by Josh Lew
Last updated: 1:00 PM ET, Wed November 18, 2015
Asia's online travel booking industry is still in its early years. International companies often end up competing with local firms. This is good news for many travelers. They have multiple sites where they can check and compare prices, often finding cheaper rates for the exact same hotel rooms and flights with a little leg work.
This competition is not good for smaller booking sites. Larger sites might get volume discounts from some hotels. Also, high volume means that the big international firms can charge less commission and still make a profit. On these sites, the overall cost of booking (hotel rate plus commission) can be significantly lower than on smaller sites.
An unregulated marketplace
Of course, the industry's smaller players don't like the fact that they are being undercut. In at least one country, however, they are not complaining about the pricing strategies of the bigger sites, but about the fact that they are escaping taxes and regulations because they are based abroad.
The Association of Thai Travel Agents (ATTA) has asked Thai authorities to take a closer look at international firms who offer booking services to tourists headed to Thailand (and also to domestic tourists within the Kingdom). The complaint is that these firms are not paying taxes on their profits like agents based within Thailand are required to do.
International companies can avoid paying taxes
An online travel agent in China, for example, could have a listing for a hotel in Bangkok. When someone books the hotel, the Chinese agent takes a commission and then pays the remainder of the money to the hotel. The hotel's income from the transaction is subject to regular taxes in Thailand, but the agent's commission ends up in China, where it is not taxed by Thai authorities.
According to ATTA, this means that overseas booking sites are getting more profit, which allows them to lower prices even further. The largest Thai online agent is Sawadee.com. The company points out that international OTAs in China must run their profits through Chinese banks. This means that income can be tracked and taxed even if the agent is based overseas. No such regulations exist in Thailand.
Other countries have taken steps to protect domestic travel agents. Taiwan recently fined Agoda more than $600,000 for failing to properly register as a business in the country before offering booking services for Taiwanese hotels.
Creative strategies needed
Greater regulations could make for a fairer field of play for domestic OTAs. However, high-volume international companies will still have the edge. Both Thailand and Vietnam are trying out a new strategy that could help their domestic travel agents in the future.
ATTA has made a deal with Taiwan. Taiwanese travelers will not have to pay any visa fees if they come to Thailand on a package tour booked through an approved Thai travel agent. Vietnam is trying a similar policy, but it is not limited to one country. Travelers from abroad who book their vacations through certain Vietnamese travel agents will get a visa on arrival in Vietnam. The strategy will focus on certain "target markets" that Vietnam's travel firms are trying to compete in.
Regulations could help the smaller companies in Asia compete with bigger booking sites. However, the upstarts will still have to find new strategies if they want to thrive in the long run.
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