Parity rates have always been dubbed a ‘complicated issue’. We think this is rubbish. The contracts themselves can be complicated and unfortunately scrapping them from the world stage is too… but the ugly premise they stand on is not.
Let’s remind ourselves of the truth and why they are STILL a problem for hoteliers the world over.
Clarity on Parity
We’ll keep this quick. The large hotel chains half decided that they didn’t want to be undercut by the OTA’s on their own room rates and vice-versa. So… They conjured up these ‘parity rate’ contracts to enforce this mutual advantage.
We won’t undercut you if you don’t undercut us. Okay, compadre?
The problem here is that the huge OTA’s took advantage of the big chains selfish idea and used these contracts to secure price guarantee when contracting other hotel chains and independents.
Not only are the OTA’s serving up a hot-plate of high commission, but they’ve also added a measly complimentary rate parity side-salad too, something hoteliers definitely didn’t order.
As you can imagine, this didn’t sit well with everyone in between the hotel chains and the giant OTA’s on the travel scale. They inevitably come off worse. This is where it got gritty!
A loophole revolution ensued where hoteliers would use a variety of tactics to incentivise direct bookings at a better price. Long story short, these were ineffective. Most of them meant splitting inventory – the rooms with the most competitive rates were kept out of contract with the OTA’s and solely placed on the hotel’s own website.
Shaving against the grain, hoteliers were never going to find a clean way out.
Legislation, Legislation, Legislation
By now these rates have been continuously poking at the sides of everyone including its creators for the backlash and obvious pitfalls… Something had to be done.
2013 was where it all began as the German company HRS banned parity rates. About time! This opened the floodgates for national jurisdictions to follow suit.
First, the EU, although this was only on a version of parity rates. Not the whole shebang…
Now, France, Austria, Italy, and Belgium prohibit all OTA parity clauses outright. With a few more countries in the pipeline.
What about the rest? What’s next?
Well, there are too many to list, to be honest. Parity rates are being beaten down or at least on their last legs everywhere but the USA and Latin America.
This is great news for most hoteliers around the world. OTA’s shouldn’t control hotels and how much money they earn, they should be used as tools to show transparently priced accommodation worldwide. No ‘complications’.
OTA’s were meant to solve the problem of distribution and visibility, yet, their visual podium (google search) has been used more often than not to snatch commission and influence rates for hoteliers and hosts. Not cool.
Fancy reading more on how the mega OTA’s are distorting the accommodation market. Have a peek at this – The Hotel Middlemen Don’t Have the Cheapest Deals.
Are you a Hotelier? Have you had a bad experience with Parity Rates or a large OTA? We’d love to hear about it! Let us know in the comments or send Gomingo an email – firstname.lastname@example.org