The Federal Court in Australia has found Trivago breached the Australian Consumer Law by ranking hotels according to fees paid rather than rates offered.
The meta-search site was also criticised for not comparing ‘apples with apples’ when showing discounts in its listings.
The Court ruled that from at least December 2016, Trivago misled consumers by representing that its website would quickly and easily help users identify the cheapest rates available for a given hotel.
In fact, the Court found, Trivago used an algorithm which placed significant weight on which online hotel booking site paid Trivago the highest cost-per-click fee in determining its website rankings and often did not highlight the cheapest rates for consumers.
Rod Sims, chair, Australian Competition & Consumer Commission, said: “Trivago’s hotel room rate rankings were based primarily on which online hotel booking sites were willing to pay Trivago the most.
“By prominently displaying a hotel offer in ‘top position’ on its website, Trivago represented that the offer was either the cheapest available offer or had some other extra feature that made it the best offer when this was often not the case.”
The Court also found Trivago’s hotel room rate comparisons that used strike-through prices or text in different colours gave consumers a false impression of savings because they often compared an offer for a standard room with an offer for a luxury room at the same hotel.
Sims said: “We brought this case because we consider that Trivago’s conduct was particularly egregious. Many consumers may have been tricked by these price displays into thinking they were getting great discounts. In fact, Trivago wasn’t comparing apples with apples when it came to room type for these room rate comparisons.
“This decision sends a strong message to comparison websites and search engines that if ranking or ordering of results is based or influenced by advertising, they should be upfront and clear with consumers about this so that consumers are not misled.”
A hearing on relief, including penalties, will be held at a later date.
Trivago said: “The judgment received from the court provides new guidance on how results of comparator websites, like Trivago and others, should be displayed in Australia. We are working to quickly understand the implications of this decision on our website design and its overall impact on the Australian travel industry.”
Trivago’s most-recent results saw CEO Rolf Schrömgens announce that he would be leaving as CEO and joining the group’s supervisory board, effective 31 December. CFO Axel Hefer stepped into the CEO role, with Matthias Tillmann, SVP & head of corporate finance becoming the new CFO.
Schrömgens described the third-quarter as “mixed” but with some developments which made the group “hopeful for the long-term future”.
He said: “On the one hand, one can clearly see that, in the Americas, the segment where we raised our advertising spend, our investment paid out. We were able to reach profitability growth close to 20%, which we believe is fairly above market growth. This gives us confidence that we are able to grow our market share in a relatively stable environment.
“On the other hand, the softness in the business in developed Europe and rest of the world generally and the volatility in our marketplace, specifically, had a direct negative impact and we did not foresee the magnitude of this.”
The group forecast revenue down on the year for the fourth quarter. For the full year it kept guidance adjusted Ebitda in the range of €60m to €80m, erring to the lower half after the performance in the third quarter.
Insight: Regulators around the world are waking up to The Internet and it being a real thing which consumers use to buy stuff from. As such, they need protection and this is not the first time Australia has wagged its fingers at those who would ply their trade online. Similar criticisms have been made in Europe, where practices are currently being scrutinised and promises to behave better have been made by parties including Booking.
But does it matter with Google coming up in your rear-view mirror? The answer is probably not. The consumer has been well educated over the years to believe that The Internet is the place to go for cheap hotel rooms and the hotels themselves have had a hard time persuading consumers that they exist on The Internet too.
Trivago has been having a torrid time of it. TripAdvisor hasn’t been faring much better, but its share price is clinging on because the market continues to believe that at some point someone like Expedia will buy it for all the user-generated content.
In the meantime, while Trivago is busy inventing ‘Mr Trivago’ to try and boost profile, Google has expanded predictive pricing offering, with suggestions on the best times to visit or typical hotel prices for specific dates. None of this is great news for hotels, but it is worse news for the meta search engines. Hotels at least have access to the product they’re selling and, as IHG is planning, are going in on the hard sell with choice.
Criticism over paying to move up rankings is, one suspects, about to become a moot point.