What Changing Rate Parity Laws Mean For Your Hospitality

If you own a hospitality and work with an OTA, then rate parity clauses are your personal headache. They're the sneaky agreements whereby OTAs make sure that you have to offer the same rate across all of your channels. That's a problem! It means that you can't easily convince your guests to book direct with you by offering a lower rate. If you offer your guest a price cut, even over the phone, then you're technically breaking your agreement. You can lose your relationship with the OTA this way, and once you've lost your OTA, you've lost the primary way that new customers find your business.

That doesn't just sound unfair to you – everyone thinks that this is shady behavior by the OTAs. That's why E.U. nations are taking legal action to stop it.

Nations are banning rate parity agreements

Italy, Austria, France, and Belgium have completely banned rate parity agreements. France started the trend in 2015, when it instituted its ban. Over the next two years, the other three followed close suit. Hospitalities in those countries still work with OTAs. However, those OTAs aren't allowed to penalize hospitalities for encouraging guests to book direct. 

Now, hospitalities in those areas can now offer a more attractive rate on their website, in person, or on the phone. Guests have a good reason to book direct. The small guesthouses that depend on OTAs for publicity and direct booking for revenue don't have to make that choice anymore.

More regulations on the horizon

That's not all the good news. Switzerland has now announced that they'll be banning rate parity agreements, too. Germany has decided to regulate Booking.com and HRS. This action prevents some of the most influential OTAs from damaging small hospitalities with rate parity. The rest of the E.U. limits rate parity agreements, a do Australia and New Zealand.

The trend toward limiting rate parity agreements is still quite new. It's only been brewing since 2013, when Germany prohibited HRS from using rate parity agreements. Since then, the rate of nations banning rate parity clauses has accelerated. The E.U. is still investigating online pricing disparities, and it seems possible that more OTA regulation is to come. As for the U.K., the Competition and Markets Authority investigated the OTAs in 2015. They found that all had made appropriate changes and were abiding by British law. 

The rate parity battle continues

Rate parity for hospitalities is still legal in much of the rest of the world. In the U.S.A., there is little regulation of OTAs, even though they've been taken to court. Rate parity clauses are the norm there, as well as in much of Latin America. 

It doesn't matter if your nation has banned rate parity yet or not. You're missing out if you cave to OTA pressure, not to mention OTA commissions. You need to get direct bookings to make your business a success. If you need pointers, then check out my 5 simple steps for increasing your direct bookings. You can also contact me at [email protected].