Red flags raised as ACCC gives green light to Wotif takeover
The Australian Competition and Consumer Commission (ACCC) said it would not oppose Expedia’s $700 million takeover of Wotif.com, despite concerns from hotel groups saying the move will likely result in higher prices for consumers.
Hotel groups argue that commissions charged by Expedia were lower in Australia due to heavy competition, which is only expected to increase with the Wotif takeover.
“The ACCC noted the concerns raised by market participants that Wotif represented an important source of bookings for some accommodation providers and that its removal from the Australian market may result in them paying higher commission rates to online travel agents (OTAs),” ACCC chairman, Rod Sims said.
“However, the ACCC found that there has been considerable change in the competitive dynamics of the online accommodation distribution market in recent years”
“The ACCC considered that the acquisition was unlikely to diminish the dynamic nature of the industry.”
The approval today sparked discussion from the AHA, the Accommodation Association of Australia (AAoA) and the Tourism Accommodation Association (TAA) together agreeing the acquisition may trigger an onslaught of higher commission rates and consolidation in the OTA sector, a negative result for the Australian tourism industry and consumers.
"Currently Expedia is estimated to hold 10% of the Australian hotel portal market. With the acquisition of Wotif, Expedia will grow to 45%. Another major competitor, Priceline, is believed to have approximately 40%. With a successful acquisition the two companies may have up to 85% of the Australian market,” Industry spokesperson, Bradley Woods, said.
“This acquisition removes choice for accommodation providers between foreign and Australian operators and different commission models for selling their rooms online through third-party websites.”
Upon handing down the ruling, Sims said smaller OTA’s which had entered the market and metasearch sites like TripAdvisor and Google Hotels Finders were expected to curb Expedia in the future.
However, the hotels groups remain unconvinced, saying growth in the meta search sector did not guarantee protection against rate increases.
“The growth in meta search engines, does not guarantee more competition or protection from massive commission rate increases, as OTA's are already buying meta search companies and consolidation creep is already happening,” Woods said.
“The movement is definitely towards consolidation and that means that OTA's may inevitably push up commission rates from the 11-12% currently towards the 18 – 25% that is more typical in the USA and Europe.
“The end effect of acquisitions and concentrations of market power into two or three companies will be that the consumer may end up bearing the cost of less competition.”
The sector also raised concerns about the emergency of rate clauses into hotel and OTA contracts, as demanded by OTA’s prohibiting hotels to offer better rates to consumers through their own hotel owned websites or booking systems.
“We have already raised the issue with the ACCC and will now take the matter further with the Commonwealth government and ACCC as it is clearly contrary to Australia’s competition and consumer law principals,” Woods said.
Meanwhile, Wotif welcomed today’s decision, saying the takeover was expected to be completed by the end of the month, pending approval from shareholders and New Zealand officials.
The Wotif board of directors have urged shareholders to accept Expedia’s takeover offer of $3.30 per share, with co-founders Graeme Wood and Andrew Bice agreeing to sell their stake
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