Some hotels in the UK are being investigated by the Office of Fair Trading (OFT) over allegations that they are pressurizing third parties to raise their rates. Investigations began after a discount website Skoosh.com lobbied the OFT for months claiming that it was being harassed to offer rooms at a standard price.
Speaking to the BBC, Dorian Harris, Managing Director of Skoosh.com said hotels would email, call and threaten legal action over his website openly offering hotel discounts. He said the hotel managers told him that the website should raise prices or take the hotels off its list.
OFT is investigating suspected breaches of competition law in the hotel online booking sector and has written to a number of parties requesting information. Some hotels are unhappy that their own prices are being undercut, but OFT has not named individual companies or hotels, an OFT spokesman said.
Hotels routinely sell many of their rooms to wholesalers at discount prices, who then sell them to travel agents. Now however, many websites buy rooms from wholesalers and offer rates at far lower prices than those of travel agents or the hotels themselves, as they have lower profit margins.
The practice of keeping prices at a preset level is known as 'rate parity' and it can be considered a breach of competition law if it is tampered with. Any breach of the Competition Act can attract OFT penalties of up to 10 percent of the offending company's turnover.
The OFT spokesman said it was too early in the investigations to say if laws have been infringed upon.