Priceline, Kayak and other family matters.

Incest has a bad rep and you can see why. It often results in the spawning of children with weird defects like underdeveloped limbs or oversized heads. Take the royal family for example or the U.S. hotel giant Priceline.

There is speculation in the media today that Priceline’s acquisition of the price comparison site, Kayak, has been delayed pending the investigation by the U.K.’s Office of Fair Trading into Priceline’s daughter company Booking.com. You’d bloody hope so, it’s disgusting! And this acquisition is a nonsense. Why on earth is Priceline trying to buy a price comparison site which is at odds with its own M.O.?

Priceline’s original business model was essentially an auction whereby customers bid for hotel rooms. This peculiar concept emerged as a result of the hotel industry’s adoption of ‘rate parity’, a statute whereby all online distributors are bound to sell hotel rooms at exactly the same price.

The only exceptions to this industry rule are business models whereby the consumer – you and I – can’t make direct comparisons between prices on different sites and thereby shop around for better prices. Lastminute.com’s ‘Secret Hotels’, in which customers are not told the name of hotel until they’ve booked and paid, is one of these exceptions. Priceline’s bidding system is another.

I am all for companies doing what they can to circumvent restrictive and most likely illegal contract clauses. However, not in Priceline’s case.

Some years ago Priceline bought Booking.com which, alongside Expedia, is one of the biggest proponents of rate parity. It doesn’t just advocate it, it insists on it, and it employs teams of rate parity monitors to police the internet for rogue companies like Skoosh undercutting the parity rate. When it finds them it contacts the hotel in question which has allowed a lower rate to hit the market and it threatens them with delisting from its now market dominant site.

In part because of the prevalence of the rate parity restriction which Booking.com has fostered and in part because of the eye-watering $1 billion annual advertising spend its doting parent Priceline has put behind it, Booking.com is now the world’s preeminent hotel site. And Priceline liked its daughter’s business model so much it adopted it for itself in preference to the auction.

It’s not often you see a parent adopt its own daughter but peculiar things happen in the hotel industry. And that brings me on to Priceline’s rather incestuous acquisition of Kayak.

Kayak is a price comparison site to which people flock to compare prices, as you’d expect. It’s a great concept and one which Skoosh happily benefitted from during its 5 years of cooperation despite the underlying concern that we were always going to be at a disadvantage to the nepotistic founders and CEOs (harsh words, I know, but it’s all in writing).

Almost as soon as it was announced that the O.F.T. was investigating some of the major Kayak partners, namely Expedia and Booking.com, Skoosh was unceremoniously dumped  with a chilling and unexplained 30 days notice. We took that on the chin, among other places, and continued our own journey.

When Priceline announced that it intended to acquire Kayak last year I didn’t lodge a complaint simply because I couldn’t imagine a competition authority worthy of the name letting that one slip through. A price comparison site being bought by the leading advocate of uniform pricing? It’s as unthinkable and nonsensical as a price comparison site in Soviet Russia – ‘any price you like as long as its this one’.

I’ve published enough articles now to know not to believe everything I read in the press but God knows I hope this speculation about Priceline’s bid being stalled by the O.F.T. is true. Or perhaps this isn’t really a competition issue at heart and with all this parent-daughter and extended family stuff going on, someone should be referring the matter to the social services.

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2 Responses to “Priceline, Kayak and other family matters.”

  1. I sure hope the OFT is stepping in as well. It’s time to move away from Leegin, et al. and get back to protecting consumers and having more transparency in this process.

  2. john says:

    Many customers also use TRIPADVISOR which is now more often than not also acting as a very determined agent on a commission for the large OTAs. Really the customer is getting shafted into thinking they are getting the best rates from booking.com and their croonies, when they are not. And many small hotels are really competing with themselves to pay booking.com and other similar otas huge commissions to rank high on their bloody lists.

    I have a small hotel and we’ve said no all OTAs as we would rather have a lower occupancy but pay less commission. I know of hotels in my area paying up to 40% commission to agoda and booking.com

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