The End of Rate Parity in OTA Contracts

the end of rate parityOTA Rate Parity Banned in France and Germany

First Germany enacted legislation that will put a stop to OTA demanding Rate parity in contracts with hotel suppliers, then France followed. We can imagine that others will soon follow and what then. This blog looks at what End of Rate Parity in OTA Contracts means for both hotel marketing, OTAs and the average travelshopper. It also begs the question is this the end of rateparity?

The legislation makes it illegal for OTAs to insist that hotel cannot offer better prices than they have negotiated. Expedia and others  are having to revise contract with hotels. What it means g=for hotels is that they now have more control over the rates that OTAs offer and can for the first time offer better rates on their own site. Best rate guarantees now have real meaning on hotels sites. as we noted in a previous blog;  “Often OTAs have used their special net costs and deep discounts to their advertized rates, sometimes below their costs, to create loss leaders. All this has put them into top spot on the best price radar. But that too is ending. It is a fine time for hotel to jump into the drivers seat.”

How banning Rate Parity benefits hotels & tourismBenefits to Hotels and Tourism

Hospitality net Europe summed up the new move by the french to legislate against OTA Rate Parity as follows

“With this decision hoteliers in France regain their entrepreneurial freedom and will be able to offer their customers any trade or tariff advantage they consider appropriate. France is thus the second country after Germany, where public authorities decide to ban rate parity clauses from OTA contracts.”

The article goes onto say it puts tourism into the 20th century on pare with “distribution channels, like telephone, fax, letters, etc., this voted amendment follows the realities of current times.”

Roland HEGUY, President of HOTREC’s French member association UMIH. calls it a revolution in the French hotel industry and for its hotel members and there guests. “This vote will contribute to the establishment of a renovated contractual framework to restore conditions of a commercial relationship based on trust between hotels and booking sites in the interest of consumer”. The European hotel industry expects that this pave the way for full entrepreneurial freedom in the hospitality sector that reach far beyond the French and German borders.

Impact on OTA Contracts and Business

endofrateparity-signals-endofotacloutMost importantly this along together with the earlier German court ruling  earlier, “seriously question the relevance of the recent announcement of Booking.com and Expedia for the alignment of their terms and conditions similar to the formal commitments of 21 April. OTAs are of course notably upset with the rulings claiming that it will disrupt competition nad put small hotels at the mercy of the big brands.  They claim Rate-Parity was a means of stabilizing rates across all sectors but in-fact this si not at all the case. Many OTAs used their special discounts to sell off hotels as lost leaders and to make sure they eliminated competition for their suppliers. It limited hotel suppliers from offering better rates in any channel which is an unfair advantage to the OTA and actually not in the hotel control. Hotels should have the right to set their own room prices and charge for accommodation according to the laws of supply and demand just as the OTA themselves do along with airlines and just about every business.

Other Countries to Follow

In Europe, rate parity is on  the agenda at many legislative and associate level.

Britain, Italy, Sweden, Ireland, and Austria are amongst those who plan to investigate rate parity and other contracts terms that might not allow hotels to offer best rates and special deals on their own websites.

Related links

Other European jurisdictions  considering rate parity legislation: http://www.tnooz.com/article/as-rate-parity-falters-what-otas-and-hotels-may-do-next/

Rate parity Definitions:  http://hotelrevenuetools.com/?page=parity

How booking.com and Priceline react http://www.tnooz.com/article/pricelines-booking-com-eases-rate-parity-european-pressure/

 

 

 

 

 

1 Comment

  1. keep in contact for future updates on this very vital issue for hotels and tourism

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