Rate parity :
What ’ s thenext step ?
Contributed by Bruce serlen
David Kong
In mIlestone decIsIons last wInter and summer , legislators in Germany and France banned rate parity clauses from online travel agencies ’ contracts with hotel owners , citing anti-trust concerns . Other countries in the European Union are moving in the same direction . For now , nothing changes for hotels in North America , where the OTAs and other distributors are intent on imposing rate parity across all channels . And ongoing skirmishes between hoteliers and “ partner ” OTAs continue .
For their part , owners and operators want to manage OTAs with as much flexibility as possible . “ They want to be able to give one distributor a certain rate for excess inventory on a slow night of the week and another distributor a different rate for less inventory seven nights a week ,” says attorney Greg Duff , a partner in Garvey Schubert Barer , where he chairs the firm ’ s national hospitality practice .
While all hotels seek to improve their distribution strategy , small hotel companies and independent hotels have a distinct disadvantage . “ An Expedia is able to display and market a hotel ’ s rooms in different languages and different parts of
the world . It can attract guests that the owner and operator could never attract on their own ,” Duff says . They have no choice but to accept the OTAs increasingly restrictive contract terms .
“ On the other hand , the major hotel companies have significant global reach of their own and various distribution channels they ’ ve developed themselves ,” Duff continues . Hilton Worldwide , for example , used its size as leverage in
negotiating a favorable deal with Expedia across all its brands last year . Similarly , Marriott International has said that one of the reasons it pursued a merger with Starwood Hotels & Resorts Worldwide this year was to give it even greater leverage in OTA negotiations than it already had .
That independent hotels find themselves at a disadvantage vis-a-vis the OTAs today is ironic , considering the situation when booking hotel rooms on the
“ They Take away hoTels ’ auTonomy To be relevanT in Their pricing and Their markeTing .”
– DaviD Kong , Best Western Hotels & resorts , on WHy He WoulD liKe to see rate parity clauses BanisHeD across tHe BoarD
Web first became popular . Back then , the Internet was seen as creating a level playing field for independents ; they ’ d have the same visibility as branded hotels . With independent hotels today paying some of the highest OTA commission rates , “ those days are over ,” Duff says .
While rate parity across all channels is still permissible in North America , many OTAs that operate globally have begun incorporating the same contractual concessions forced on them in Germany and France into their agreements worldwide , North America included .
Meanwhile , industry leaders like David Kong , president and CEO of Best Western Hotels & Resorts , would like to see rate parity clauses banished across the board . “ They take away hotels ’ autonomy to be relevant in their pricing and their marketing ,” he said in a note to Best Western members early this year .
May 2016 hotelsmag . com 49