The war between hotel owners/operators and online travel agencies (OTAs) MakeMyTrip and Goibibo is set to get ugly with the Federation of Hotel & Restaurant Associations of India (FHRAI) joining in. The apex body has warned the OTAs to resolve the issue amicably or its member hotels will go on a nationwide protest.
In its letter to OTAs, the FHRAI highlighted some of the most critical concerns including distortion of market price, the demand for exorbitant commissions between 18% and 40% and the hosting of illegal and unlicensed bed and breakfast accommodations.
Gurbaxish Singh Kohli, vice president of FHRAI and president of Hotel and Restaurant Association of Western India (HRAWI), said one of the biggest concerns is that after securing discounted rates from a hotel, the OTAs further discount it on their online platforms without the hotel's consent. "This damages the hotel's reputation while simultaneously distorting the market scenario. Ironically, the OTAs have a clause in their agreement that forbids hotels from discounting their own rates but are themselves free to do so. This disparity is not just unfair but is clearly intentional and is done with the objective of market cannibalisation," he said.
The federation also stated that based on the previous experience of hoteliers whose attempts at negotiations were neglected by the OTAs, it has forewarned a nationwide protest against the OTA entities.
Responding to DNA Money, a MakeMyTrip spokesperson said, "We are actively engaged with our partner hotels and are in dialogue with the FHRAI as well. We are confident that we will be able to resolve any concern amicably."
The move was necessitated after a number of FHRAI's member associations complained about the business practices of the OTAs. According to the member associations, the business model of OTAs is exploitative, unethical and divisive, thus leading to predatory pricing and other market distortions that had the potential to harm both hoteliers and consumers in the long term.
Sudeep Jain, vice president of development - South West Asia, InterContinental Hotels Group (IHG), said the best solution to this problem will be to sit down and figure out each others' issues and try to resolve them. "If it's come down to a nationwide protest, clearly indicates there is an issue that people need to discuss and find a solution to that works for everyone. That's a fair thing to do. What the solution is anyone's guess and I'm not sure what that would be right now."
Hotel industry players are of the view that not honouring the bookings would prompt MMT and Goibibo to initiate a legal action. "That's because the hotel contracts being signed clearly mention that all bookings made by their website shall be honoured. In case they are not, then the hotel has to provide alternate accommodation in similar/higher category of hotels. It will give rise to a lot of litigation on a few hoteliers," said a hotel owner on condition of anonymity. According to another hotelier, the OTAs did not force the hotel owners to sign the contracts. "I'm not trying to be a devil's advocate here but no one forced them to sign the contracts and it was done willingly. If the hotels don't want OTAs, they should give them a formal notice and go off their portal. It seems the budget hoteliers have acted in haste. They should have planned the move in advance with the guidance from legal experts," said the hotelier.
Agreeing to 30-40% commissions demanded by the OTAs may have been a situational decision taken by hoteliers in haste. "However, the same should have been reviewed periodically or should have been done for a limited period only. A blanket ban by hoteliers is not the solution. With the help of legal experts, hoteliers should have sat across the table with MMT and Goibibo and resolved the matter," said a hotelier.
The federation also raised an alarming point in its letter. It alleged that the OTAs were legitimising unlicensed businesses by promoting them on their sites and apps, which was disrupting the business of the organised hotels.
S K Jaiswal, vice president (North), FHRAI said that over 40% of the room inventory available on the OTAs is illegally operated. "The so-called bed and breakfast (B&Bs) are operating without valid licences from local or state authorities, and hence, are cheaper by default. This disrupts the spirit of a level playing field by pitting the fly-by-night operators against the organised sector and is also a huge loss to the exchequer. Not only does this put legit hotels at disadvantage but such indiscriminate hosting encourages illegal activities. Such non-compliance of statutory rules and regulations compromises guest safety and is a big concern for everyone involved," said Jaiswal.
DIRTY LAUNDRY
- In its letter to OTAs, the FHRAI highlighted concerns including distortion of market price, the demand for exorbitant commissions between 18% and 40% and hosting of illegal and unlicensed accommodations
- The federation alleged that the OTAs were legitimising unlicensed businesses by promoting them on their sites and apps, which was disrupting the business of the organised hotels
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