The European Rate Conundrum: To Be (in Parity) or Not to Be?
January 26, 2016 8:25am
By Jean Francois Mourier
First, I’d like to start this article by saying “Felicitations!” and “Gratuliere!” to hoteliers in France and Germany. It is an exciting time to be a European hotelier because the laws relating to rate parity are being amended as we speak/write.
In July 2015, the French National Assembly completed the process to ban rate parity clauses in contracts between online travel agencies (OTAs) and hotels. Germany’s courts have decreed that OTAs cannot have a “best price” clause in their contracts with German hotels – and that all OTA contracts must be amended by January 31, 2016.
As many European properties obtain 70% of their business from the OTAs (vs. 35% to 50% in the US) and because most consumers choose a hotel room based primarily on price, the new laws can help French and German hoteliers funnel more business to the direct channels, minimizing their reliance on the OTAs, while increasing occupancy, decreasing the cost of acquisition and increasing overall RevPAR.
While it is still not clear exactly how the European market as a whole will be affected by this ruling over the long-term, we are seeing drastic changes on the horizon that will have HUGE effects on the industry – both in Europe and abroad. Booking.com and Expedia are implementing changes in their contracts in other European markets, allowing hoteliers to offer lower prices on competing OTAs but NOT through their direct channels. The two OTAs are making this change in an effort to preempt further legislation (similar to France and Germany’s rulings) that would banish rate parity clauses across the board.
While Booking.com and Expedia’s contract changes will help hoteliers (as it allows them to direct more business to smaller OTAs with lower commission rates by offering lower rates through these channels), it will not create the widespread changes that are necessary to give hoteliers control back over their revenues. Until hotels are allowed to offer the cheapest rate through the direct channel (and/or all restrictions are eliminated completely), European hotels will remain reliant on the OTAs for the majority of their income, and therefore, will be sacrificing a large percentage of revenue to commissions.
As a whole, the European Commission is moving towards making a European-wide decision on the issue, which – if enacted - will have HUGE impact on both European hoteliers and eventually, North American hoteliers (who will follow suit at some point once laws are amended in Europe).
But until rate parity laws are amended worldwide, it is still possible for hoteliers to increase the amount of revenue that they earn through the online channels – without changes in legislation.
By using a sophisticated revenue management system (RMS) that facilitates automated pricing updates made in real-time (as the market changes), hoteliers can guarantee that they will be pricing their rooms at the right price, at the right time, across all of the online channels, which will result in a drastic increase in occupancy and revenue. An automated pricing strategy will also continue to benefit hoteliers long after the law is implemented in every European country, as it will help hoteliers to adapt to any pricing and distribution trends that manifest as a result of the new legislation – no matter which possible outcome is realized.
Tags: jean francois mourier,
Jean Francois Mourier is CEO and Founder of REVPAR GURU, a company that provides hotels around the world with an alternative revenue management software system designed to deliver maximum bookings and profits. You can reach Jean Francois by calling 1.786.478.3500.
Contact: Jean Francois Mourier
Tambourine Shares Three Easy Ways to Tighten the Bond Between Marketing and Revenue Management
Food for Thought: The Future of Revenue Management and Maybe Starbucks + More
PortAventura Extends Revenue Strategy Partnership With Duetto
HSMAI and Level60 Partner on Revenue Management Curriculum Tools and New Student Certification
Mid-Year 2018: Brands, OTAs, Marriott, Blockchain, Robotics and Sustainability
Hospitality Financial Leadership: Why Hotel Brands and Franchisers Secretly Love the OTAs
Why Facebook Will Help Hotels Beat the OTAs
HSMAI Recognises Tech Innovation of Smart Space by IDeaS
Restaurant Revenue Management Practices: Altering Customer Perceptions
Hit the OTAs With a Rebound: 5 Direct Booking Strategies for Hotels
IDeaS Expands Partnership With Preferred Hotels & Resorts to Over 100 Properties
North American Hoteliers Spring Into Second Quarter of 2018 With Continued Growth
Hospitality Financial Leadership: Fixed/Variable Costs and Room Revenue Management
Rainmaker Expands Business Operations in the Middle East and Africa by Adding Hicham Diab to Dubai Office
Total Revenue Management- The Journey from Capacity to Profit Management
The True Essence of Hotel Revenue Management
Infor EzRMS Mobile App Enables Revenue Management on the Go
Spring Hotel Outlook Shows Stability and Consistency in North American Markets
Rate and Bookings Growth Continue Positive Trend for Hoteliers in Early 2018
TravelClick and Google Expand Partnership to Help Hoteliers Maximize Revenue in an Increasingly Competitive Market
Please login or register to post a comment.