The Department for Business and Trade has announced that a ground-breaking legislation aimed at curbing deceptive practices is to be introduced to the landscape of online commerce. This new law seeks to prevent the pervasive issue of 'drip pricing' – which is the practice of businesses revealing additional fees later in the booking process.
Beyond addressing this concern, the legislation takes a robust approach by also targeting the proliferation of fake reviews. Under the new law, website hosts will be held responsible for the authenticity of the reviews featured on their sites.
In a statement by Kevin Hollinrake, the Minister for Enterprise and Markets, the legislation's purpose is clear: 'to ensure customers can compare purchases with ease, aren’t duped by fake reviews, and have the sting of hidden fees taken away.’ (theguardian.com)
This blog post will explore the important factors of this upcoming change, and its potential impact on the hospitality sector.
Assessing 'drip pricing' in the hospitality industry
To tackle the issue of 'drip pricing,' government officials scrutinized four key sectors: retail, entertainment, transport and communication, and hospitality.
Their examination, involving 525 providers across these sectors, revealed a startling statistic – 72% of the sampled online and mobile app providers incorporated at least one dripped fee within their checkout processes (gov.uk).
This practice has significant financial implications, as UK consumers reportedly spend an additional £0.6 to £3.5 billion online each year due to 'drip pricing' (gov.uk) .
The hospitality industry appears particularly implicated, with The Guardian estimating that 56% of establishments in this sector engage in this pricing strategy (theguardian.com).
The hospitality industry, a sector that relies on providing consumers with positive experiences, recently faced concerns over the potential impact of banning drip pricing on revenue. Leaders in the field expressed worries about losing a significant channel of income, particularly for businesses offering optional extras to customers.
UKHospitality chief executive Kate Nicholls emphasized the importance of allowing customers to customise their experiences, stating that ‘UK pubs are renowned for offering fantastic experiences to consumers, and it’s important that consumers are able to customise those experiences to best suit their needs.’ The announcement came as a relief when it clarified that optional extras would not be included in the ban.
This decision ensures that hospitality operators can still offer additional services when customers purchase a table or a room, safeguarding their revenue streams. The government's initiative to ban fake reviews is also noteworthy, addressing the reputational and financial impacts that misinformation can have on businesses.
While the legislation signifies a positive shift in the relationship between businesses and consumers, it does present an upcoming challenge. Operators must take proactive measures to amend pricing displays that do not adhere to the new law.
Furthermore, the responsibility falls on the hosts of websites, especially those catering to businesses in the hospitality sector, to regularly monitor the authenticity of online reviews. This task becomes crucial in maintaining transparency and trust between businesses and their clientele.
Although the road ahead may pose challenges for operators adjusting to the new legislation, the overall impact is expected to foster a healthier and more transparent environment in the hospitality industry.
Overall, the ban on drip pricing is a positive step towards reducing unnecessary consumer spending and ensuring clarity when making purchases. Though this change means some businesses will need to restructure their pricing models, it will ensure that consumers are able to fairly compare brands and feel confident in their purchasing choices.As well as consumers, operators are further protected from reputational and monetary damage caused by fake online reviews, which also serves to give consumers more insight into what they are purchasing.