The fundamental purpose of a Rate Parity Agreement between an OTA and a Hotel is to secure overall integrity of rates across the internet. Thereby offering a fair chance to both parties to make a sale. One could even go so far as to say that it would be fair if the hotel’s had a slight edge, after all they are the primary service provider. That should have been the ideal situation. In the cut-throat business world, however, situations are almost always far from ideal.
To throw further light on topic of debate, what does the Rate Parity Agreement actually mean? According to the report released by the “Evercore Group”, it means three things:
- Hotels are not allowed to display on their own websites, prices that are lower than the ones they publish to OTAs.
- Rate Parity Agreement is effective only for public rates.
- Both OTAs and Hotels have the same opportunities for acquiring online bookings.
So, the overall purpose of such agreements comes down to two things:
- To preserve price consistency in room rates across all the distribution channels including the hotel themselves.
- To ensure that both parties honor the same publicized lowest room rates.
But, are Rate Parity Agreements serving both these purposes sufficiently? Short answer, no. And let’s begin the longer answer with a real-life example:
Notice the room rate for a particular room at the hotel’s own website.