Italy outlaws hotel rate parity

View of Rome from Castel Sant'Angelo, Italy

Italy will no longer be able to enforce price parity clauses in its hotels after the Senate voted to outlaw the practice. 

The move followed the lead of France and Austria, where a compromise on the clauses accepted by competition authorities and booking platforms was reversed in favor of an outright ban as authorities toughen up on the clauses.

The legal ban on rate parity clauses in Italy is expected to come into force next month, stating that “any agreement by which the hotel is obliged not to offer to the final clients, by any means or any instruments, prices, terms and any other conditions better than those offered by the same hotel through intermediaries, independently from the law applicable to the contract, is void."

“This is an important milestone for the restoration of fair competition in the field of online distribution, both from the consumers' point of view and the hotel industry in Italy and across Europe,” said Markus Luthe, chair of HOTREC’s distribution task force.

“Italy is following the trend set by France and also reflected in the approach of the German courts in prohibiting any form of price fixing being imposed by [online travel agencies],” Neil Baylis, competition partner, K&L Gates, told HOTEL MANAGEMENT. “This is a stricter approach than that adopted by the EU and a number of other European competition authorities. This will make it impossible for the European Commission to push through its preferred compromise allowing narrow best available rate provisions whereby the OTA can require the hotelier not to offer better terms on its website than are being offered by the OTA. 

“Whether the major OTAs will be offering different terms and conditions to major hotel groups in different countries within the EU remains to be seen. Obviously it is up to the hotels to decide whether they want to take advantage of the pricing freedoms being granted them by the French and Italian legislatures—they may still decide that it is in their interests to keep the OTAs happy by not undercutting the prices they are offering. Suffice to say we haven’t seen the end of this long-running saga.”

Expedia said that it was concerned that the prohibition of Most Favored Nation clauses would “negatively impact Italian hotel bookings, especially for smaller hotels, as well as negatively affecting investment in Italian tourism.

“For the past 20 years, Expedia has helped hundreds of thousands of hoteliers compete for consumers’ business and has helped consumers discover these hotels quickly and efficiently. The result has been a marketplace where hoteliers gain global exposure to consumers who find value and efficiency in shopping for travel through our world class travel brands and our significant investments in marketing and technology at no upfront cost. Hoteliers only pay for this visibility if a booking is made on Expedia’s websites.”

As Italy banned rate parity clauses, the Competition and Markets Authority in the UK sent a “60-second summary” on changes to rate parity to hotels, to inform them that they could charge different rates to the OTAs. “Many hotels were not aware that and Expedia no longer enforce ‘wide’ parity clauses or of what this means for hotels’ ability to differentiate their prices across OTAs,” the CMA said. “The CMA is taking steps to raise awareness among UK hotels of the changes.”

Whether education or the law strikes first, rate parity looks set to play a lesser role in Europe.

Katherine Doggrell is an editor at Hotel Analyst, the U.K.-based news analysis service for hotel investors.