Competition Commission and Booking com: Innovation, Sustainability, and Transformation in one fell swoop

November 18, 2024

A recent settlement between the Competition Commission and Booking.com aims to empower hospitality providers by allowing them to set their own rates on alternative sales platforms. This move is expected to accelerate industry transformation and boost competition, benefiting local industry players.

According to the Competition Commission, the settlement "effectively enhances price competition between online travel agents and allows accommodation providers such as hotels and guesthouses to price lower on their own websites for online bookings".

Consumers may also benefit by being able to shop around for lower prices, while accommodation providers have the latitude to innovate and develop their direct sales channels.

The implications of this settlement extend beyond mere pricing strategies. It represents a step towards a more sustainable, dynamic and diverse hospitality sector in South Africa. By allowing providers to exercise greater control over their pricing across different platforms, the industry can respond more actively to market demands and seasonal fluctuations. This flexibility could lead to more tailored offerings and potentially boost occupancy rates during off-peak seasons.

In addition to the price parity agreement, the settlement includes provisions aimed at fostering growth and inclusivity in the sector. Booking.com has committed to developing a substantial program to support small to medium enterprises owned by historically disadvantaged persons ("HDPs") or HDP communities. This initiative promises to identify, onboard, promote, and grow accommodation establishments, activities, and experiences provided by these enterprises.

The settlement has been widely accepted with nods of approval; however, industry experts remain "cautiously optimistic" regarding the HDP initiative until such time that there is a better, wider, and more transparent understanding of its objectives and the strategy that will be undertaken to achieve these objectives. Neil Hughes, the managing director of Providence Hotels in South Africa, says "As good as this ruling is, across the board, for all accommodation establishments in South Africa that are using the Booking.com tool, I remain cautiously optimistic, and would need to better understand eligibility requirements and the time periods for execution".

The success of these changes will depend on how effectively the industry is able to respond to and shape this new landscape. Smaller enterprises, particularly those from HDP communities, may require additional support to compete effectively in this more open market. Hughes adds that "The mechanisms for strategy implementation and support are going to become increasingly important. At this stage, it remains unknown whether associations such the Federated Hospitality Association of South Africa and the Tourism Business Council of South Africa will be engaged as regulatory or governing partners to provide support to the HDP initiative. Moreover, once identified as an eligible participant, there will be a training and development requirement so that these selected HDPs know how to better access the more favourable benefits available to them in order to achieve the desired strategic and commercial social returns. It is unlikely that this training will come directly from the Booking.com team, and so thought and action must be applied to potential partnerships."

While enabling HDP communities may have the direct benefit of adding more local offerings to the market, the mechanisms for achieving this may prove challenging in the absence of an organised strategy and structure capable of supporting a "substantial programme".

Increased competition, diversity, and demand for industry-specific partnerships resulting from this settlement could play an important role in making South Africa a more attractive tourist destination. The ability for accommodation providers to offer more competitive rates, combined with a broader range of unique, locally owned establishments, could give South Africa an edge in the global tourism market.

The hospitality industry's positive reception of this ruling reflects a broader recognition of the need for transformation, sustainability, innovation and adaptability within the swiftly changing global tourism landscape. As South Africa continues to position itself as a premier tourist destination, this settlement could serve as a catalyst for more dynamic and inclusive sectoral growth.

Authored by Khatija Kapdi and Deepna Desai. (Attorneys at Dentons in South Africa)