The future impact of changes in rate parity agreements on hotel chains: the long-term implications of the removal of rate parity agreements between hotels and online travel agents using closed consumer group booking models

The Office of Fair Trading, a not-for-profit and non-ministerial government department of the United Kingdom (from April 2014 incorporated within the Competition and Markets Authority), investigated the legality of rate parity from 2012, particularly rate parity agreements made between Intercontinental Hotel Group, Booking.com, and Expedia. Consequently, these major hotel brands and agents have committed to remove rate parity for closed consumer groups. This article identifies confusion over such groups and longer term implications. Smaller agents will enter the market, leading to increased fragmentation and competition. Branded hotels will face tough challenges in protecting prices and value from aggressive agents suddenly facing a more competitive market and independent hoteliers able to establish effective relationships with the new, smaller agents. Keywords : Rate parity, pricing, closed consumer groups, hotels.