RATE PARITY on the hospitality agenda
Rate parity is now very much on travel industry’s lips. The buzz around this controversial and complicated topic, follows recent agreements between the competition authorities in France, Italy and Sweden and Booking.com.
Antitrust legislators throughout the EU are pushing major online travel agencies to amend their rate parity agreements to allow for more competition among suppliers and distributors. The aim is to create an environment that supports increased transparency and competition among OTAs which would ultimately benefit consumers. Rate parity remains a double-edged sword though.
Regulators throughout the European Union are pushing major OTAs to amend their rate parity clauses, under which hoteliers must chart the same rate on their websites as on third-party distributors. France, Italy and Sweden took the first step, opening a fantastic opportunity for hotels to conduct a more flexible and theoretically fully independent pricing policy. These changes remove the bond to comply with parity price in relation to all dealers, both online booking platforms and traditional sales channels. Following pressure on Booking.com, the provision in their agreements that a hotel could not provide another OTA with a lower rate, disappears.
While rate parity agreements might be coming to a head in Europe, in the US, the practice of price parity is considered legitimate competition. Last year, a court in Dallas stated that setting equal prices among different OTAs represents a “rational business interest”, and it is not against the consumers nor breaches competition law.
I am a hotelier, how does these changes impact my business?
If you are a big hotel chain you most probably favour or at least accept price parity agreements as you wish to maintain control over pricing and brand equity. However, if you manage an independent hotel, a B&B, hostel or apartment, you most probably run into rate parity as a consequence of dealing with the big OTAs. You would rather prefer to sell a room at a lower price on your own website than through an online agency which charges you a 15-20 percent commission. In order words, you could undercut prices given to OTA to reflect commissions paid, and try to attract guests to your hotel website for a better deal.
The rate parity debate, it seems, continues. What happens next is still uncertain and only time will show if the rate parity „crisis” will turn into an opportunity to create a new business model in which the hotels and OTAs will work in the same direction.