Sharing economy and online booking issues update.

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Just a quick note keep you all informed progress with two issues: the sharing economy APPG inquiry and the CMA online accommodation booking investigation.

Kurt Janson and I met earlier in the week with Gordon Marsden MP our President and the Chair of the All Party Parliamentary Group on Tourism which Kurt and the Tourism Alliance administer.  The APPG will now hold oral evidence sessions for its inquiry into the Sharing Economy in February with a view to publishing interim finding in March.  This will be in time to allow these to be presented as a session by Gordon at the  joint Tourism Alliance British Destinations one day conference in London on the 19th March.  Gordon is also hosting this year’s Annual Tourism Parliamentary Reception in the House of Commons in the late afternoon of the 19th to which all conference delegates  are invited to attend.

The APPG took written evidence last year but the oral evidence session were curtailed by the unexpected General Election and there has been no real opportunity to proceed  much before now.  If anyone has strong view for or against the sharing economy in tourism which have not yet been submitted to the APPG, then let me know and I will speak with Kurt about late submission.  Being an APPG it isn’t tied to formal select committee rules.

The Competition and Markets Authorities investigation in to online accommodation booking closed for written submissions at 5 pm today.  After some debate (with myself) I decided late in the day to make a very informal submission primarily in order to highlight the possible impacts on destination management that almost certainly lie outside the direct remit of the investigate.  However, never let an opportunity pass you by.

What I sent is reproduced below.  If you have any comment and particularly if  you think I have got anything badly wrong or you disagree with the direction taken then please let me know:

Email text reads:

British Destination is the trade body for major destination based tourism interests in the UK, we currently represent over 40 destination management organisations who between them represent and manage the interests of a variety of urban and rural destinations and those of the tourism businesses that operate within then.  The majority of our members are public private sector partnerships, many of those are coastal resort based but we also represent inland Cities, towns, rural Counties and rural tourism areas.   See www.britishdestinations.net   for more detail about us and our work.

Our primary role in support of your investigation in to online hotel booking has been to encourage our members, to encourage their local businesses and, where possible, consumers to respond.  We did so because we were already aware of a growing concern, especially amongst SME accommodation providers, that a small number of very large online booking platforms (owned by even fewer companies) were apparently achieving and potentially exploiting a position of market dominance.  The evidence we have seen suggests that some of that dominance has been achieved by the use of questionable consumer focused marketing practices and that having dominated the online route to market directly and, to a degree, dominated or suppressed the offline route indirectly, they were now setting some unreasonable conditions and asking overly high prices, especially of the smaller providers who may have fewer if any alternative routes to market.  We are confident that these claims will be supported by the evidence submitted to you by individual businesses and that appropriate action to remedy any true abuse found will consequently be taken by you. We are less confident that you investigations will expose the very serious problems the market dominance is starting to cause amongst popular UK destinations, or that if they do that you can directly remedy these.  Nonetheless, we feel it may be useful to give you a brief overview and a flavour of the issues so that if it does fall within your remit you can then seek further detail from us.

Most UK destinations of any significant size have a commercial need to plan, coordinate and deliver joint activities which will benefit the destination as a whole.  There is no legally binding framework or fund mechanism available to do this (other than Business Improvement Districts which are limited in their effect and are not yet widely used in tourism).  Examples of joint activities typically undertaken include, the provision of events (air shows, illumination, cultural activities, markets, shows etc.), support for conferencing and generic destination marketing, including destination branding, PR websites and social media, none of which can easily be organised or funded at the destination level by any individual businesses acting alone.  That function is usually provided by a voluntary local partnership structure that will involve a mix of local tourism businesses and local government (often called a destination management, marketing or partnership organisation [DMO or DMP]). The local models vary significantly in structure and funding but all have traditionally suffered from a degree of freeloading from businesses that don’t volunteer to contribute but who patently benefit from the branding, marketing, publicity increased footfall and additional staying guests that the destination activities attract.   Historically the gap between what businesses need to do on a joint basis for the destination to thrive and what collectively businesses are voluntarily prepared to pay for by way of membership fees, sponsorship, commission payments, service fees and contributions, has been filled by the public sector.  Unfortunately even in the most tourism reliant areas, local authorities are now struggling to fund or fund and provide what is a non-statutory function in an environment of ever decreasing public expenditure.

The relatively recent advent of the online accommodation booking platforms has served to inadvertently compounded the freeloading problem.  As far as we can ascertain none of the major online booking organisations contribute to the destination management costs of any UK destination where they do business.  So for example, whilst Blackpool Illuminations will attract significant number of individual to stay in Blackpool and book online, the major online booking platforms that benefit are contributing  nothing to the significant cost of providing the illuminations or indeed to what is a multi-million pound series of activities conducted by Visit Blackpool and partners throughout the year.   That issue is replicated at every other destination in the UK.  Moreover, increasing local accommodation businesses who would have previously contributed are citing the high cost to them of using online booking platforms as a reason for not contribution as much or at all  to the local destination activities. Many feel they have no choice but to operate through online booking platforms and no choice but to pay the usually high costs of doing so.  Having paid, in some cases we believe up to 30% of the room rate to getting a booking, there is little appetite to pay anything to anyone else unless there is a legal obligation (VAT, income tax etc.).

Freeloading on the destinations corporate activity isn’t by any means a new phenomenon but the activities of the online platforms are exacerbating the issues and doing so at a time and at a point at which the traditional funding models for destination management and marketing are under pressures from public sector austerity. This will almost certainly serve to damage many UK destination’s future prospects and those of their local businesses both contributing and non-contribution.  It may have an impact on the online booking platforms too but we suspect that given the global nature of their business models, they will simply move on and replace lost business and lost revenues from elsewhere in the world.

Better consumer understanding of what the platforms are actually offering them, lower costs to the accommodation providers and fairer practices from a wider choice of genuinely independent online booking platform might go some way to easing the destination management problems we allude to; as would an active and preferably contributing relationship between online platforms and the destinations that actual generate much of the demand that the online accommodation booking platforms then exploit to make their money.  The former might possibly be within the CMA’s gift, the latter is perhaps something the destinations might need to attempt to address themselves.  In fairness to the platform providers the degree of growth and development in such a short period of time is bound to result in a number of unintended consequences and serious structural issues.  Whether they wish to address these or continue increase their market share and dominance by disruptive technological means, remains to be seen.

My apologies for the informal and hasty nature of this response.  Given that our main concerns seemed to lie outside the remit of the investigation the decision to write to you wasn’t made until the eleventh hour before the submission deadline later today.  If the content is of any substantive use to your investigation we would happily provide a more detail and structured summary of the issues outlined above or attend a meetings, if that is appropriate means of contributing to your investigation.

Your sincerely

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One thought on “Sharing economy and online booking issues update.

    Kevin Boorman said:
    December 15, 2017 at 11:44 pm

    Thanks, Peter, this seems very fair to me.

    All the best,

    Kevin

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