The European Commission has been working on the new wording of the latest version of the Package Travel Directive. While discussions are still continuing with European transport ministers, there are some significant developments for those involved in business travel.
- There will be broad-based exemptions for business travel, where the travel arrangements are purchased on the basis of a general agreement between a travel company and a traveller for the arrangement of business travel. Most travel management companies will have agreements with their buyers, and should fall within this exemption. However, language is still under discussion about what constitutes a ‘business’ – does this include sole traders, partnerships, LLPs, charities and so on?
- Beware airline click-throughs that are likely to require financial protection and may become ‘packages’. Where data including the passenger’s name, payment details and email address is transferred between an airline’s website (or other travel service provider) and another online supplier within 24 hours, this will be an ‘assisted travel arrangement’ and a package. In other words, an airline can become a tour operator.
- Where there is a click-through by one travel supplier to a recommended linked travel service provider ‘in a targeted manner’, but with no data sharing, these are likely to fall within the definition of ‘linked travel arrangements’, where the provider of the first service will need to provide insolvency protection, to protect buyers in the event of its failure.
The new directive is unlikely to come into force before 2017. However, it has led to a reaction from International Air Transport Association (IATA),that the new rules will cause considerable legal uncertainty, add administrative costs and lead to an increase in red tape.
GDS charges
Lufthansa has announced plans to introduce booking systems to enable agents to connect their networks directly to its booking engine, based upon IATA’s New Distribution Capability (NDC). At the same time it announced a new ‘distribution cost charge’ for all tickets within its airline group not made through one of its own distribution channels.
The charge has been indicated as €16 per ticket issued by a booking channel using a global distribution system (GDS). The booking fee may deter passengers booking through online travel agencies (OTAs), or through price-comparison sites or metasearch engines.
It is likely that other airlines will review whether similar changes fit their own distribution models. What can and can’t be done will be driven by competition law rules.
Pricing practices
Following an investigation into pricing practices between Intercontinental Hotel Group with Expedia, Booking.com and Priceline (the latter’s parent company) the Office of Fair Trading (OFT) accepted commitments on whether the hotel was unable to give better discounts to other traders.
Other commitments prevented the OTAs discounting, but only to a closed group of customers who had previously booked hotels at the full price.
These commitments were challenged by Skyscanner, a price-comparison website, by a successful appeal with the Competition Appeal Tribunal finding that the OFT had failed to take into account price transparency and the ability for metasearch to undertake proper price comparisons. The case has been sent back to the Competition and Markets Authority (which superseded the OFT in 2014) for further review and market analysis.
This case is seen as significant by suppliers of travel services who sell through vertical arrangements, such as through travel agencies, down to the eventual consumer.
These vertical arrangements must also be seen in the context of groupings of suppliers where market share and negotiating power are relevant to the application of competition law principles.
It is interesting to note that hotel group Accor has announced it will partly become an OTA itself, by allowing independent hoteliers access to its website to market hotels for a booking commission expected to undercut some of the larger OTAs.
These developments indicate how suppliers and agents are seeking to exercise greater control over e-bookings, and at the same time, suppliers are trying to control their own distribution networks.