The French National Assembly accepted a new bill on 16 June to outlaw all Rate Parity clauses in contracts between OTAs and accommodation providers.
The practical details of the “Macron Bill” still have to be arranged, but the final vote will take place on 14 July 2015.
This move is particularly welcomed by the hospitality industry, especially after the recent decision by French, Swedish, and Italian competition authorities regarding Booking .com’s proposed rate parity concessions. That recent decision allowed Booking to continue their practice of forcing hotels to give them the same prices that we sell on our own websites and only abolished rate parity requirements with regards to other OTAs.
That decision only served to strengthen Booking’s position against competitors and accommodation providers alike. It was a particularly damaging blow to the industry because the European Commission will still apply those conditions all across Europe as of 01 July.
Conversely, the Macron Bill will force all OTAs to remove ALL rate parity clauses from their contracts and give accommodation providers in France the freedom to set their prices as they see fit. This overthrows the previous decision by the competition authorities. After being signed into law it would take effect as early as August this year.
Fines of up to 150,000 Euros can be applied if the clauses are not removed from the contracts.
As if that weren’t good enough, the Macron Bill also says that the selling price will be determined by the hotel. OTAs will not be allowed to undercut the accommodation providers by offering lower rates than those set by the hotel. This serves as protection for hotels in order to ensure that they maintain control of their own pricing.
With any luck other countries will decide to follow suit and outlaw this abusive practice as well. Rate Parity clauses have already been outlawed in Germany.
The OTAs stand to lose too much control in this arrangement to just accept it, so there is sure to be backlash for the French hotel industry. Booking remains committed to their Best Price Guarantee despite the new bill, which suggests that they already have a plan in place to shift the power once more and maintain their dominance.
Booking’s Regional Director Carlo Olejniczak responded with a warning that the elimination of rate parity would lead to a deregulation of prices, which risks staring an intense price war that would affect the margins of hotels and in the end the quality of the offer.
Quoted in hospitalityInside.com (by subscription only), Booking .com’s Managing Director EMEA said that in a world without rate parity many independent hotels in France will not be able to compete with the major hotel brands and search engines, and this will have a negative effect for tourism to France as a whole. (Source)
This could simply be an attempt at fear mongering to throw hotels into a panic over the prospect of a price war. Or it could suggest that the costs associated with listing on Booking (and possibly other OTAs as well) are likely to go up to a point where independent hotels cannot compete with the budgets of big chains for placement on the site. This would not be a price war, but rather a commission war where all hotels lose and OTAs continue to win.
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