Recent developments in legislation throughout the world have made rate parity an important topic in the hospitality industry.
But despite its frequent appearance in the news, rate parity remains a complicated issue, and one that takes a different form from one market to the next.
To understand what exactly is happening with rate parity in the greater hotel industry, our researchers examined it on a global scale. Presented here, their findings offer a comprehensive look at rate parity from its origins to its current legal status in countries around the world.
What is rate parity?
Rate parity is a legal agreement between hotels and online travel agencies (OTAs) in which the hotel guarantees to use the same rate and terms for a specific room type, regardless of the distribution channel. The price of the room can regularly change – which means the exact rate is flexible – but it must always remain the same across all distribution channels, both direct and indirect.
While the specific terms of each rate parity agreement vary depending on the country and parties involved, there are two broad categories: wide rate parity and narrow rate parity.
Wide rate parity?
Wide rate parity is the more restrictive form of parity agreement. In such clauses, a hotel agrees not to undercut the room prices that the OTA charges for their hotel. This agreement generally applies to all distribution channels, including other OTAs and the hotel’s own website.
Narrow rate parity?
Narrow rate parity developed in response to intervention from regulators in Europe. Such clauses generally allow hotels to offer lower rates to other OTAs, but not publicly online through their own websites. Narrow rate parity clauses also generally don’t restrict the hotel from offering lower direct rates when it’s through indirect or offline channels, such as email or telephone bookings, or to guests in their loyalty programs.
