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Rate Parity's Legal Landscape

Ilse Scott
Hotel News Now
August 12, 2015

Ilse Scott's article,"Rate Parity's Legal Landscape," was published in Hotel News Now on August 12, 2015.

From the article...

"Over the last decade, online travel agencies, such as Expedia, Travelocity and Booking.com, have gained enormous market power. The OTAs have advertising budgets that dwarf those of most hotels, and they benefit from the increasing consumer preference for online booking, particularly among tech-savvy millennials. Up to 50% of bookings in the United States originate from customers who find hotels through OTAs or aggregator search engines, and in Europe that number can be as great as 70%.

Accompanying the rise of OTAs is the practice of rate-parity agreements—contracts between hotels and OTAs that establish acceptable rates for room listings. Now the industry standard, these agreements have been embraced by some hoteliers and despised by others. Recently, rate-parity agreements have come under attack through both legal challenges and erosion, as hoteliers exploit loopholes to offer lower rates without breaching the agreement terms.

The pros and cons of rate-parity agreements

The standard rate-parity agreement between a hotel and an OTA contains two essential terms: (1) a "rate parity" clause providing that the hotel will maintain parity with the minimum rates set by the hotel; and (2) a "most favored nation" clause, providing that the lowest rate offered to the public via the hotel’s own website, or via competing OTAs, must also be made available to the OTA entering into the agreement."

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