If you’ve bought a hotel room or a flight from a travel site like Travelocity or Priceline recently, it was probably because you thought they were saving you money—and that’s exactly what these sites want you to think. Online travel agencies (OTAs) like to lure you in with ads promising that they have the lowest price with flashy messaging that makes you feel like you’re getting a deal.
We’ve written before about how these deals aren’t always what they seem to be; they’re just urgency marketing tactics to get you to book faster. Today, we’re going to dive back into the nitty-gritty of the hotel industry to show you that these “low prices” aren’t what they seem to be either. OTAs claim they have the “best price,” but that doesn’t mean what you think it means.
OTAs sell a lot of hotel rooms, roughly 50% of all hotel rooms sold in the United States and 70% in Europe to be exact. Because of this, hotels rely on OTAs to help them sell rooms. A hotel chain would miss out on a lot of potential bookings if they were to choose to not list their properties on these sites. This gives OTAs quite a lot of power to dictate the terms of their relationships with hotels. For example, OTAs require hotels to sign rate parity agreements that put restrictions on how the hotels are allowed to sell their rooms on their own. Here’s what we mean…
What Are Rate Parity Agreements?
Basically, an OTA (like Expedia) tells a hotel (like Marriott) that if Marriott wants Expedia to sell Marriott rooms on Expedia.com, Marriott has to sell them at the same price. Marriott can’t sell rooms more cheaply on their website, because that would undercut Expedia’s business. This works in reverse as well—Expedia is not allowed to sell Marriott’s rooms at lower prices because that would undercut Marriott’s business.
In a way, these agreements protect the hotels against OTAs undercutting their rates, but they also put unfair restrictions on how hotels are allowed to price their own rooms. Because of rate parity agreements, hotels are bound* to sell rooms at the same price that OTAs are selling them. (*We’ll explain that asterisk in a bit. Teaser: there’s a loophole!)
What This Means for You
If you’ve tried searching for hotel rooms lately only to be frustrated when website after website yielded the exact same price results, this explains why. Everyone is bound by similar rate parity agreements, so the basic prices and options you’re seeing for a specific hotel room are the same. As a result, OTAs are able to say that they have the best price for a hotel room because everyone has the best price; everyone has the best price because they all have the same price. This creates inherent confusion for travelers who are always on the hunt for good deals on hotels.
Rate parity agreements are highly contested. By now, they’ve actually become illegal in parts of Europe because they give OTAs an unfair advantage and are detrimental to the success of the hotels themselves. These agreements have led to steeply declining profits for hotels—and therefore lower quality facilities for travelers.
*How Hotels Remain Competitive
So, since hotels can’t sell their rooms any more cheaply than their biggest competitors can, how can they hope to make any direct sales if OTAs continue to dominate the travel industry?
There is one exception to the rate parity clause that allows hotels to sell their rooms for less than the price they’re locked into with OTAs. This loophole lies with hotel loyalty memberships. Many hotel brands offer discounted rates to members of their loyalty programs. These lower rates are allowed to bypass the rate parity agreements because they are sold to a “closed user group.” This simply means that travelers must be members of the hotel’s loyalty program to snag the lower rates. The good news for customers is that these programs are completely free to join and don’t obligate you to spend any money before you can take advantage of the lower rates.
The OTAs don’t want you to know about this. The only way that customers can book a loyalty rate deal is by booking directly with the hotel, not through an OTA. When you book direct, OTAs don’t get a commission. Instead, the full amount of your stay goes to the hotel.
Roomkey Is Different from the OTAs
Yes, Roomkey is a hotel search site, but we’re very different from an OTA. First, we never use any of their questionable sales tactics to try to convince you to book before you’re ready. We also have unique offerings from our hotel partners that no other travel site has.
Roomkey.com is the only hotel search platform that shows you multiple loyalty rates from multiple hotel chains in one place. Earlier, we learned how these low loyalty rates are the only way to bypass the rate parity agreements and find a cheaper hotel rate. Roomkey is your one-stop shop for searching those low rates and comparing prices across all of your options. When you’re ready to book, we’ll send you off to complete your transaction on the hotel’s own website where you’ll secure your room, exclusive low rate, and loyalty points, too.
You can also use our Scout browser extension to know for sure if you’re getting the best price. This is an easy and convenient way to circumvent rate parity and make sure that, if there’s a better deal out there, you’ll know about it and can get it every time. You’ll never be fooled by those “best price” claims ever again. With Scout, you can confirm who has the “best price” for yourself.
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