Korea’s state watchdog launched an investigation into an alleged price-fixing practice by the country’s high-end hotels, suspecting that it resulted in hikes in their room prices despite a stall in demand. 

According to news reports, the Fair Trade Commission recently requested the country’s so-called five-star hotels to report on their price-setting processes.

FTC officials suspect that the hotels fixed prices in order to avoid undercutting each other.

“These five-star hotels suffered from falling demand after the Middle East respiratory syndrome coronavirus outbreak in May, only to have recovered their figures in late summer. But if the price fixing is confirmed, it will pose substantial damage to the hotels and the overall travel industry,” Yonhap News quoted an insider as saying.

But hotels argued that prearranging prices among them is quite impossible. “The price of a hotel room varies — whether the guests are staying during the weekdays, weekends or holiday seasons, or whether they are using a certain package program or travel agencies and many more. The price range of a standard room is very wide and the possibility of consulting with our competitors is quite unlikely,” a PR official for a major hotel in Seoul told The Korea Herald.

The FTC has been eyeing the hotel industry for several months.

In 2013, it ordered top-tier hotels to stop “forcing brides and grooms to buy flowers from their own flower shops if they want to hold a wedding at the hotel.” The authorities noted that the hotels have been making extra profit with flowers that are priced up to 10 million won ($8,800) alongside expensive catering services.

The Korea Consumer Agency, an FTC affiliate, in June revealed that many high-class hotels have been reluctant to give their customers proper refunds or any instructions about refunds.

Both regulations have seen little progress, as hotels are still said to be inducing soon-to-wed customers to choose their flowers and wine services by offering discounts, while turning a blind eye to refund policies.

The industry is reportedly expecting that the price-fixing case will reach a similar conclusion.

“The FTC has studied the case before but failed to detect any irregularities,” another industry insider was quoted as saying by Yonhap.

According to the Tourism Knowledge & Information System by the Ministry of Tourism, about 71.9 percent of the rooms at five-star hotels were sold in 2014, down 7.46 percentage points from 79.36 percent in 2013. With more hotels such as the Four Seasons opened this year, the competition will be fiercer, industrial pundits said. 

By Bae Ji-sook (baejisook@heraldcorp.com)