Friday, August 3, 2012

Is Rate Parity Price Fixing?

It is a widely accepted online marketing strategy by accommodation providers to offer "rate parity" across all online websites that are accessible by the public.

Rate parity applies to a particular room type on a particular night. Although these rates may constantly change according to demand, applying rate parity dictates that no matter where customer chooses to shop for a particular accommodation choice online, they should find a consistent price at any one time. It is believed that consistency of tariff is gives an accommodation property's rates transparency, integrity and supports online reputation.

Accommodation providers can (and often do) fudge rate parity by offering package deals and offline direct marketing offers.

Although widely accepted by accommodation providers, using a rate parity strategy may work for some accommodation providers better than others. The trouble with rate parity is that it makes less sense if accommodation providers want to favour a particular channel (for example their own web site) and train guests to go there for the lowest price.

While many accommodation providers accept that a rate parity strategy is best for their business, others do so under sufferance as most OTA agreements dictate that rate parity must be applied. In order to list inventory on most mainstream OTAs to gain the benefit of targeted marketing initiatives and consumer brand loyalty, accommodation providers must undertake not to undercut elsewhere online. Is this fair enough?

Should online travel agencies restrict an accommodation provider offering a better online deal elsewhere if they use their services?

Should an accommodation provider offering wholesale rates to an online travel agency, be permitted to dictate a minimum tariff that is offered in the retail market?

After a two year investigation, Britain's Office of Fair Trading has provisionally ruled that the accommodation industry practice of rate parity and dictating minimum tariff to resellers is outside consumer law should be considered "price fixing."

The final decision will be worth looking out for as this may be ground breaking by changing how accommodation providers price and distribute inventory across sales channels. 

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