In a significant move affecting the hotel online travel agency (OTA) market in the European Economic Area (EEA), the European Commission has formally prohibited the proposed acquisition of Flugo Group Holdings AB, also known as eTraveli, by Booking Holdings.
This decision follows an extensive investigation into the transaction, which aimed to combine two major players in the OTA industry.
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Booking Holdings, the OTA and eTraveli, a provider of flight OTA services in Europe, found themselves facing the Commission’s scrutiny owing to their significant roles in the travel industry.
Booking Holdings also operates the price comparison platform KAYAK.
The Importance of OTAs
Online travel agencies play a crucial role by connecting travellers with travel services including accommodation, flights, car rentals and attractions.
In the EEA alone, OTAs facilitate transactions exceeding €100 billion annually. The hotel OTA segment, valued at €40 billion annually, is the most substantial and profitable within the OTA market.
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By GlobalDataDuring the investigation, stakeholders including hotels and competing OTAs voiced concerns that the acquisition would further strengthen Booking’s already dominant position in the EEA hotel OTA market.
There were fears that this consolidation would reduce competition and potentially lead to higher prices for hotels and consumers.
The Commission’s decision
The Commission’s findings indicated that the acquisition would significantly bolster Booking’s dominance in the EEA hotel OTA market, potentially increasing costs for hotels and consumers.
Key factors contributing to this conclusion include:
- Booking’s dominance: Booking Holdings has consistently grown its market share to over 60% in the EEA hotel OTA sector. With limited competition, it could charge higher commissions than its rivals.
- Customer acquisition: The acquisition would have granted Booking a primary customer acquisition channel, strengthening its presence in the flight OTA market, which closely complements its core hotel OTA business.
- Expanding ecosystem: The transaction would have expanded Booking’s travel services ecosystem, particularly in flight OTAs, driving more traffic to its platform and making it challenging for competitors to contest Booking’s position.
- Increasing bargaining power: Booking’s strengthened position could have allowed it to negotiate more favourable terms with hotels, potentially resulting in higher costs for hotels and consumers.
Booking’s proposed remedies
In an attempt to address these competition concerns, Booking Holdings offered remedies, including a choice screen displaying multiple hotel offers from competing OTAs on the flight check-out page.
However, the Commission found these proposals inadequate for several reasons:
- Lack of transparency and potential discrimination in the selection and ranking of offers.
- Limited display of competing OTAs only on the flight check-out page, missing other opportunities for cross-selling.
- Difficulty in effectively monitoring the proposed remedies due to the complexity of KAYAK’s algorithm.
Considering the shortcomings of Booking’s proposed remedies and their potential ineffectiveness in preserving competition, the European Commission has decided to block the acquisition.
This rare incident of such action emphasises the significance of competition in the OTA market.
Companies and products
Booking Holdings, based in the US, operates well-known OTA brands such as Booking.com, Rentalcars, Priceline and Agoda.
In the EEA, Booking primarily focuses on hotel OTA services under the Booking.com brand and offers flight OTA services sourced from eTraveli. Booking also provides metasearch services through KAYAK, which encompasses brands in accommodation, car rental and flights.
eTraveli, headquartered in Sweden, operates OTAs under brands such as Gotogate, My Trip, Seat24 and SuperSaver, with a primary focus on flight OTA services.
Merger control rules and procedure
The transaction was initially notified to the Commission in October 2022, leading to an in-depth investigation. Following a Statement of Objections sent in June 2023, the Commission’s decision to prohibit the merger underscores its commitment to maintaining effective competition within the EEA.
