Rate Parity Issues Keep Hotel Lawyers Busy

by Jason Q. Freed, Managing Editor | July 07, 2016

When bills become laws and are written in proverbial stone, it usually takes a lot to get them changed. So when attorneys take on cases, they’re usually looking at their clients with respect to the current laws on the books, not expecting those laws to be flexible. But when you’re talking about hotel rate parity regulation, all of that can be thrown out the window.

An irregular amount of laws that detail how hotel rooms can be priced and distributed are changing right before our eyes, says Ruth Walters, attorney at Garvey Schubert Barer, who specializes in hospitality operations and advises clients on matters such as online hospitality inventory distribution agreements.

While it’s still not clear exactly how future hotel distribution agreements will shake out, it’s important for hoteliers to follow along closely and be prepared to make major changes in operations, Walters said during a breakout session at HSMAI’s Revenue Optimization Conference in New Orleans.

“There is an astonishing amount of law taking place in this small amount of time,” she said.

[bctt tweet="What do rate parity changes mean for the #hotel industry? “A mess,” says one lawyer."]

Walters caught the ROC audience up to speed on what has changed with regard to rate parity in the past year.

  • In July 2015, France’s National Assembly passed the Macron Law, designed to eliminate barriers to free competition in the hotel industry. It explicitly bans rate parity clauses, granting hotels the right to price rooms as they please, including below the rates given to distribution partners.
  • Both Expedia and Booking.com voluntarily omitted parity clauses in contracts with hotels throughout Europe.
  • In Germany, the Bundeskartellamt Court ruled that OTAs are barred from requiring rate parity between various third-party distribution partners and from requiring parity between the supplier and the OTA.
  • Spain, the U.K. and Sweden are among other European countries weighing pro-competition statutes.
  • Recent headlines suggest Hilton Worldwide and Marriott International have negotiated with OTAs the ability to break parity with special offers to loyalty club

Walters also cautioned that negotiated parity agreement terms aren’t always about rate. Parity agreements could pertain to product availability, such as last-room availability, or terms and agreement parity, which might include a hotel’s cancellation policy.

Many times the issue can come down to semantics. For example, Walters said the definition of Best Available Rate was previously around five words long; now these explanations are paragraphs long and include legalese explaining room type segmenting and restricted blackout dates.

Where Hotel Rate Parity is Headed

There is no sign of rate parity coming out from under the microscope.

Other channels outside of OTAs will get involved, Walters said, citing new questions surrounding whether a hotel’s GDS rates should be in parity with rates on other channels.

And there continues to be an ongoing debate over whether text messages are sent on a public or private channel, which would determine whether hotels and OTAs could send personalized rates to travelers through SMS messaging.

“What does this all mean for the hotel industry? A mess,” Walters said. “Everything is changing. Do the best you can.”

In the meantime, hoteliers continue to embark on data-driven analyses and leverage Open Pricing and direct-booking strategies with parity in mind. (Here is a free whitepaper outlining 10 proactive steps revenue managers can take.)

In the United States, Walters predicts very few changes in the near term.

“What it will take is legislation,” she said. “The suits that were already filed (in the United States) were all dismissed because the Department of Justice found that, in reality, a perfectly regulated and unregulated market may look the same.”

If U.S. hotels are serious about removing parity regulations, Walters suggested political action. “Write your congressman,” she said, “because lawsuits have tried and failed.”

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Jason Q. Freed, Managing Editor

Jason joined Duetto as Managing Editor in June 2015 after reporting, writing and editing hotel industry news for a decade at both print and online publications. He’s passionate about content marketing and hotel technology, which leads to unique perspectives on hotel distribution and revenue management best practices.

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