Rate parity future and the new ban from France regulators

France the second country to ban rate parity after Germany has taken the decision that all hoteliers where waiting, to bring the rate parity to an end. But what will this imply in term of the application and what will this mean for hoteliers in term of the application or will this imply that it will move in to a pricing war?

The French national assembly adopted a new bill that will reshuffle the cards on how Booking.com and Expedia partner with hotels.
The bill called “Macron bill” – named after French Minister of the Economy Emmanuel Macron – prohibits OTAs from including any parity clauses at all in their agreements with hotels, and gives hoteliers the full pricing freedom – including offering lower rates on their own websites.

From a hotelier perspective this means that new agreements between OTAs and hotels will have to be formulated in a way that allow hotels to offer lower rates in any of their sales channels, including their own website. What’s more, the bill also prohibits OTAs to offer lower rates as those provided by the hotel, giving hotels full pricing control within their contracted distribution channels.
Carlo Olejniczak, director Booking.com for France, Spain and Portugal, told AFP (Google Translate version) that the new bill will result in intensified pricing wars between OTAs and hotels, as Booking.com remains committed to its “best price guarantee.”

Roland HEGUY, President of HOTREC’s French member association UMIH “It is a real revolution that is underway for the French hotel industry and for our customers. After the decision of the Competition Authority, this vote will contribute to the establishment of a renovated contractual framework to restore conditions of a commercial relationship based on trust between hotels and booking sites in the interest of consumer”.

Quoted in hospitalityInside.com (by subscription only), Booking.com’s Managing Director EMEA said that in a world without rate parity many independent hotels in France will not be able to compete with the major hotel brands and search engines, and this will have a negative effect for tourism to France as a whole.
The main problematic with rate parity will be the application as chain hotels will need to make a major change in their technologies and this will also affect their global contracts as this new policies don’t apply worldwide. For smaller independent hotels that don’t manage their distribution proactively this will mean not much as they will not be able to enforce this or control it as it requires a lot of work and knowhow to manage their channels.

Furthermore the new regulation may be effective for hotels whose source market is France but for hotel with source market coming from Asia and Americas and other European market this may mean not much of a change as OTA as already playing with rates in the source markets.

While OTA won’t have a contractual right to prevent hotels to give them better rates, it should still have strong commercial leverage to punish hotels that are giving better rates to other sites. This should drive greater price disparity across channels, which will encourage consumers to comparison-shop more than ever