Educational establishments should review prices of dormitory accommodation for tourists - Competition Council

RIGA - Educational institutions in Latvia should review the prices of dormitories for tourists, the Competition Council told LETA.

The Competition Council, while conducting market surveillance of the activities of educational institutions in providing dormitory services to third parties, including tourists, encouraged the institutions both to review the existing regulatory framework on the pricing of paid services to public entities and to reassess whether their dormitory activities are necessary in the market.

The Competition Council initiated the market surveillance following a number of complaints about potential restrictions of competition in the letting of accommodation to tourists by hostels owned by educational establishments.

The council discovered that almost all hostels, when setting their prices, follow the methodology set by the Cabinet of Ministers for the pricing of paid services, which stipulates that the fee for the service should not exceed the costs associated with the provision of the service. Thus, no profit is added to the charge for the tourists. This situation creates an uneven playing field when public entities compete with private hostels for an identical service.

The Competition Council's market monitoring concluded that competition is affected by the disproportionate pricing of paid services by serviced hotels, with most serviced hotels charging between EUR 3 and EUR 10 per bed or room per day, and only a few exceeding EUR 20 or up to EUR 100 for superior rooms with additional facilities such as breakfast.

The authority also found that, despite a clear increase in costs in recent years, a large number of municipal hostels have not updated their price lists for accommodation services. 

In order to mitigate the identified restrictions of competition, the Competition Council calls on educational institutions to assess whether it would be possible to lease dormitories to a private operator, with the lease agreement providing for cooperation aspects and the educational institution setting both the rent for students and the internal rules of procedure. This would be particularly the case for dormitories that no longer accommodate students or have a lower student/tourist ratio.

In addition, the benefits of providing dormitory services to third parties and their impact on competition need to be assessed and, if the dormitory has a negative impact on private business, the educational establishment should withdraw from providing the service.

According to the regulatory framework, educational establishments may provide services for a fee as long as it does not interfere with the implementation of educational programs.