hotel rate parity France French revolution
2 years ago
 

French parliament kills rate parity, and Booking predicts hotel price war

On Thursday, the French National Assembly moved to cancel rate parity clauses in contracts between hotels and online travel agencies (OTAs). Violators will be fined up to Euro 150,000.

The next step is for a council minister to fix the practical details and for the regulation to go into effect. That may take months.

Booking.com and other hotel reservation platforms may challenge the law via the Constitutional Council.

Otherwise hoteliers will soon be able to display on their online and offline channels lower rates than they offer to online booking channels.

The parliamentary move particularly stung Booking.com, which commands two-thirds of the online market in France.

The banning of rate parity tosses into the air the agreement reached six months ago between Booking.com and the French competition authority. That had a more nuanced, compromise position that restricted but did not ban rate parity.

On Wednesday, in anticipation of the government’s move, a Booking.com spokesperson told Agence France-Presse that the end of rate parity might lead to an “exacerbated price war” (“Cela risque de conduire à une guerre des prix exacerbée“, as quoted in Les Echos).

On Wednedsay, Carlo Olejniczak, regional director for the France, the Spain and Portugal, said, according to a rough translation:

“This may lead to an exacerbated price war, affecting the margins of hotels and in the end the quality of the offer…. Hoteliers are likely to suffer….

Comparison engines are going to do what they want, because there are always ways to have differentiated prices and reductions. This will cause unbridled price pressure.”

The Assembly also stipulated that the deal between OTAs and hotels should be a “contrat de mandat“.

Spokespersons for Priceline Group, Expedia Inc, and HRS, have told Tnooz that the contracts they have issued in the past year have already been in compliance with the contrat de mandat legal standard.

Guilain Denisselle, editor-in-chief of hotel trade news website Tendance Hotellerie, told Tnooz that:

“The mandate contract does not change much, except that every platform selling hotel rooms will now have to have signed this type of contract.

I am waiting answers from lawyers to see whether affiliates might be considered as a “reservation platform”. We might get it clearly defined when the law will be published by the minister council.”

For example, it’s unclear if French law will consider that the hotel booking offers of companies like Easyjet or Europcar count as “a booking platform online for the rental of hotel rooms to customers” under the wording, as proposed.

The law applies regardless of where the online booking platform is headquartered in the world.

CONTEXT: May 2015 French regulators rule against Expedia in rate parity case

ANALYSIS As rate parity falters, what OTAs and hotels may do next

French-speakers will find analysis on Tendance Hotellerie and Challenges.

NB: Image of Eugene Delacroix’s famous via Flickr/Creative Commons

Share on FacebookTweet about this on TwitterShare on LinkedInEmail to someone
 
 
Sean O'Neill

About the Writer :: Sean O'Neill

Sean O’Neill had roles as a reporter and editor-in-chief at Tnooz between July 2012 and January 2017.

 

Comments

Your email address will not be published. Required fields are marked *

  1. Ryan

    Great the end of pricing fixing and start of the free market

     
  2. Weysprings

    This is great. OATs are so dominate on Google Searches that many of my guests book through them by accident thinking they had booked directly. Anyone searching for a specific hotel is overwhelmed by the OTA versions of the hotel listing, and with “price guarantee” and “only 1 room left” comments they book without checking. OTAs are out to divert bookings away from the very hotels the guests wish to book. Why should a hotel pay a commission for a booking it would have received anyway.
    Once guests become aware that OTAs may be more expensive than booking direct they can decide for themselves if they value the service from the OTA enough to pay for it.

     
  3. Hedwig Wassing

    Now that this is out of the way, hotels should invest in better UX on their (brand) booking engins to compete with the OTA’s.

     
  4. Preferably anonymous

    Ladies and gentlemen, this change concerns only other OTA’S. Still hotel’s own website has to offer same online rates and conditions

     
    • Markus Luthe

      This is not true, dear Anonymous, and your state of knowledge is outdated and misleading as it refers to 21 April decision by the French Competition Authority and Booking.com’s “committments” only. And even then it is wrong, because availability, and terms & conditions parity are not in place anyhow even in France, Sweden, and Italy as of 1 July. This includes hotels’ websites as well. And the new French law, this Tnooz article is about, will ban any kind of mandatory parities in OTAs’ contracts with hotels in France, including rate parity.

       
      • Preferably anonymous

        Dear Markus,

        I do not want to start a back and forth disagreement with you, so I will just ask you if you still believe in what you wrote.

         
  5. anonymous1

    One of the winners will be newer OTAs. There is no reason for a consumer to book on a new OTA if they have never heard of them especially under rate parity rules. But now newer, creative OTAs will be able to negotiate for lower rates than the majors, adding value to their site.

     
  6. Anil Varghese

    Ha, no one is worried about price wars other than the OTAs. Hotels should not waste time in offering a” best rate guarantee” on their direct website. The best end result of this should be OTAs coming down to the good old days of working at 10-15% commission

     
  7. anonymous

    The only people getting cheated out are the guests. Hotels will not drop rates on their own sites, they will just raise them on OTAs

     
  8. max

    Ha, great news, now they cannot bully in their cartel like contracts, if they do 150,000 euro please. There now needs to be someone to take them on at 8-10% commission.

     
  9. Mark Ramage

    What great news!
    Hopefully this ruling permeates throughout the hotel world.
    I think hoteliers will increase rates at OTAs over time while maintaing rates on their direct channel. Every hotelier will act differently with some taking an agressive approach while others seeking to tweek their pricing only on busy times or on certain room types. Over time however this will be massive chink in the OTAs armour-PRICE.
    Price was used to create the OTAs now its price that will lead to their unravelling!
    I am sure new players will emerge on a very different commission level.
    You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.

