A potential lack of competition in the accommodation industry as a result of the planned acquisition of Wotif Group by Expedia is under review by the Australian Competition and Consumer Commission (ACCC).
The ACCC announced it is considering the proposed acquisition under section 50 of the Competition and Consumer Act 2010 (the Act).
Section 50 of the Act prohibits mergers and acquisitions that substantially lessen competition in a market, or are likely to do so.
The ACCC said it is “seeking comments from market participants and interested parties to assist with its review of the proposed acquisition and would welcome any comments you have in relation to the competitive effects of the proposed acquisition”.
Among the key questions, it is asking: “Is there a separate market for the supply of online platforms for the accommodation and/or other travel products?”
“Please comment on the substitutability and closeness of competition between the following distribution channels relative to online platforms: ‘Bricks and mortar’ travel agents, such as Flight Centre, Helloworld and STA Travel; and
Direct booking channels (including online sales by airlines and hotels),” the ACCC has asked.
The ACCC is also asking: “Is the proposed acquisition likely to give the merged Expedia / Wotif a competitive advantage in attracting consumers or travel content owners to its websites? Please explain how this may or may not occur.”
Comments and submissions are requested by close of business Wednesday 6 August 2014.
The Australian Hotels Association (WA) CEO, Bradley Woods, has welcomed the review.
“It is appropriate that the ACCC looks closely at this proposed acquisition,” he said. “The acquisition must be examined in the context of consumer, customer and national interest.
“The AHA(WA) is seeking a determination from the ACCC as to whether the proposed acquisition is likely to substantially lessen competition in the market.
“Foreign operators could potentially dominate the Australian landscape of online travel agent hotel booking websites, it is therefore appropriate that the ACCC examines this matter.
“Obviously for the information technology sector and associated jobs there are also implications, as Expedia headquarters are in the United States.
“The Australian Hotels Association will be making a submission to the ACCC on behalf of our members and customers,” Woods.
The Accommodation Association of Australia CEO, Richard Munro, has had concerns about the acquisition from the outset.
“The prime concern, of course, is that Wotif have historically maintained a lower commission base (according to their half year report, the commission on accommodation is circa 13%, derived from AUD$500million bookings divided by AUD$66 million in Wotif revenue) compared to global OTA’s that may charge up to and over 20%.
“As a result of the lower cost to transact, Wotif have been able to ensure that they have enjoyed the largest market share of hotel partners and subsequent bookings in the Australian market.
“If this dynamic were to shift as a result of the takeover and transaction costs increased, it would certainly be difficult to pass these increases onto consumers in the current climate.
“We would add that the industry would also actively seek alternative avenues to promote their inventory to consumers, should any significant increases be sought by Expedia, to ensure a fair outcome for operators and their customers (guests).
“Expedia is a very large international company with unprecedented distribution channels booking over 260,000 properties for 146 million room nights, in fact they book around USD$40 billion of business a year globally, and raise revenue of USD$5 billion.
“By the nature of its size, Expedia does present opportunities for operators to promote their properties internationally, but it is also important to note that the relationship is symbiotic, as Expedia require our industries inventory to even operate.
“The Association will be watching the situation unfold closely and keep our members advised of any potential shift of transaction costs and alternatives,” he said.