The Fight against Rate Parity Agreements
Today, we want to talk about an issue, that causes great pain for the hotel industry and was one of the reasons why LockTrip was founded.
Rate Parity Agreements
This kind of agreements are used by online travel agencies to eliminate competition and ensure that no party is offering better prices than they do. In such a case, not even hotels themselves are allowed to offer lower prices than the one displayed by the travel agency, which includes a hefty commission of around 20%. Hotels are forced to accept such terms, as they are dependent on the service of such monopolies.
However, more and more headwind is coming up regarding this practice. It obviously violates free market conditions and is a way to abuse monopolistic power. As a result, countries have begun to ban such agreements and restore the freedom to compete.
July 2015 — France
The “Macron Law,” which outlawed all rate parity clauses, was adopted.
November 2016 — Austria
Austria amended the Competition Law to outlaw all rate parity clauses.
August 2017 — Italy
The Competition and Market Law, which outlawed all rate parity clauses, was adopted.
November 2017 — Belgium
The Council of Ministers adopted the draft law of the Consumer Affairs Minister, allowing hotels to freely publish their own rates on their websites. Hotels are now no longer bound by price agreements with popular booking sites such as Booking.com.
In addition, the topic is being discussed heavily in other countries and the EU.
What does this mean for the LockTrip Marketplace?
In order to not breach such agreements, we as LockTrip are forced to hide fiat prices on our marketplace for people that are not registered or logged in on our marketplace, making such offers exclusive offers for our users.
This represents a market barrier, as not everyone will take the time to register, just to compare prices.
A worldwide ban of such agreements would allow us to lift this barrier and show prices directly, increasing conversion rates.
What does this mean for the LockTrip Distributed Database?
A worldwide ban would enable true competition and increase incentives for new marketplaces and business models. This translates to many more potential customers, which could connect to our Distributed Database.
We are optimistic that rate parity agreements will be banned at more and more countries over time, eventually making them illegal around the world. We are seeing the first examples already.
LockTrip is the first marketplace with 0% commission where you can save on average 20% on your hotel and rental bookings compared to anywhere else. Learn how to buy LOC tokens to enable access to our marketplace and its lower prices here!