OFT forces travel agents to give punters a better deal

Hotel customers should get bigger discounts after the Office of Fair Trading forced two of the biggest online travel agents and the world’s largest hotels company to pass on commissions to guests.

The deal agreed with the competition regulator also means that InterContinental Hotels Group, Expedia and Booking.com avoid possible multi-million pound fines.

The OFT said in July that the three companies had broken the law because the online travel agents had agreed with IHG not to discount prices using commissions they received from the hotel group for booking rooms. They all denied this.

The agreement means none of the companies has to face fines. Companies can be fined up to 10 per cent of their global revenues for breaking OFT rules. IHG’s 2012 revenues were $1.8bn (£1.2bn).

The OFT said it would hold one month’s consultation on the commitments made by the three companies and they should come into effect a month later.

Ann Pope, a senior director at the regulator, said: “The OFT is consulting on whether these commitments offer an immediate and effective means of injecting some meaningful price competition into the online offering of room-only hotel accommodation bookings where, in our provisional view, none may exist. Under the proposed commitments, online travel agents would be able to offer discounts off hotel room bookings to qualifying consumers.”

The new deals will apply to UK residents booking hotels across the European Union and only kick in if they are signed up to a loyalty scheme and have been to that particular hotel at least once before.

Online travel agencies are believed to receive around 15 per cent commission on each room they take a booking for.

Industry experts said they believed they could pass on anything from half to two thirds of that fee to their customers resulting in 7.5 per cent to 10 per cent discounts.

The OFT said it believed the online rooms booking market for UK hotels alone was worth £849m in 2010 and that IHG and the two dot.coms had been working together since 2007.

IHG, Expedia and Booking.com dismissed the watchdog’s original findings and claimed their arrangements had not broken the law.

An IHG spokesman said: "IHG has worked closely with the OFT to agree these commitments”. A spokesman for Expedia said: “Expedia welcomes these commitments which will enable the OFT to close its investigation without taking any action and to permit Expedia to focus on its long-standing commitment of driving global demand for its partners by providing the best online travel experience.