     
  10. Dorian

    There won’t be a price war.

    The effect of rate parity was to create an advertising war, which was funded by ever increasing demands for higher hotel commissions.

    Without rate parity, the challenge is for travel companies to operate at the lowest distribution costs because those are the ones which will have the most sway with hotels.

    At nearly 30% commission in some hotels, Booking.com has become the most expensive channel and starts right at the back.

     
  11. Boyan Alexandrov

    So what? If I am an OTA and hotel X is trying to trick me with lower direct rates, how much seconds would I hesitate, before I kick it out of my system? And if my OTA is SO important for hotel X, would it try to try my nerves by playing price games? The market will find its way, don’t worry.

     
    • Valentin Dombrovsky

      > If I am an OTA and hotel X is trying to trick me with lower direct rates, how much seconds would I hesitate, before I kick it out of my system?

      And that’s how you’ll get fined by authorities after rate parity clause will be banned. That’s the whole point.

       
      • Boyan Alexandrov

        Well, as a private company, I can take my own decisions who to offer and who – not.

         
    • Markus Luthe

      If you are a market dominant player – as Booking.com certainly is in the majority of EU member states – you cannot abuse your superior position and kick out partners for “misbehaving” in your eyes as you like. You have an obligation to contract.

       
      • Boyan Alexandrov

        Yes, I can, but if I do it with too many of them, the competition will kick me out, eventually. This is why I say that the free market will find its way. It’s a two-way street.

         
        • Valentin Dombrovsky

          Boyan, Booking.com executives know it a bit better, I guess, and then why are they worried so much if the can do whatever they can as you say? If they say officials say that rate parity clause is illegal, then they won’t be able to include into contracts. And if it’s not in the contracts, then how could they”kick out” hotels out of their search and not to get lawsuits in return? They might become banned in EU if they violate the rules after all.

           
  12. Oz Har Adir

    That is good news for two parties: hotel website service providers and meta-search engines, and the two should be collaborating far more than they currently do. Daniele, The current state of price-parity favors the big OTA for a variety of reasons: 1. Only they have the market size to dictate such clauses to begin with. 2. They already have ‘share of mind’ in consumers mind, and ‘share of screen’ through better marketing than any hotel or small OTA. 3. They convert better on same price levels than less optimized solutions.
    The only way to un-level this playing field is to let pricing become more flexible (and there is still much room to improve that freedom, in the current wording of the law)

     
  13. Daniele Beccari

    Without rate parity, the biggest OTAs will have a major competitive advantage thanks to their fluid volumes. Who would want to list a rate higher than necessary? I think the hotel industry and regulators are shooting themselves in the foot.

     
    • Sean O'Neill

      Sean O'Neill

      Thanks, Daniele.

       
    • Valentin Dombrovsky

      How it might be and advantage for an OTAs if customers get used to searching for hotel on OTA and then going to hotel website to book hotel for lower price directly?

       
    • Evan

      This is great for both hotels and travellers, hotels can offer cheaper rates on their websites and travellers willing to visit the hotel website get a small discount. What’s not to love? Obviously the big OTA’s are dead against this from happening

       
    • Guilain Denisselle

      Hi Daniele, hope you’re well :).
      Well the law is written in a sense that the party that will decide of the selling price is the hotel only. I was expecting price war with the end of rate parity, eg Expedia using some of its 22% commission to offer a better deal to its consumer but this won’t happen that way. With the law, if the hotel says that its selling price is 99 Euros, no OTA nor any reservation platform will be allowed to sell it for 95 Euros. That paragraph is simply forgetting 70+ years of aggregators/tour operators/travel agents… It means that websites like Olotels (is this one still operating?) or Amoma that are king at buying the cheapest possible net prices from GTA/Travco/Jack Travel/etc… in order to resell 5 to 10 Euros chaper than any other online channel will get into trouble sometime soon

       
      • Pascal Gauthier

        I fully agree with you Guilain,
        This law is a good news for hotels regarding those sites you named, playing with Wholesalers rates to propose lower ones on their sites. This kind of practice is terrible for any hotel trying to build his own rate strategy and most of the time their complaints remains without answers or actions. Now with this law, it will be more difficult to avoid legal procedures.
        Im’ not sure hotels will create such a big difference of prices between those proposed on their own site and those on the OTAs. A clever hotel would just need to reduce the cost of commission to increase his margin. OTAs deserve of course a commission when bookings are done through their portals, and they do a big job to promote their site and hotels listed consequently. And I join you when you say everything is not fixed, ilt’s clear that brand protection topic is not included in this new law and this is one of the biggest issues for hotels who wants to create their own direct strategy. We know there are solutions to fix this, but not all hotels knows it or just dare to do it.

         
    • Gautam Lulla

      Daniele, Can you please tell me how this will happen, because as far as I can tell, the price war warning by OTAs is a ruse and a scare tactic.

       
  14. Martin Hatchuel

    Can someone please explain – what IS rate parity?

     
    • Sean O'Neill

      Sean O'Neill

      When consumers shop for hotels online and they see a “Best Rate Guarantee” — a promise that the price they see on that site is the lowest price available anywhere on the Internet open to the public for, say, two days — that is possible because of rate parity agreements.

      The Ritz Hotel promises not to charge only $190 for a room on its own website when it’s offering the same room via Booking.com for $200.

       
 
 

Newsletter Subscription

Please subscribe now to Tnooz’s FREE daily newsletter.

This lively package of news and information from Tnooz’s web site provides a convenient digest of what’s happening in technology that drives the global travel, tourism and hospitality market.

  • Cancel