Whatever you do, your hospitality business needs to be practicing rate parity.
If you’re in the business of hospitality and hoping to keep your revenue management on an even keel, rate parity ought to be in your repertoire.
What Is Rate Parity?
When you have rate parity, your rates are the same across the board. A room should cost the same on all online booking sites (like Booking.com, Agoda and Expedia). You should also maintain the same cancellation policy on all platforms.
Why Is Rate Parity Important?
Rate parity directly affects brand reputation. If your rates are inconsistent, your guests will have less trust in you. They will doubt the value they’re getting for the money.
Moreover, a lack of rate parity — also known as rate disparity — will cause friction between your online travel agent (OTA) partners.
Here’s an example. If Agoda finds lower rates on Booking.com, they won’t be very happy with you. This could be the case with any platform. You need to maintain good relations with each OTA if you want to maximise the conversions from these channels.
Without maintaining parity, you’ll end up in a never-ending fight with OTAs. You need these partners, so ideally this is not the situation you want to be in.
Lastly, you not only want to maintain rate parity between third parties, but also between them and your own website. Ultimately your goal should be to drive direct bookings.
3 Reasons Why Rate Disparity Happens
1 – Technical
Rate disparity can occur as a result of technical issues. For example, rates may be uploaded incorrectly, or the channel manager software may have a glitch.
2 – Exclusive Promotions
Sometimes, OTAs reach out to hotels asking for exclusive discounts in exchange for additional marketing.
3 – Undercutting
Most OTAs have a clause in their agreement that guarantees the best rate for their customers. The channels may undercut the rates by adding an additional discount, which is totally out of the hotel’s control.
For example, if one OTA finds lower rates on another OTA, they’ll discount the rate further to increase competition. The OTA may pay for this additional discount out of their own commission or through fees from a restricted rate plan (such as a members-only rate plan offered to the public, or a mobile-only rate plan offered to desktop users).
4 – Country specific promotions
Nowadays, specific point of sale promotions are more common. Sometimes setup by hotels, often initiated by OTAs, and on other occasions caused by currency conversion. Either way – this type of disparity could harm your rankings and/or drive bookings to OTAs instead of to your own channels. To investigate country specific rates, use a VPN to trick your browser and it allows you to see you the prices as if you were in that particular country.
How To Maintain Rate Parity?
To ensure rate parity across your OTA channels, consider contracting with them directly. This lets you manage the rates yourself rather than leaving the OTAs to purchase from wholesalers.
Buying from wholesalers can manipulate your margins. They get net rates and add their profit margin, and you don’t have control over the selling rates. In comparison, OTAs always allow you to give selling rates while they take commission.
Stay on top of your rates. Whenever you find rate disparity, make sure to fix the issue. Check each OTA’s extranet to ensure your rates are correct and any promotions are accurately applied.
If you encounter an issue, reach out to the market manager for clarification. As a last resort, you can always make a test booking to identify the source of the disparity.
Persistency is key
Managing rate parity causes many a revenue manager a headache. With today’s technology market managers do not have control over the OTA rate and neither have you. So the best thing to do is to check regularly (there are plenty of tools to check parity – one of my favorites is OTA Insight), follow up when you find disparity and foster relationships with your OTA contact persons. Good luck!
