New law would force sites to disclose they aren’t hotels — but is it enough?

By | February 10th, 2016

The hotel industry is throwing its weight behind a bill that would require online travel agencies acting on behalf of hotels to say they don’t do a direct booking. It’s an issue that has bothered hotels for years. But does it go far enough?

The Stop Online Booking Scams Act, introduced today, would require all third-party hotel booking websites to disclose that they are not affiliated with the hotel for which the traveler is ultimately making the reservation. It also instructs the Federal Trade Commission to study the issue of third-party bookings.

The bill’s sponsor, Rep. Lois Frankel (D-Fla.), says that the new requirement will help consumers tell the difference between name-brand hotel websites and fraudulent ones masquerading as name-brand sites. Hotels are eager to draw a line between online travel agencies and themselves and, potentially, to win back some market share from these retailers, which charge hotels hefty distribution fees.

Question is, does this legislation go far enough? For hotel guests, the most important disclosure is price. The hotel industry is awash in mandatory “resort” fees, lodging taxes and other surcharges, and hotel websites frequently don’t reveal these extra charges until the final booking screen. For consumers, the problem isn’t just knowing that they’re booking via a third party, but knowing up front how much they’re going to pay for their room.

If the hotel industry really wants to help its customers, it would support a full disclosure — not just the partial disclosure for which this bill advocates.

Here are the details:


(1) IN GENERAL — It shall be unlawful for a third party online hotel reservation seller to charge or attempt to charge any consumer’s credit card, debit card, bank account, or other financial account for any good or service sold in a transaction effected on the Internet, unless the third party online hotel reservation seller clearly and conspicuously discloses to the consumer all material terms of the transaction, including—

(A) before the conclusion of the transaction —

(i) a description of the good or service being offered; and
(ii) the cost of such good or service;


(B) in a manner that is continuously visible to the consumer throughout the transaction process, the fact that the third party online hotel reservation seller is a third party seller and is not affiliated with the person who owns the hotel or provides the hotel services or accommodations.

The bill would update the Restore Online Shopper’s Confidence Act, which prohibits any post-transaction third-party seller from charging any financial account in an Internet transaction unless it has disclosed clearly all material terms of the transaction and obtained the consumer’s express informed consent to the charge.

Why is this legislation necessary? There’s the truth and then there’s the truth.

The truth, as far as the lodging industry is concerned, is that thousands of customers are misled every year into making hotel reservations through fraudulent websites that give the appearance of being affiliated with a hotel, but legally have no relationship to them at all.

The “fraud” takes several forms, according to the hotel industry. You could be charged additional hidden fees when you arrive, lose expected loyalty points, or worse, you could learn that your reservation was never actually made.

The truth is a little more complicated. In 2015, the hotel industry estimates that close to 15 million reservations were made on “deceptive” sites, which cost the industry $1.3 billion per year. Hotels want to remove these competitors, and they believe prominent warnings will do the trick.

The bill contains two other noteworthy provisions. First, there’s a provision to give state Attorneys General more power to pursue rogue hotel sites, giving state law enforcement the ability to go after perpetrators in federal court with the same remedies available to the FTC. (Today, only federal authorities can fully penalize individuals who commit online hotel booking fraud.)

Giving state Attorneys General the ability to pursue damages and restitution for victims will leverage the power of all 50 states to hold fraudsters of all levels accountable and deter criminals, according to the hotel industry.

The Stop Online Booking Scams Act also directs the FTC to produce a report on the impact of these fraudulent sites on consumers, and encourages the agency to simplify their online complaint procedure for reporting hotel booking scams.

It’s a good start. But unless the sponsors can add language that requires all hotels to disclose the full price of a hotel in a price quote, it will only benefit the hotel industry, not the guests who they claim to be protecting with this proposed law.

The Stop Online Booking Scams Act is …

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