Eliminating rate parity is currently one of the biggest challenges inside the hospitality industry. This unfair practice is currently depriving the hoteliers of direct bookings and making them feel powerless in the fight against the monopolists on the market. In today’s article, I will try to explain in detail what is the rate parity, where is it illegal and what might be its future.
What is Rate Parity?
Rate parity is a legal agreement between hoteliers and the online travel agencies. Its main purpose is ensuring, that the hotels give the same rates for the same hotel rooms on all channels they use. Therefore, not only does that mean, that if the hotel cooperates with more than one OTA, it cannot give any discounts to the other OTA without giving them to their other partners.
But rate parity isn’t targeted only at the booking platforms. Hotels cannot even offer lower prices on their own websites. They are obliged to keep their rates at the exact same level no matter if the channel belongs to them or somebody else.
How Does it Affect the Hoteliers?
What does that mean for the hotelier? To put it simply – loss. They are not able to give any discounts on their websites without giving them on the Online Travel Agents’ sites. That means that it is significantly more difficult for them to attract guests. The customer feels that they could get a better deal via OTA because the price is the same.
It lowers the number of direct bookings. Therefore, the hoteliers are still forced to pay the commission, whether they want it or not, because people do not realise that they could pay the same amount to them directly. Booking via hotel’s website or a channel that ensures direct bookings, like bidroom.com, often ensures extra benefits, but rate parity is one of the reasons people still vary when it comes to choosing those options.
It lowers the trust to the OTAs and makes the hoteliers feel used as if they lost the control over their businesses.
Countries That Illegalized Rate Parity
Currently, governments of some countries are helping the hoteliers fight this unfair practice. In France, Italy and Austria all types of rate parity are now illegal. Switzerland and Belgium are following those steps to at the end also enforce the ban.
Germany has not illegalized it completely but instead chose to apply regulations only to certain OTAs. On the other hand in In Australia, New Zealand, and the European Union, a few OTAs have adopted narrow rate parity clauses.
Sadly, in most countries rate parity is still legal and used to the disadvantage of the hoteliers.
It may seem as if there are not many options for the hoteliers to escape rate parity. Firstly, they would need the help of their politicians to create rules that could protect them. Governments need to see the issue and create solutions that would protect their citizens – hoteliers. Rate parity is especially dangerous for the small hotels, that cannot fight the large OTAs. They need help since they do not possess the power to do it on their own.
One of the solutions is simply offering extra benefits to their guests, that the OTAs have no access to. This way they can have a bargaining tool.
Another solution is choosing the Online Travel Agents that do not use the rate parity clauses, like Bidroom.com. We believe in fairness and transparency and do not charge hoteliers any commission. We also do not use the rate parity clauses, because our goal is helping the hoteliers, not trying to take over their business. Sadly most booking platforms seem not to think the same way.
The road to success is long, but we believe, that together we can achieve it.