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Tour & Activity Industry Terms

What is Rate Parity?

 

Rate parity is an agreement between an OTA and a supplier providing the same retail rates for products sold across all distribution channels.  Primarily used in the hospitality (hotel) industry, rate parity is beginning to show up in supplier agreements for tours and activities as well.

The primary issue with the practice is that it locks the supplier into providing fixed retail rates and prevents the ability for suppliers to sell to their own direct customers at better rates.  Since OTAs may change their commission amounts, this means that suppliers pay more for indirect bookings.

Wide rate parity clauses, which are the more restrictive clauses, are generally regarded as unfavourable by suppliers and in many markets (especially Europe) they have been discontinued or banned entirely.  Tour and activity suppliers should be careful to ensure that any supplier agreements they sign with OTAs do not include such clauses and, if so, have them excluded from the agreement.

It is important to distinguish rate parity from price integrity.  Price integrity is the practice of controlling your retail price across all channels.  This ensures that consumers are paying the same for a given product regardless of where they shop for the product.  The key difference however, is that the supplier has the ability to reduce or change their direct rates without having to change the rates on other channels, giving the supplier the advantage of providing best rate guarantees for direct customers.

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