Hostelworld has acquired Hostelbookers!!!

From Sláinte:

I presume OFT will explain in detail as to why they approved this right? Will make some interesting reading

The full report from the Office of Fair Trading regarding this decision can be found here.

The report is 43 pages long. Here are some interesting highlights.

As many hostels suspected, the OFT agrees that WRI considers hostels’ own websites to be direct competition for HW and HB.

35. …the OFT considers that the extension of 'price parity' and 'availability parity' clauses to hostels' own websites is not inconsistent with the parties' submission that these websites compete with them for consumer bookings.
…
95. The OFT notes that hostels' own websites have a significant combined share of bookings… The OFT also notes that hostels' own websites' inclusion in the parties' 'price parity' and 'availability parity' clauses suggests that the parties regard these websites as exercising a competitive constraint (see further from paragraph 34).

This emphasizes the suspicion that clause 2.8 in the new HW contract (regarding their use of a hostel’s brand name for keyword marketing) is an attempt to compete directly against hostels and capture customers who would otherwise book directly with the hostel.

It seems that the biggest competitors in WRI/HB’s mind are Booking.com, Expedia, AirBnB, and hostels’ own websites.

Some lesser competitors that concerned WRI and HB were:

• wotif.com
• budgetplaces.com
• laterooms.com

Anything that gives WRI cause for concern is probably a good opportunity for accommodation providers. If your hostel isn’t listed on these sites yet, maybe you should take a look?

WRI and HB also expressed concerns over metasearch sites Google Hotel Finder and TripAdvisor Connect.

32. The parties [WRI and HB] further submitted that the importance of hostels' own websites is growing with the emergence of metasearch sites as an additional distribution channel, as metasearch sites often list these websites as an option for booking beds alongside third-party websites. The OFT notes that currently metasearch sites appear to list hostels' own websites to only a limited extent or not at all. However, the parties pointed out that TripAdvisor, which according to its website is the world's largest travel site by visitor numbers, will launch a new 'TripAdvisor Connect' service in late 2013, which is 'an online platform that will give independent hotels and B&B's of all sizes the ability to participate in metasearch pricing display'. The parties expect TripAdvisor to push this service aggressively to switch bookings to hostels' own websites, since they can bid more than the entire commission they would pay to an OTA for a better placing on TripAdvisor and hence represent a potentially larger revenue source for TripAdvisor than OTAs. The parties also referred to Google Hotel Finder as a way for hostels to attract consumers to their own sites, as accommodation providers, including hostels, can bid to list their own sites alongside OTAs' sites when consumers search for accommodation in a specific location at a specific date. The OFT considers that it is therefore likely that metasearch sites will provide hostels with additional ways to attract consumers to their sites.

This also sounds like an opportunity for hostels, suggesting the ability to connect directly with our own customers.

The Office of Fair Trading considers that the only other OTA that actually represents competition for WRI is Booking.com. Sadly hostel-specific OTAs like HostelsClub and Gomio barely even got a mention in the report.

Below is the final summary and conclusion of the report.

131. The OFT further considers that the evidence shows that Booking.com is the only other firm that currently has a significant position in the provision of online hostel accommodation services. There are several other firms that list some hostels on their websites, but they currently have only small market shares and third-party comments and other evidence did not show that their current position is more significant than suggested by these shares. The Acquisition therefore gives rise to significant competition concerns on the basis of the current structure of the market.

132. However, the OFT considers that this static evidence does not provide an accurate prediction of the impact of the Acquisition, because there is significant dynamic evidence that the market in which the parties operate is rapidly evolving. This evidence strongly suggests that barriers to entry and expansion by established OTAs are low, as shown by Booking.com's success in building, in only around two years, a position in hostel accommodation services that is similar to the constraint lost by the Acquisition. Other firms, such as Expedia, have also shown their interest in expanding their activities in hostel accommodation services by their introduction of technical functionalities that facilitate hostel bookings and by their investment in PPC spend relating to hostel search terms. The parties' internal documents also show increasing and significant concern about the competitive threat from these firms. The OFT therefore considers that there is sufficient evidence that entry/expansion is timely, likely and sufficient such that the parties face a significant competitive constraint that is sufficient to prevent a realistic prospect of a substantial lessening of competition as a result of the Acquisition.

133. Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION
134. This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.