Hostelworld Contract: A letter to BOA

The below letter was distributed to the BOA members attending the open forum on the 10th of July from Carmel Dunne, VP of Accommodation Relations at Hostelworld.

Dear BOA Members,

Kristy Carstairs has passed on the below email to me in relation to your upcoming meeting this Wednesday.

Having reviewed your comments, I felt it was important to respond personally to the questions and concerns that you have around Hostelworld.com Ltd.’s new contract.

To give some background on why we are rolling out a new contract:

  • Some of the main elements of our current contract are over 10 years old and simply put have not kept pace with the evolution of the online travel market.
  • The new contract is undoubtedly longer in length but essentially provides clearer guidance in respect of many of the issues contained in the current contract, including important areas such as bed/room allocation, availability and price parity. Indeed, the PPP (‘Hostelworld Recommends’) agreement that some of your members signed last year encompassed these areas
  • This new contract gives more protection to both our customers and accommodation partners with a focus on areas such as health & safety, insurance and licensing. We want to be associated with properties that comply with and insist on the highest standards of customer safety and care, which will benefit the sector as a whole. As competition intensifies in the budget accommodation space, we believe that customers are increasingly focusing on issues like health & safety, licensing and others as differentiating factors in choosing which properties to book. We believe that by strengthening the offering on our sites, we can help hostels deliver a more competitive product to consumers and help preserve hostels as an important part of the budget accommodation market.
  • It also offers greater flexibility in trading terms and conditions, ensuring that we can adapt to changes in the marketplace, launch new products etc. quicker than hitherto has been possible under our current arrangements. We think this is important in ensuring that Hostelworld keeps pace with the service updates and technology advances introduced by the major OTAs.

We do believe that many of the changes you have identified are not in fact changes. And where we have changed something, we believe that there are very good commercial reasons for the change – in particular linked to our desire to keep competing hard against the major OTAs. As I know that you have some specific queries about particular clauses: I thought it best to address the various clauses one by one as you have laid out in your email below to members.

Licensee’s obligations

1.1.4 Booking price cannot exceed lowest price at which beds offered elsewhere including licensee’s website (No change). If caught out doing this then sets out what licensee must do including providing recompense to all past customers who seek redress.

Hostelworld: The last sentence is not taken from the contract and obviously an interpretation of it. For the avoidance of doubt the exact wording is as follows: Where a licensee does not comply with this obligation, the contract sets out the provisions that the licensee must put in place for customers who seek redress.

It is very important to note that this clause already exists in our current contract under the section “Licensee Agrees” which states you as licensee will: “… offer Product on Hostelworld.com websites at a price not exceeding the lowest price at which the Licensee offers such Product elsewhere (including on the Licensee’s own websites).”

As such, the obligation has not changed. In the event where obvious price differences are identified (either by HW or customers), we state the solutions that apply. Where a customer contacts us in order to seek redress which we deem as valid, we would contact you to compensate the customer for the difference between the lowest rate they found and what they booked the same bed for on Hostelworld.

1.1.5 Ensure “availability parity” by making beds available to HW on no less favorable basis than other channels including own website(s).

This clause clarifies obligations in respect of availability. It states that where you are offering beds for sale through other online channels, including your own website, the lowest price that you make these beds for sale must also be made available for these beds on a Like-For-Like basis on Hostelworld.com and its network of websites. As many of your members will appreciate, this is a very common requirement on sites such as competitor OTAs. As such, we are only requesting to provide services to you on a similar basis to other OTAs that you work with. This will of course enable us to remain competitive with the pricing offers mounted by those large OTAs.

1.1.6 Provide HW access to all available beds as are for sale on a real time basis (i.e. first come first served) and always with “last bed/room availability”.

As you will appreciate, one of the biggest reasons for poor conversion is partial or no availability on your microsite. HW customers are often booking “on the go” and increasingly on mobile devices and with HW investing hugely in PPC marketing across markets and languages to find customers for your beds, it is hugely important that we have access to last bed availability. This will allow us to better compete with the major OTAs for customer acquisition and invest further in PPC, in the knowledge that visitors will convert to customers.

Property Information and Marketing

2.7 Licensee agrees that data relating to the Customer who has made the booking belongs to HW and Licensee is not entitled to use it to market to the Customer.

This clause is new, but we think is unobjectionable since similar provisions exist – we understand – in contracts with other OTAs many of you are working with. Obviously if a customer has agreed to opt in for marketing material on check in or departure from your property, we cannot and would not see this as an issue. That of course does not cause us any concern. What we are focused on here is a narrower point that properties respect data protection obligations and do not store or solicit HW customers’ email addresses.

2.8 HW entitled to promote the property using its name in online marketing (including email marketing and pay-per-click advertising). Licensee grants HW license to use property name for this purpose.

Hostelworld has a team with dedicated skills and expertise in PPC marketing who perform the work on your behalf across a range of channels, platforms and languages as part of our service. We have always had this and will continue to do so. We are continually seeking to optimise our performance in this respect and grow bookings into your property. This clause clarifies our right to perform such marketing activities on your behalf. OTAs engage in this activity in order to be able to deliver bookings into your property. We know that our old contract was not clear on this point, so we have taken the opportunity to make clear the position when we are marketing a property on your behalf.

Hostelworld’s obligations

3.2 Order in which properties displayed by HW on Hostelworld.com and other sites determined by HW acting in its own discretion. HW entitled to generate and display search results in any manner and system of ranking it deems appropriate.

Again, this point is not a change from the current contractual position. Indeed, I am surprised that this is a concern given that we have always displayed properties on each page at our own discretion. We will endeavor to always update you in relation to any significant changes to the display.

This does give me the opportunity to make you aware that we have been trialling a new model since April on certain city pages that allows properties to opt in to pay a higher % service fee (commission rate) in return for higher placement on their city page. Included in this pilot program were properties in Cairns and Perth who were given the choice to opt in to the program.

The pilot has been hugely successful and as a result, we have developed a tool (“Elevate”) which is nearing launch to enable you to vary your service fee on a real time basis in return for improved placement on the Hostelworld.com website. We will launch this in phases and plan to roll out to several key cities in Australia over the coming weeks. This has been a reason why properties in some cities have not received the contract yet as we wanted to gather feedback on the pilot, develop the Inbox technology and update the contract to contain clauses that provide you with the flexibility to opt in to use this tool when rolled out to your destination. We are very excited about this new innovation. We know that some competitor OTAs offer a similar sort of functionality and we want the service we provide on Hostelworld to keep pace with the major changes being introduced by major OTAs. We think that the major attraction of our approach is that properties can continue with the same arrangement as has existed historically, or – if they so wish – can take advantage of an enhanced service to improve page positioning as part of your yield management strategy. It all comes down to the properties’ choice.

General

9.2 HW may vary any terms with 14 days notice

This provides greater flexibility in trading terms and conditions, ensuring that we can adapt to changes in the marketplace, launch new products etc. quicker than hitherto has been possible under our current arrangements, such an example being the Elevate programme I reference above.

I hope the above answers any concerns and questions you had around the specific clauses highlighted in the Members’ email.

I also trust you are aware you can always pick up the phone to speak with Kristy or Kayla in the Sydney office at any stage.
We look forward to an update from the meeting and if there are any more questions we can assist with, please do not hesitate to let us know.