solicitor, agreed the fine wasn’t likely to knock the wind out of Trivago.
“Costs could range anywhere from the thousands to the millions,” she told Crikey. “It is unlikely that the penalty issued would be extremely high to result in a shutdown of the company, given that the company operates worldwide.
“It is likely, as with most ACCC cases, that Trivago is being used as an example to provide a stern warning for other hotel comparison sites to ensure they are fixing their advertising methods to avoid similar ramifications.”
Will this have a knock-on effect?
Not only will Trivgo keep operating, but we’re also not likely to see a mass exodus of hotel chains from booking sites, Miller says.
“It’ll be a brave move to move away from them altogether,” he said. “I think there’s a real scope or opportunity for industry bodies to step in and to create codes of conduct. The industry should be self-regulated, with acceptable and non-acceptable practices.”
Prices aren’t about to get cheaper, either.
“Markets like Sydney have high rates of occupancies — Sydney has a mature market and we know what we’re going to pay.”
But, he adds, smaller cities that aren’t as busy may have a small price dip as people move away from booking sites. “That CPC is one less cost for the hotel,” he said.
Whether there’s going to be meaningful change in the industry depends on how shaken companies are, says Pamamull.
“If [other listings] are found to be similar to how Trivago had listed their deals and recommendations, then those companies could have action taken against them by the ACCC,” she said.
But, she added, it all comes down to costs. “Other hotel comparison sites that may operate in the same way as Trivago may choose to continue their practices depending on the penalties Trivago receives, and also based on the costs to the business with regard to changing their current practices on advertising.”
So while Trivago’s been given a slap on the wrist, and other companies operating in the same way may also face fines, it’s unlikely to have any lasting impact — and those annoying Trivago ads are sure to grace our screens again in no time.