The Importance of Rate Parity

We live in a digital world and today’s OTA’s provide quick and easy transactions for the ever time poor consumer. The power of the internet has created opportunities for a shift in consumer booking behaviours as online options provide helpful property location especially in saturated markets & comparisons on one page. Online bookings are available anytime, present last minute opportunities and are a one stop shop for the consumer to book flights and car hire as well.

It has quickly become a preferred booking tool by the customer and unfortunately with the shift in customer behaviour so has come a greater percentage of commissions paid by the hotelier to online/3rd party websites. Currently the power has shifted to the OTA’s and so the size of commissions have been growing. As well as there being undeniable benefits, visibility across a global platform for your property being one of the main benefits a love hate relationship has developed.

Rate Parity is very important for our industry to maintain as it is your protection moving forward with technology evolving rapidly. If we give up rate parity, you give up all control of the retail pricing of  your product in the market. The internet will fast become just a search for the lowest price as OTA’s undercut each other and the property to gain share.

  • Without parity you condition the market to search the net as no one wants to pay more than they have to.
  • Rate Parity sets a clear value of your product to the market place.
  • Rate Parity is not just something OTA’s want. It is an essential requirement of a property before entering into any contracts.
  • OTA’s currently want rate parity so consumers don’t go direct however they don’t want it as price is the only thing they have to grow their share over their competitors.
  • Whilst hotel’s should be able to offer the best value directly to the customer. Not maintaining rate parity and having a lower price on the market is too dangerous in the current situation as very quickly your property will lose visibility on the internet especially if online is one of your main booking drivers.
  • Encourage direct bookings with value add and exceptional customer service. You can also package rates with local attractions which avoids rate parity issues currently and offer great package deals direct as well as value add.

With the evolvement of Metasearch technology (this is where the OTA’s become pitched against each other in front of the consumer so all the consumer can see straight up is a list of OTA’s and their price). Sites like TripAdvisor, Trivago and Google Hotel Finder are playing and facilitating this booking process currently.

This technology is a threat to the traditional OTA model as price options for the same property is the only thing in front of the consumer that will sway them where to book. This technology puts more pressure on the OTA to not have rate parity as each one wants to come up top of the list with the lowest price to the customer so the customer chooses them.

The threat of this technology to the traditional OTA model is why sites like Expedia have bought the Trivago site and technology. With rate parity all the customer sees is a list of OTA’s all with the same price and this still encourages the consumer to contact your property directly to check for deals. Google and TripAdvisor are working with suppliers (hotels) and OTA’s as they facilitate this process. With Metasearch the hotel website is listed as well (although usually small and right down the bottom).

This is an evolving space and one to watch closely. Consumer booking preference may shift from the traditional OTA model to Metasearch sites and when this happens it can place hotels in a more favourable bargaining position if the lead up is handled strategically.

Currently Google and TripAdvisor say they have no plans to become OTA’s in their own right but we will watch this space closely, so the most strategic and favourable deals moving forward can be made.

For now it is very important to maintain favourable relationships with our booking partners, maintain rate parity and ensure where exclusive’s are offered at times to OTA’s to assist need periods in certain campaigns that the property is getting great exposure and value for their dollars,  measure the results always and Revenue Manage.

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