Dear Mr. Leibowitz,
Almost exactly 2 years ago in November 2010 I brought to your attention the fact that the largest travel companies in the U.S. were working together to preclude price competition in the hotel industry. I’m not sure how much time you were able to spend reviewing my case or whether you deemed it a priority. I assume not. The situation has now got worse.
It was announced yesterday that Priceline has bought Kayak. In other words, the most dominant force in the hotel industry has acquired the only significant price comparison site in North America. It’s a crushing blow for the travel industry and the consumer.
The consolidation not only reduces competition but also removes downward pressure on prices. Priceline works on a commissionable model with hotels so the higher the rate the customer pays the better it is for the company. Indeed, Priceline has spent half a decade forcing its competitors to raise their prices.
As a price comparison site Kayak should in theory seek out the best discounts for its visitors but, as a result of price parity in the hotel industry, it has no competitors and will get paid advertising revenues regardless of the rates available on its site.
You may suppose that there’s sufficient inter-brand competition to keep the market fluid but that’s not the case. Hotel chains also work on a commission so they want to sell at the highest rate possible and they hunt down discounters, with threats of legal action.
So it has long been in the interests of all the major players to keep rates high (and, remarkably, at exactly the same level) and now they are joined by Kayak, the one company which should be setting competitors apart in aid of the consumer.
I don’t propose to open up a formal complaint against this acquisition because I feel that Skoosh has done more than its fair share to highlight the imbalance in our industry. At the same time, I could not watch this one pass by without note. Consumer have been hurt badly enough by the banks, we don’t need this nonsense in the travel industry.
If the F.T.C. doesn’t step in with the greatest of urgency, the hotel industry in the United States will be so skewed by this latest monstrous tie-up you may never be able to unravel it.