On September 19th, Europe’s top court ruled against Booking.com’s use of parity clauses in their agreements with hotels. While the OTA giant did already remove these clauses in the EU back in July, this ruling means that these changes are likely to stick around for the long run. It may also encourage the phasing out of any similar practices from other OTAs.
Specifically, the ruling by the European Court of Justice (ECJ) states that Booking.com’s restrictions against hotels offering lower rates on their websites or on rival sites are unnecessary and could reduce competition. This decision isn’t surprising - regulatory trends across Europe are definitely going in the direction of putting more power back in the hands of individual hotels, with landmark legislation like the DMA working to ensure fair market practices and avoid monopolisation in the hospitality industry.
Key Points of the Ruling
The core issue in this case was whether Booking.com’s price parity clauses inhibited competition. Parity clauses have been a contentious issue in Europe for years, with some countries like Germany banning them outright. The ECJ determined that such clauses were not justified in their current form, as they restrict hoteliers from offering better rates on their direct channels or through other online travel agencies (OTAs). The court did however stop short of labeling them as fundamentally anti-competitive under European Union law.
The decision specifically focused on how these clauses could hinder market dynamics by making it difficult for hotels to differentiate their pricing strategies. By preventing hotels from offering better deals through alternative channels, Booking.com’s restrictions limited the ability of both consumers and hoteliers to benefit from competitive pricing. This ruling follows the logic of the DMA, which targets major online platforms like Booking.com that have substantial influence over the digital marketplace.
What this ruling means for hotels
- Greater pricing freedom: This decision opens up more flexibility in pricing strategies. Hotels will now have the freedom to offer lower rates on their own websites or through other booking platforms without being bound by price parity agreements. This could empower hotels, particularly smaller independent ones, to more effectively compete with large OTAs by offering exclusive discounts and packages on their direct channels.
- Increased OTA competition: The ruling might also foster more competition between OTAs. Without the influence of Booking’s parity clauses, smaller or newer platforms may gain market share by negotiating more favorable terms with hotels, offering consumers better deals. However, it could also lead to a fragmented pricing landscape, where consumers might need to shop around more extensively to find the best deals.
- Potential for increased direct bookings: The ECJ’s ruling gives hotels a tool to compete with OTAs by offering better rates on their own sites, which could drive more direct bookings and enhance customer loyalty. This shift could be particularly beneficial for hotel chains and independent properties that rely heavily on direct customer relationships
Is this a game-changer for hotels working with Booking.com?
There are a lot of potential benefits to be gained for hotels through this legislation, but it’s not necessariy that simple. Booking.com’s parity clauses may be gone in the EU, but they can still encourage hotels to offer strong rates through their “Algorithmic Persuasion Strategy”. This strategy doesn’t penalize hotels for not being in parity, but it does promote hotels who cooperate with Booking and don’t offer cheaper rates direct. You can find more tips on how to comply with Booking, and maximise your performance, in our article about Booking’s Algorithm Update.
Looking for the best ways to compete effectively with Booking.com and other OTAs in the wake of new (and future) legislation? Our direct booking experts are here to provide you with ways to future-proof your business, and drive more direct bookings.
Get in touch with our direct booking experts today to take advantage of the new price parity landscape
Genevieve is a product marketing manager at Triptease.
