The Decline of Rate Parity Clauses and What This Means for Hotels
The rate parity spotlight turned to the UK earlier this year, with an agreement between the government and OTAs to cease certain practices around how they merchandise and price hotel rooms to consumers in that country.
The agreement, which was announced in February, was signed by six OTAs and requires full compliance by 1st September 2019.
The UK joins several other European nations in re-calibrating the dynamic between OTAs and suppliers – as well as the consumers caught in-between. As more nations restrict rate parity agreements, hoteliers enjoy a new dynamic that supports channel-specific rates. Yet, even in regions with loosening parity restrictions, it’s a complex map of differing regulations.
Parity works both ways, with hotels and OTAs each sometimes feeling that the other party is at an unfair advantage. We often look at how OTAs’ rates can undercut hotels when the rules aren’t properly applied. But hotels sometimes feel restricted from setting lower rates in circumstances that they would argue are competitively fair.
This article considers the full mix. So, with an eye towards clarity, let’s review global rate parity regulations, and then explore their influence on how hotels should optimise both channel mix and pricing strategy.
Parity around the world – some highlights
Hotels have bristled at contractually-obligated rate parity since the day such clauses originated. Many are relieved to see hotels untethered from artificial pricing restraints. Here’s how parity looks in a few important countries around the world.
The UK. Starting on 1st September, hotel booking platforms must drop any misleading practices, such as pressure selling, discount claims, and hidden charges. This means that booking platforms can no longer give a false impression of scarcity, offer misleading discounts (such as comparing the price of a luxury suite with a standard room), or bury compulsory fees deep in the booking process. These platforms must also make it clear how hotels are ranked after a customer has entered their search requirement by, for example, telling people when results have been influenced by hotel commission payouts.
France. France was one of the first countries to ban restrictive rate parity clauses back in 2015. Championed by Emmanuel Macron, at the time Minister of Economy, the law allows the hotelier “to consent to any customer discounts or pricing advantage of any kind whatsoever.” In essence, hotels can price their rooms however they want on whichever channel they prefer – except on their own channels, which must match the OTA price. This is “narrow parity.”