The controversy surrounding rate parity in the hospitality industry hasn’t been resolved, but rather escalated critically and became illegal in most of Europe. This topic takes a complicated stand and is often seen as unbeneficial to the hotel’s stakeholders. It also poses challenges that if hoteliers do not respond well with a favorable strategy to be better positioned, it might be “out of parity” and unable to get the best out of third-party distribution networks. Then, what rate parity is all about, why does it exist in the first place, how to monitor and turn it to your advantage? CiHMS will lay them all out for you in this blog today.
What is Hotel Rate Parity?
By definition, hotel rate parity practices sell consistent room rates across all distribution channels. That means your room rate should remain the same, including on your hotel’s official website, regardless of OTA’s commission whether it’s high or low. However, in the real world, rate parity is practiced slightly differently compared to the fundamental concept. For instance, your superior room is listed at a $199 rate per night on your website. It should be quoted at $199 everywhere else, such as Expedia, Traveloka, Booking.com, Agoda, etc for the same room type, but would be found much higher on your own website.
Why is Hotel Rate Parity Important?
Rate Parity is considered a solid core agreement in any typical OTA contract to prohibit hotels from undercutting the OTA rates on their website. It provides guests the price transparency they always look out for. No customers would like to experience being charged differently for the same products or services depending on the landing pages they’re on.
OTA channels are generally the easiest and effortless marketing tool for a hotel to gain its visibility and brand reputation. They contribute their share in boosting hotels’ revenue overall. It also helps hotels to capture and analyze their competitors’ pricing strategies to consider alternatives of their own.
The downside of Rate Parity
Everything comes with a cost. OTA channels are allowed to offer lower prices by cutting their commission. To stay in sync with the OTA contract agreement, hotels have to make sure to give out the lowest price possible to their OTAs partners. Although bringing more bookings from OTA channels, hotels actually lose out on revenues. Imagine paying a commission on top of your lowest room rate possibly, plus there is nothing to stop OTA channels from raising their commission rates and earning more while hotels suffer. This becomes a significant risk for your hotel’s profit.
If hotels have promotional plans, they ought to inform OTA channels due to their contracts’ obligations. However, if hotels want to opt-out of an OTA marketing campaign due to the lower price range might come back and hurt your brand reputation at last; there is no say in this matter, absolutely nothing at all! Frustrated yet? It is why rate parity is considered an unfair trade price and has been banned in most European regions.
The “in parity” struggle
To remain “in parity”, you have to monitor your room rate across all distribution channels. This might have been challenging in the past, however can easily be done by utilizing a powerful hospitality management software (PMS) in place. Having different commission rates can result in different net incomes from various OTA channels. If not monitored by a distribution channel linked in your hotel PMS, it shall remain confusing, difficult, and time-consuming to manage.
Monitoring your Hotel Rate Parity
To prevent violation of the rate parity, hotels and distribution channels have to keep track of the rate parity implementation by either manually using metasearch channels to randomly check their rate across the distribution channels lists and make sure they got listed for the same price.
Otherwise, this issue can be resolved with a rate shopper integrated into your hotel PMS. Not only tracking your hotel room rate, but also your competitors’ rate in real-time based on your own set defined criteria. Rate shopper alerts you regarding parity issues, identifying the markets’ high demands with comprehensive reports. All configurations are to aid in a better pricing strategy for your business. A demo on CiHMS’s Rate Shopper is also available for you to experience. Contact us for a quick demo!
Turning rate parity challenges into your hotel advantages
Rate parity jeopardizes your hotel revenues and profits. Hoteliers establish that sustainable profits would come from direct bookings, however, driving your guests away from OTAs channels is insanely difficult and rather ambitious per se. Distribution channels such as OTAs have huge marketing budgets and often are willing to go out of their way with discounts, loyalty points, redeem hotel stays, complimentary nights, spa vouchers, and so on. Like everything else in life, problems often come with solutions.
Sufficient reason for direct bookings
Without affecting the actual room rate on your hotel’s official website, consider giving out free parking services, early check-in hours, late check-out hours, complimentary meals, or drinks instead. These bonuses are the reasons for your guests to prefer booking directly with you over the OTAs’ websites.
Segmented target audiences
Market exclusive promotions to closed member networks such as Facebook fans, Twitter/Instagram followers, etc. Reach out to guests previously booked through OTAs for a special discount if they book directly with you on their next trip.
Seamless Direct Booking Process
Make sure to improve the booking process on your website to be as smooth as possible. Easy to navigate, no frustration or glitches, looks, and feeling secure while booking is something you should look for. The better experience they have the less likely you would lose direct traffic on your website.
Leverage your visibility on metasearch sites
In order to approach your audience directly, try to appear on the metasearch sites as further up as possible. Starting out with focusing on your hotel rank on the search result of a set of keywords relevant to your hotels. This would help convert all search results to visit your official website, becoming your hotel’s potential leads rather than ending up at the OTAs.
Rate parity policy has been banned in Australia, France, Italy, Belgium, and other European countries, as it puts small business interests at disadvantage. Long-term speaking, the practice is totally not beneficial for hotels nor their brands, or their customers. The lowest pricing structure arguably hurts brand reputation at last. High commission level makes it incompetent for hotels with their direct booking tactics to compete with indirect distribution channels’ bookings. Rate parity obviously serves OTAs most and is continually a controversial topic.
Therefore, hotels have to establish their effort in revamping marketing activities to not be dependent on OTAs channels. Equipped your hotel with an efficient cloud-based hotel PMS and a rate shopper integrated to stay on top of the game. Get updated with all your hotel room rates and availability, easily synchronize your rates across all distribution networks, and manage all reservations, bookings at the dashboard quickly and reliably at your convenience. Enforce rate parity to your advantage and practice rate parity to favor you instead.