ACCC Expedia ruling allows hotels to reduce rates below online platforms

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The ACCC has negotiated a deal with online booking companies such as and Expedia to allow hotels to offer lower rates through telephone bookings and walk-in customers instead of adhering to the contract ‘lowest price guarantee’. Expedia and have considerable market power, similar to the Coles – Woolworths duopoly. However, this had negative effects on hotels as they needed to pay fees to booking agents to attract people to book their rooms at cheaper rates. With the ACCC deal, customers are now encouraged to book through the hotel directly to reduce these costs. Furthermore, customers would also receive a significant discount as hotels may try to undercut online platforms.

However, Tourism Accommodation Australia argues that the effects of the ACCC deal will not be extensive enough as the agreement does not allow hotels to set cheaper rates on their websites.

How does this relate to the HSC syllabus?

  • and Expedia accounted for 80% of making share in the online travel booking market, which means it was virtually a duopoly (Preliminary Topic 3 – Markets). As a result, these online platforms have significant power over the hotels in negotiation due to the limited number of online platforms they can interact with. This means that these online platforms may charge a high fee for provision of their services which would be costly and inefficient for hotels.
  • Since hotels were not permitted to charge lower prices as a result of the online platforms’ ‘lowest price guarantee’, it meant that a lot of their bookings got diverted to the online platforms. Using these platforms required payment of 15% commission, which was a cost the hotels. However, hotels continued to use these platforms since customers tended towards the cheaper deals for the same good (Preliminary Topic 3 – Markets). Now with the new agreement in place, hotels can accept direct bookings which will reduce their costs as they do not need to pay as much commission to the online platforms for the bookings.
  • With the ability to charged reduced rates to consumers, the ACCC predicts that up to 1/3 of hotels will try to charge lower rates to undercut the online platforms in order to increase demand for their rooms and therefore increase revenue (Preliminary Topic 2 – Consumers and Business). This would be beneficial to consumers since they would be able to purchase the same goods for lower prices.
  • However, Tourism Accommodation Australia argues that the change may not be as impactful as hotels are not able to publish these prices on their websites, so consumers are unaware of the change.

Business investment tumbles 5.4%; retail flat

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Business investment has fallen more than expected, while retail sales has also stagnated. Investment has shrunk as a result of the diminishing resources boom, with new capital to shrink 5.4% from March levels, greater than the estimated 4.1%. One of the reasons attributed to this fall has been the fact that Australia’s growth has been weaker than expected which is putting downward pressure on wages and government tax revenues. Mining investment in particular has experienced a decrease of 24.2%.

How does this relate to the HSC syllabus?

  • A decrease in business investment may be a negative signal for economic growth since investment is a leading indicator. A decrease in investment results in a decrease in aggregate demand as (AD = C + I + G + (X – M)). A reduction in aggregate demand, ceteris paribus, causes a decrease in output which decreases economic growth (HSC Topic 3 – Economic Issues). A large majority of the decrease in investment has been as a result of a reduction in mining investment due to the slow-down of the sector.
  • The reduction in investment may also be a result of uncertainty as expenditure on buildings and structures have decreased by 10.6%, while smaller investments such as equipment, plant and machinery had increased 2.8%.

Australia’s march towards an emissions trading scheme inexorable

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A recent report from the Climate Change Authority has paved a clear path towards implementing an emissions trading scheme to reduce carbon emissions and transition Australia away from using fossil fuels. The Authority outlined various schemes including an emissions trading scheme or a carbon tax. However, talk about implementing these schemes is being treated tentatively as a result overlaying political interests and fear of backlash from conservatives. The uncertainty in development of any carbon system as a result of political debate has frustrated the energy sector who want investment certainty. Currently, the only carbon policy only applies to about 140 companies, which means Australia may not meet its targets by 2020.

How does this relate to the HSC syllabus?

  • Carbon emissions are directly causative of air pollution, resulting in environmental degradation (HSC Topic 3 – Economic Issues). Shifting Australia away from using these sources of energy and towards renewable energy sources will help to reduce the carbon emissions Australia produces.
  • The report calls for an exchange traded system or a carbon tax to reduce carbon emissions by increasing the cost of pollution (HSC Topic 3 – Economic Issues). These strategies operate differently. The carbon tax is a regulation based scheme which taxes per unit of emissions. An exchange traded system however, involves providing firms with permits which are traded amongst each firm so that firms with larger emissions are penalised more than firms with smaller emissions. Australia has previously endeavoured to implement a carbon tax. However, political ‘skirmishes’ between governments saw the carbon tax repealed.
  • Attempts to implement a carbon trading scheme is currently being hindered for political reasons as the government fears backlash from conservatives (Preliminary Topic 6 – Government and the Economy; HSC Topic 4 – Economic Policies and Management). The current policy only affects a limited number of companies which most likely means that the policy is not having a significant impact on reducing emissions. The report argues that the maximum amount of carbon emissions permitted is too high, which means only a limited number of firms will be affected. Hence, the baseline would be lowered to be inclusive of other companies.


Theresa Dang is an economics mentor at Keystone Education. She attended Sydney Girls High and achieved an ATAR of 99.70 in 2012. She is now studying Commerce and Law at the University of Sydney. She has experience in a global technology firm and a mutual fund.


Gary Liang is the founder and director of Keystone Education. He attended Sydney Boys High and achieved an ATAR of 99.95 in 2012. He achieved 5 state ranks in Mathematics, Mathematics Ext 1, Mathematics Ext 2, Chemistry and Economics. He is now studying Economics and Science (Advanced Mathematics) at the UNSW Australia, where he is the recipient of four scholarships.

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