Price Parity as a practice must be banned – Accommodation Association of Australia CEO Richard Munro told a Federal Senate inquiry in Melbourne yesterday.
Munro was testifying before a Senate hearing into a proposed Amendment to Treasury Laws aimed at ensuring offshore-based multinationals pay their fair share of tax in Australia and prevent passing on any tax increases directly to contracted accommodation providers.
Under current contracts between some major online travel agents and individual accommodation providers, clauses are in place legally prohibiting hotels, motels and serviced apartments from competing against the big OTAs with their own promotions or reduced rate offers.
Munro said any tax increase levied against online travel agents will simply be passed on and would have to be absorbed by accommodation providers as they were unable to raise their own rates to compensate. This practice, he added, would drive consumers in greater numbers to stay at unregulated accommodation operators such as Airbnb hosts.
“Despite making hundreds of millions of dollars in profits in Australia, booking.com manages its Australian online travel agency business almost exclusively offshore in the Netherlands,” the AAoA boss said.
“This means it doesn’t pay GST even though, when an Australian consumer books accommodation through booking.com, the way it displays its pricing gives the impression that it pays GST. It’s actually displayed as VAT, but it’s not remitted.”
Munro referred to several European countries where price parity had already been banned, including France, Belgium, Austria, Germany, Italy and Sweden. Banning the practice in Australia would give accommodation operators a better opportunity to compete with the online travel agencies directly by offering better rates, at their own discretion, directly to consumers including loyal regular guests and locals. This associated extra revenue would allow hotels to offset the imposts of the new tax.
“If price parity were to be outlawed in Australia, another consequence would be that more bookings would be made directly with the websites of accommodation operators, resulting in local jobs being created and more taxation being paid in Australia,” Munro added.
Conservative Australian businessman Dick Smith was mentioned and praised by Munro in his testimony as a key figure in the battle against the OTAs not paying their fair share of tax. Smith’s recent and ongoing ‘Book Direct’ campaign has polarised Australians, with Smith’s online monologue drawing over four-million hits online and the ire of consumers against the online booking giants.
“Australians are absolutely outraged,” Munro said.
“They didn’t know and they have apologised to a lot of our members, saying: ‘We didn’t know all this money was going offshore.”