- Spanish hotel sector backing two class action lawsuits against Booking.com for the damages.
The Spanish hotel sector is currently fighting a legal battle that, due to the global nature of tourism, could have rippling effects beyond European borders and open up new opportunities to increase profitability and strengthen the competitiveness of Dominican hotels.
Backed by a ruling by the European Union Court of Justice (CJEU), issued on September 19, 2024, which confirmed that parity clauses – both broad and narrow – violate European Union competition law, the Spanish hotel sector is pursuing two class action lawsuits against Booking.com for the damages caused by these contractual provisions.
For two decades, these clauses prevented establishments from offering lower prices on their own websites or on competing platforms, thus limiting free competition in the market.
In force since 2004, these conditions forbad hotels from marketing rooms through any other sales channel at prices lower than those published by Booking.com. According to the plaintiffs, this practice eliminated competition between platforms and contributed to artificially inflating commissions, which were around 20%. The company ended this policy on June 30, 2024,
The main potential benefit of this process is that platforms such as Booking Holdings and Expedia Group capture a significant portion of the revenue generated by tourism. If their ability to impose conditions is reduced, the commissions they charge could decrease or become more negotiable, thus improving hotel profitability.
This would mean that Dominican hotels would also have more leeway to offer better conditions to tourists.
An eventual loss of dominance of digital platforms would lead the way to strengthening direct bookings, local agencies and the marketing strategies of hotels. However, this transition would not be without its challenges. The international visibility offered by these platforms remains a valuable asset, as not all hotels have the technological capacity or marketing budgets to replace it, and the consequential risk should be ignored: less intermediation, without effective alternatives to replace it, could translate into a reduction in the flow of tourists.
If the role of digital platforms decreases, competition between hotels themselves would also increase. Direct discounts, differentiated offers, and more aggressive commercial strategies to attract customers would emerge. As happens when new floodgates open in a market, competitive currents tend to intensify.
For the Dominican hotel sector, this could imply a moderate reduction in average prices and initial pressure on profit margins. However, if the strategy is properly managed, the end result could lead to higher occupancy levels and a more efficient distribution of revenue. A possible regulatory effect cannot be ruled out either.
If the European reform is consolidated and generates positive results, it could arouse interest in the Dominican Republic to review certain practices by digital platforms and open a broader debate on competition in digital markets, in line with international trends.
In the end, the balance of this change could be favorable for the sector. A loss of power by Booking and other similar platforms would hardly reduce the country’s total tourist occupancy to any great degree. However, it could contribute to a slight reduction in prices and, at the same time, improve the profit margins of many hotels and accommodations, provided they manage to attract bookings through alternative channels or through a direct relationship with their customers.
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