Hotel prices onlineTravel sites like Expedia (EXPE), Orbitz (OWW), and Travelocity appeal to consumers wanting to quickly compare prices and find the best deals. But according to consumers Nikita Turik and Eric Balk, we're being played.

Turik and Balk are seeking class action status for a lawsuit alleging that these travel sites, as well as Priceline (PCLN) and others, not only failed to offer consumers the best deals, but actually conspired with several large hotel chains to fix prices and prevent competitors from offering you cheaper rooms.

The Allegations

How did the travel sites manage to prevent smaller online retailers from offering lower prices? According to the plaintiffs' lawyer, they pressured hotel chains like Starwood Hotels (HOT) and Marriott International (MAR) to enter into "price maintenance agreements," which set a minimum price that hotels could offer to third-party wholesalers. These agreements prevented hotels from using more substantial discounts to book rooms that would otherwise remain unoccupied.

But how did the defendants get the hotels to agree to these conditions? After all, the deal prevents the hotels from getting what revenue they can from rooms that are likely to remain vacant without the lure of discounts.

The answer lies in the fact that these hotels rely a great deal on large travel websites to gain bookings. According to the plaintiffs, roughly 50% of hotel rooms in the United States are booked through online retailers like Expedia, Orbitz, and Travelocity. And according to industry researcher TravelClick, sites like these accounted for 11.4% of hotel bookings in North America among individual business and leisure travelers in 2011.

In other words, these hotels were worried about losing access to the marketing services offered by the online travel companies, which bring in a great deal of their business.

Consumer Con

The plaintiffs complain that these travel sites "created the illusion that savvy consumers can spend time researching hotel rates online to find good deals," and thus misled consumers. Indeed, the implicated websites do create such an impression.

Consider, for example, Expedia's claim that "As the world's largest online travel agency, we make it easy to get the best prices on flights, hotels and flight + hotel vacations." Orbitz also leads customers to believe it helps them find good deals by claiming, "[L]et Orbitz be your best source for cheap travel rates. We'll get you there on the cheap with hotel discounts, cheap airfare and more." And Travelocity lures consumers with the prompt, "Enter your email address to get great savings and deals."

Therefore, if the plaintiffs' allegations are true, then not only are these travel sites preventing consumers from getting better deals from other sources by preventing the major hotel chains from offering substantial discounts, but they are also misleading consumers with the false promise of great deals.

Will the Outcome Be Good for Consumers?

In addition to unspecified damages, the plaintiffs' demands include a court order preventing the defendants from continuing their alleged price-fixing practices. If it is ruled that such price-fixing indeed occurs, a victory for the plaintiffs could bring cost savings for consumers. In addition to allowing hotels to offer bargain prices, putting an end to "price maintenance agreements" would reopen the market for smaller online retailers to challenge the dominance of the larger online travel portals.



Motley Fool contributor M. Joy Hayes, Ph.D., is the Principal at ethics consulting firm Courageous Ethics. She doesn't own shares of any of the companies mentioned. Follow @JoyofEthics on Twitter. The Motley Fool owns shares of Priceline.com. Motley Fool newsletter services have recommended buying shares of Priceline.com.



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Jessica

http://www.onlineparentdeals.com

September 19 2012 at 4:00 PM Report abuse rate up rate down Reply
Jessica

Hi there! thanks for sharing this article. In my personal opinion sometimes I do feel that travel sites may be ripping people off and one of the reasons why I say this is because sometimes when you book with traveling sites you are not guaranteed a seat and of course a lot of people don't realize that if you have a family who is flying you can actually be spread through out the whole plane and away from your family. Trust me that's not the way I want to travel but I know that's not a big concern but its one of mine. People really should cater more to online parent deals to help parents find real and true deals that will actually help then instead of hurt them !

September 19 2012 at 4:00 PM Report abuse rate up rate down Reply
Emma M.

A great site for booking transportation and hotels is www.worldwideetravel.com ! Great photos, reviews, and discounts !

September 10 2012 at 5:56 PM Report abuse rate up rate down Reply
sunklst

I like to use Expedia to compare prices as well as departure/arrival times for a particular itinerary. Once I see one that I prefer, I book it on the airline's website directly.

September 05 2012 at 12:18 PM Report abuse +1 rate up rate down Reply
1 reply to sunklst's comment
Wheres George

I do that too, but lately I found the travel site's price is $1 cheaper than the airline/hotel price.

September 05 2012 at 2:57 PM Report abuse rate up rate down Reply
Taina

They started out saving you money, but as they matured the bean counters come in and ruin it.

September 05 2012 at 11:28 AM Report abuse +1 rate up rate down Reply
JOHNYKMWA

Gone are the days of Captain Kirk [Shattner was canned] when you could actually do a bit better by using priceline or orbitz. Now it seems prudent to deal with the hotel directly.

September 05 2012 at 11:26 AM Report abuse rate up rate down Reply
Iamdjoker

Just as bad as the companys promising to show you the cheapest insurance & mortgage rates....they want all your info then give you a song and dance!

September 05 2012 at 9:38 AM Report abuse rate up rate down Reply
dweisguy

If you want the best deal....deals directly with the hotels and airlines!

September 05 2012 at 9:08 AM Report abuse rate up rate down Reply
alysse

I have stopped using them because they all offer the same deal. Like others said..go to the hotel direct after scanning these sites and get your own deal most of the time I find something better. I just use those sites to find what hotels there are in the area.

September 05 2012 at 8:26 AM Report abuse +3 rate up rate down Reply
Snowfall20

All I know is that if I call a hotel directly I get the same price if not a better price. Never use these sites anymore.

September 05 2012 at 6:43 AM Report abuse +4 rate up rate down Reply
1 reply to Snowfall20's comment
Frank

We agree. We have also found it's easier to cancel and make changes when dealing directly. We still look at the travel sites to gauge prices/perks etcc but have been dealing direct more and more.

September 05 2012 at 7:56 AM Report abuse +3 rate up rate down Reply