June 24, 2013

Is hotel rate parity finally coming full circle?


Some can’t live without it, others hate it. Some call it a ‘sensitive issue’, others argue that it could soon be illegal. Whichever way you look at it the issue of rate parity against a backdrop of recent allegations of price fixing in the hotel business is increasingly in the spotlight.

For many independent hotels, the issue of rate parity is much more complex. Many rely heavily on OTAs to deliver room bookings, and must pay heftier commissions than the chains to boot.

While booking.com and Expedia may be in the driving seat today, the reality is that much of their revenue still comes from independent hotels. In other words they need the business of independent hotels. And increasingly hotels are seeing the light. In December last year, several Scandinavian chains decided not to renew contracts with Expedia over issues of rate parity and commissions. In addition hotels are beginning to warm to the potential for rate parity legislation that would effectively weaken the negotiating power of the OTAs, which would no longer be able to demand the cheapest rate.

So it could be that rate parity is coming full circle. In the past hotels would sign different rates for different markets based on the conditions in that country. “We can go back to that model as today it is technologically possible. It makes the revenue landscape much more sophisticated and in the end it improves the bottom line for hotels and reduces the cost of customer acquisition,” says Pyner.

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