The role of online travel agents (OTAs) has become increasingly important within the hospitality industry. A growing number of customers are turning to OTAs as a one-stop shop to search for and book hotels online. According to a study by the EU stakeholder organization HOTREC, the market share of online intermediaries (OTAs and global distribution systems) for hotel bookings in Europe increased from 21.8 percent in 2013 to 28.7 percent in 2021.
In light of OTAs’ significant market reach and global footprint, the dependency of hotels on OTAs remains very high. At the same time, OTA commissions are one of the largest cost factors for hotels.
In 2020, the European Commission found that 46 percent of business users experienced problems with online intermediation services throughout their business relationship. One out of five businesses often experienced problems, while heavy business users, i.e., businesses generating more than 50 percent of their turnover via online platforms, were even more likely to experience problems.
Meanwhile, the EU has modernized its legal framework for OTAs, enacting various harmonized legal instruments to rein in the power of OTAs as online platform gatekeepers. These measures are designed to ensure a more balanced partner relationship between online platform giants (including OTAs) and business users, such as hotels and customers, which depend on the major online platforms and gatekeepers.
- Platform-to-Business Regulation – Regulation (EU) 2019/1150 (the P2B Regulation). The P2B Regulation took effect on July 12, 2020. It aims to ensure the fair and transparent treatment of business users by online platforms, giving them more effective options for redress when they face problems, and creating a predictable and innovation-friendly regulatory environment for online platforms within the EU. The P2B Regulation sets forth specific legal requirements for OTAs’ terms and conditions for business users. The P2B Regulation also introduced new transparency requirements for OTAs; this includes new requirements to achieve a more thorough understanding of rankings and search results. The P2B Regulation was well received by the hospitality sector.
- Digital Markets Act – Regulation (EU) 2022/1925 (the DMA). The DMA applies from May 2, 2023. It will put an end to unfair practices by companies that act as gatekeepers in the online platform economy. While only dominant OTAs will qualify as gatekeepers, the DMA establishes a list of do’s and don’ts that gatekeepers will need to implement in their daily operations to ensure fair and open digital markets. Among others, the DMA sets out a ban on narrow price parity clauses, which would prevent hotels from offering a better price on their own channels than on the OTA’s platform. Europe’s hotel industry expressly welcomed the DMA as a clear signal to digital giants to behave like partners, and not as gatekeepers.
- Proposal for a new EU regulation on short-term accommodation rentals (STR). On November 7, 2022, the European Commission presented a proposal for a new EU Regulation on STR (STR Regulation). In essence, the STR Regulation is intended to ensure a level playing field among all accommodation providers by introducing new obligations for hosts of STR and OTAs listing STR on their platforms. The proposed new obligations for OTAs include the obligation to display hosts’ registration numbers on their platforms and the obligation to share specific data about hosts’ activities and their listings with public authorities. Industry stakeholders support this new proposal.
The EU legal framework for business users of online platforms, including OTAs, is in the middle of a significant improvement. But what will come of the EU’s efforts to achieve a level playing field around STR remains to be seen.