Pressure grows on Booking.com, Expedia over carving out commissions from New Zealand

The NZ Superannuation Fund is monitoring its investment in Booking.com's parent company as concern grows about overseas online travel agents' commissions eating into the struggling travel industry's profits here.

The fund earlier this year had a $53 million stake in the biggest of the overseas firms — Booking Holdings which has a market capitalisation of $100 billion — and says it understands the tourism industry's concerns.

A spokesman for the $45b fund has shares in about 8000 listed companies globally, with two-thirds of it invested in a passive market-tracking portfolio.

"We are not in a position to assess the actions of all companies across the world and as such utilise proxy voting and social, environmental, governance advisers to provide advice on each company's record on responsible investment matters. We understand the concerns that some tourism operators have and will continue to monitor the company via our external advisors."

An hotel expert today joined a push for Kiwis to book local - directly or with agents - for their holidays, which are in this country for the foreseeable future.

And Tourism Minister Kelvin Davis said while it was up to consumers to make their own choices, he would always encourage New Zealanders to support local businesses.

''Little things to help out local businesses can make a big difference,'' the minister said.

Consultant James Doolan says the online travel agents (OTAs) have their place — but now only as comparison and referral sites. He wants Kiwis to book directly with hotels or through those traditional travel agents which are transforming their operations to handle domestic bookings.

Doolan's Fantail Advisory says OTAs take a 10 per cent to 15 per cent commission, employ few people here and take profit overseas.

"By all means use your favourite OTAs to find a hotel or price-compare your shortlist. Once you've made your choice, shut down the OTA website and switch across to the hotel's own website. Book the same room at the same price there. Alternatively, or if the prices don't match, phone the hotel up."

Doolan, a former manager at Marriott International, said the direct approach can save money, result in a room upgrade or perks such as a free bottle of wine or complimentary breakfast.

He said travel agents — some of which were pivoting to the domestic market — added value for the commission they charged.

"The specialist agents are actually doing some on-the-ground work arranging transfers, bundling packages and giving people actionable advice whereas the large OTAs are simply an electronic shop window for hotel room stock — their business model is to buy up the best Google key words and monetise the audience they've captured."

Online agents operating here include Booking Holdings' Booking.com and priceline.com while Expedia's brands include trivago which earlier this year fell foul of regulators over how it promoted hotels.

Labour list MP Kieran McNaulty started what he calls as education campaign earlier this month to encourage Kiwis to go local when they book instead of using the offshore giants.

He said he had been flooded with feedback since, including from some who had cancelled bookings through OTAs and gone directly to the hotel or motel itself.

While the campaign initially urged holidaymakers to book directly with hotels, he also wanted Kiwis to also support travel agents.

James Doolan of Fantail Advisory says Kiwis need to use local booking services. Photo / Supplied

Thousands of agents' overseas bookings have dried up and many are still working for nothing to recover an estimated $2b in refunds owed to Kiwis whose holidays had been cancelled.

During normal times OTAs are valuable for putting New Zealand accommodation providers before a global audience they couldn't otherwise reach with their limited budgets.

But Doolan said these were extraordinary times with no overseas tourists and Kiwis needed to think carefully about using the big OTAs.

"Those two companies employ very few people in New Zealand, and make absolutely no investment in physical hotels or tourist infrastructure here. If all near-term Covid-19 travel is going to be domestic, let's stop losing a big chunk of our spending to overseas-based websites that are designed to attract foreign guests," said Doolan.

"All those dollars saved and kept in New Zealand will help Kiwi businesses in their battle to survive, boosting New Zealand tax receipts and thereby helping all of us."

It was a more clear cut case than use of Uber Eats which led Prime Minister Jacinda Ardern to encourage users towards local delivery services.

"With Uber Eats, they do actually employ people to deliver the food, and therefore PAYE and profits tax get paid in NZ," said Doolan.

The Super Fund spokesman said Booking Holdings' was under scrutiny from its advisers
for having some issues with its business practices, including Japanese anticompetitive investigations and various antitrust and pricing investigations in Europe.

''These matters have been flagged as a matter of concern — but have not triggered the severity of a red flag required to focus resource on engagement with the company. These reports show that the company will be making changes in response to EU regulatory action,'' he said.

While Booking.com did not address the commission issue, a spokeswoman said the company was rapidly securing and funneling current domestic demand in New Zealand to local businesses, which was the best way to help their recovery in the long-term.

The company had 20 staff supporting over 10,000 local accommodation outlets and experiences.

''As Kiwi travellers begin to experience New Zealand again, we provide a highly cost efficient means for these properties to market and capture as much business as possible, as quickly as possible.''

An Expedia spokeswoman said Expedia was standing by hoteliers, destinations and the travel industry to support their recovery. Earlier this month it committed $430m to a global programme that supports recovery for lodging partners, destinations, and the travel industry.

''Our teams on the ground have been engaging actively and supporting our lodging partners in New Zealand.''

Expedia's shares have fallen by more than a third this year and were trading at US$77 ($119) last week. The Seattle-based company says its first quarter revenue was down 15 per cent in the first quarter and global bookings down 85 per cent year on year.

Connecticut-based Booking Holdings shares have slid by about 25 per cent to US$1540.