Backpacker Network Germany: Letter to Hostelworld

Following the recent news published on STAY WYSE regarding the global concern over the new Hostelworld contract, the Backpacker Network Germany shared with STAY WYSE and other relevant organisations the following letter sent to John O’Donnell, Chief Operating Officer of Hostelworld.com:

Dear Mr. John O’ Donnell,

I am writing you on behalf of the Backpacker Network Germany which represents 58 hostels in 33 cities throughout Germany. Many of our hostels have been working with Hostelworld for several years, and we highly appreciate your service. Hostelworld is a valuable partner for our hostels. That is why we believe it is important to contact you directly about our issues with Hostelworld’s new proposed contract.

bngermanyMany hostels have expressed their concern about the new contract and have demanded a reconsideration. Last week we conducted a survey with our members which showed that 50% have intentionally not signed the new contract and nearly 90% believe there is a need to negotiate the terms and conditions of Hostelworld’s proposed contract. In this letter I will name some of our most important concerns with the contract although there are other minor terms which we would like to discuss. I have also included a few requested additions to the contract.

We are aware of the competition between you and other OTAs, and we are also aware of your arguments addressed in your FAQs about the new contract. But since many terms are against the fundamental interests of the hostels, we must refuse to accept them.

Firstly, you are most likely aware of the second adhortatory letter from the German cartel office against HRS and its best price clause. This clause prevents price competition and it is, in our opinion, principally against the freedom to conduct our businesses. You explained that the old version of the contract already contained a “price parity” clause. However, this is no argument against our concerns. There has been a need to change this clause for years, and with your request to sign the new contract, this issue has arisen once again. Although rate parity might be common with other OTAs, it’s counter to the interests of accommodation providers and also anticompetition. We are motioning to remove this term, not only with Hostelworld, but also with all other booking providers. You may also be aware of the investigation by the Office of Fair Trading about the same issue (Case reference: CE/9320/10) with Booking and Expedia. If you choose to retain this clause in the contract as you proposed after merging Hostelworld and Hostelbookers, we will also inform the German cartel office about the clause. It is our freedom of business to adjust our prices according to the situation as we see fit and profitable for our businesses. We are still working for ourselves, not as a licensee for any booking provider. We are not subcontractors of Hostelworld, of Booking, Expedia or any other booking engine. The same arguments apply for the “availability parity” and “last bed availability” terms.

The second major issue with the new contract concerns clause 2.8 “use of property names in online marketing”. You argue that using our brand names on your websites and for ads is critical for your promotions online. However, using our brand names is critical for our businesses. Hostels spend time, money and energy developing brand names and we are protective of our name and reputation. Hostels take great efforts to be found on Google and other search engines. It is unacceptable to then find a paid ad above our hard achieved spot on Google when customers search for our hostel names. Once again, you rely on the argument that these were the pre-existing conditions; however, these conditions have long upset hostel owners as it disregards their efforts to establish and strengthen brand names. While some hostels might rely on Hostelworld to fill their beds, the majority of businesses rely on their own marketing efforts. Again, hostels are not franchises of Hostelworld and we ask you to respect hostels’ own marketing efforts.

Thirdly, in term 6.1 you ask the hostels to indemnify HW with respect to all losses, costs etc. as a result of any claim brought against Hostelworld. This term is far too general. We propose that such conflicts be resolved directly between the customer and the hostels before Hostelworld steps in to make an independent decision. We believe the booking creates an agreement between the customer and the hostels, and thereby, should any conflicts arise out of said booking, these conflicts should be dealt with by these parties.

Fourthly, we would like clarification about clause 4.2. The formulation of the clause makes hostels responsible for the VAT of the commissions. However, by European law these tax obligations are the responsibility of the renderer. Some hostels believe that the commission is earned in Ireland and that the service (booking reservations) has been rendered there, concluding that the VAT should also be collected there. Currently, Hostelworld obliges hostels to pay this tax though we believe this to be invalid: Hostelworld cannot pass its tax obligations onto businesses in other countries because only independent state bodies dictate the payment of taxes.

Moreover, in order to make the new contract more agreeable to hostels, we suggest some additions to the contract: 1) We would appreciate if Hostelworld could, in some fashion, insure that the card used at the time of the booking is also valid at the time of the customer’s scheduled arrival; 2) Hostels should be allowed to provide their own booking conditions different from the “24-hours notice 1 night charge”; 3) Hostelworld should agree to respond in a reasonable and timely manner to any and all questions from the hostels; 4) Upon notification by the hostels, Hostelworld should agree to remove or not publish reviews from No-Shows, people who do not stay in the hostel, guests who have been expelled from the hostel and/or have caused excessive damage to the hostel during their stay; 5) We would also like to make sure the “service fee” is never higher than the “deposit”. The hostels want to be assured that they do not have to cover any service charges that were not included in the deposit; 6) It should also be stated in the contract that the 14-days notice about changes in the contract is for minor changes only.

We would like to continue working with Hostelworld in a relationship that remains equally beneficial to both parties. To achieve this goal I would like to propose negotiations about the contract between you and some hostel representatives in the near future. The German Hostel Network will be happy to constructively support this process.

In the meantime we have asked our members NOT to sign the new contract and are working with other hostel networks to gain a common voice for our hostels. Since we realize that these concerns are not restricted to Hostelworld, we are in the process of writing to and voicing our issues with other booking channels as well.

We are looking forward to discussing this further with you to establish a mutually acceptable agreement.

Kind regards,

Michael Lottes
General Manager

Comments

  1. Hostelworld might have been started with the right intentions, but think they have been lost, partly to do with the fact they are not just a hostel booking engine any more, but just another Hotel booking engine. It’s good to see the same concerns are being voiced around the world. Might be time for someone to start a new booking engine? I can think of a few good names, still available, if someone is interested?

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