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.
I’ve always assumed Trivago and the rest are looking after themselves first and foremost. I thought the stuff they got pinged for was a pretty open secret.
This article ignores what Trivago in particular offers that people like. It offers a quite comprehensive method to compare and rate actual services, offerings and add ons. I’ve used it many times for travel here and overseas and it’s impressively accurate most of the time.
However I long ago moved towards direct booking with hotels etc and strongly recommend doing so. You can ring or email and deal direct and easily ask about finer details and preferences. And of course the place doesn’t pay the excessive booking fees even though they may pay the Click per view fee.
There’s a place for us he Trivagos and Expedias etc. Smarter customers could force them to morph into more pure advertising and recommendation sites.
The really big issue with these companies is that they are massive tax avoiders and for this reason alone people should do as little direct business with them as possible. Another sector where we need flat turnover tax instead of jokeworld company tax.
I realised it was crap half way through last year when I was looking for a room in Canberra. Found one using a simple booking site that was cheaper than their best anyway. Sick of the smarmy ponytail on their ads too.
Agreed +++
I absolutely despise Trivago’s smarmy, we’re oh so superior, ads. Of course the industry creatures on Gruen would say that made an effective ad, because I hate it, I pay attention to it.
But will I ever use Trivago? Not bloody likely.
The best thing I can say about those sites is they at least give a succinct list of possible places to stay and how much it’ll cost. Then I book through the hotel’s website. (Maybe I should be picking up the phone…) No sense in paying a middle man for what can be a direct relationship – with the internet it’s really not hard to find what you need to get in contact with the business directly.
Yes indeed. Love him or loath him, Dick Smith has long been pleading for Aussies not to use these sites. “Why have a middleman (who has to get a cut) for such a simple task, and worse still, it’s an American middleman who’s not even going to pay tax here…?” he asks rhetorically. Hard to argue with his logic.
Before these sites started, it was bloody hard to get alternate lodgings to the big hotel chains, particularly if you were holidaying to unknown places. For that reason I’ll keep using them (not the comparison sites).
I often use the site as a starting point when searching for accommodation. It allowes quick comparison of the different fascilities and offeres. Once I narrowed down the possible places I visit their internet site to get conformation if the the booking site was correct. I have rang Hotels direcltly but ususly the cost was higher or the same. Last time I called and bookef direct wss the same price. That was only 4 months ago. I found booking sites very helpful with cancellations. I have never called Trivago but have spoken with Expedia and Booking..com when I have stuffed up or was not sure about something. If you use your wit, as you should do when dealing with any business, they can be very useful. At least you can contact them directly, which is better than Airbnb.
Good on you GoTo. You completely miss the point of Dick Smith’s plea (and therefore the thrust of my post). He doesn’t deny it appears to be a quick and easy solution to acquiring a comparative list. But, for domestic purchases anyway, he’s suggesting these organisations aren’t there for you…. they’re there for themselves, and you could make a few quick phone calls and keep the business (and the profit) in-country.
Gumshoe, I did not miss your point but you missed mine. First rule for a business is to make profits. Hence, in general a business has its own business interest before yours. I said, I have several times called or contacted by email hotel directly and was told that they cannot undercut the booking sites price. Some quoted a lot more. My experience is that it is a fallacy that going direct will give you better deals. It you travel in countries where English is not widely spoken, paying for an expensive overseas call and not being able to communicate with the person on the other side can be frustrating. Trust me, I travel lot and I do all my own bookings, these sites have their advantage if you know how to use them.
Have another read above, Go To. We’re talking about DOMESTIC purchases, as was the ACCC. What you might feel obliged to do for international purchases is another matter. There isn’t space or time here for a debate on that… (although there’s plenty of scope for one).
Gumshoe, I am talking about both, overseas and within Australia. In Australia, I have tried several times contacting the hotel directly, always with the same answer. The cost was higher or it was the same. If they sign up to a booking site, they are not allowed to undercut. Accommodation providers use the booking sites because it increases their visibility, hence they get increased business. Have you ever been able to get a better price by going direct? I mean compared both costs? Maybe rules have changed recently and I am not aware of the recent rule change. That does not mean that I support false or misleading advertising. It should be called out and it should be punished. Unfortunately, it has become more the norm than the exception.