The rate parity is a legal agreement between online reservation websites (these go by the acronym OTA: Online Travel Agency) and the hotels themselves. This legal agreement guarantees that hotels use the same and terms for the specific room type that is the same rate and terms per room type regardless of their distribution channel.
To summarise, if a room is available at a specific price. This price must be the same on Airbnb, Booking.com, or the website of the hotel.
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 an 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.
The end of the rate parity in France, 2015: The Macron Law
For many years the Constitutional Council has been working on the issue of equal economic opportunities. In the continuation of this approach, there was validation in 2015. A series of articles to promote this question. The law known as the “Macron Law” then appears.
The law n° 2015-990 of 6 August 2015, cancels all tariff parity clauses. It thus allows hoteliers to display prices lower than the rate proposed by the OTAs and thus to favor the distribution channels they want.
This law has been applicable since 7 August 2015 and also applies to previous contracts.
The law has been well received by hospitality professionals. Thanks to the Macron Law they have regained their negotiating power, their rate management and the right to position themselves as they wish in relation to their competition.
What about other countries
The end of the rate parity is not unique just for the case of France. Austria, Italy, Belgium, and the United Kingdom have the same liberties.
For Germany, the end of the rate parity concerns uniquely two OTA: Booking.com and HRS.
For New Zealand, Australia and the European Union, the end of this rate parity concerns the giants booking.com and Expedia. For smaller OTAs, the Rate Parity is maintained.
Where are we now? How to take advantage of this Law?
Now it is necessary for property owners to be visible on the internet. The patterns of reservations for hotels and vacation homes have changed, 80% of travellers are booking online and only 20% call properties directly.
Most of the travellers possess smartphones and want to be able to reserve in 3 clicks. This willingness to book quickly and from different devices explains the success of OTAs.
The popularity acquired over time by OTAs has put them at the forefront of the hospitality industry. However, these OTAs operate on a commission-based reservation service. These commissions are very expensive for owners with a minimum of 15% for guest house owners and 20% for hotels.
The mission is simple. Travellers should be encouraged to book directly on their websites in order to avoid commissions.
This is where we must take advantage of the end of the rate parity. The most important element for reservations is the price. By offering cheaper prices on their own websites, owners encourage the conversion of OTA bookings to their own booking engine.
The end of the rate parity did not go unnoticed by the owners, but above all, it did not go unnoticed by travellers.
Indeed, a Google study shows that 55% of travellers who find hotels, guest houses or cottages on OTAs then systematically go to the owner’s website in the hope of finding better prices.
Therefore, it is very important to choose the right technology. and to have optimal booking software on your website.
- The user must not leave the site. Travellers want to book directly on the site and not to be directed to an external site. (fear of internet scams with their bank details)
- The software must be responsive (i.e. adaptive to all types of devices)
- The design must be intuitive (reservation buttons on all pages to convert the visitor into a customer)