Hotel Rate Parity: What It Is And How To Maintain It
If you work in the hotel industry, you must be familiar with OTAs i.e Online Travel Agency. You can list your property on them and they will show your hotels to the potential guests and promote it on your behalf. OTAs offer several benefits - such as the help of an OTA manager, advertising, and streamlined marketing. OTAs do charge a commission but many hotels consider it worth the cost due to increased reach. OTAs rank hotels based on several parameters. One of the most important factors is hotel rate parity.
If you are not completely familiar with the term, we are here to explain to you its meaning, its importance and know-how. Being aware of this concept is important to you want your listing on the OTAs to gain results.
What Is Hotel Rate Parity
Hotel Rate Parity is the primary principle for the hotels selling via OTA Platforms. It means that a uniform rate is maintained across all OTAs irrespective of the commission given to the OTAs to get bookings. It is ideal for both the OTAs and hotels, since the OTAs will not be discriminated against by hotels regarding pricing and bookings, and the OTAs in turn will promote the hotels willingly if they are getting a fair deal.
Some OTAs have a rate parity clause, while others don't. However, all OTAs do look at the rates of the hotels at other OTAs and will penalize the hotels if there is a rate disparity. The hotels will be ranked lower and will lead to a loss for the hotel business.
What Is Hotel Rate Disparity
Hotel Rate Disparity refers to a situation wherein the different OTAs display different rates from each other on a particular day. OTAs don’t like rate disparity because it reduces their sale and your hotel’s credibility.
What Is Hotel Rate Parity Clause
Hotel Rate Parity Clause or Price Parity Clause (PPC) is the part of the Contract the OTAs and Hotels sign. The clause has been introduced to ensure that the OTAs don’t charge a price lesser than the hotels. It restricts the hotels from selling the room inventory at a better price on their competitor's websites. Some OTAs even restrict a hotel from selling at a lower price on their website.
The Price Parity Clause is divided into two types - Wide Price Parity And Narrow Price Parity. The Wide Price Parity Clause prevents the hotels from undercutting the price sold on online platforms. The narrow Price Parity Clause on the other hand allows the hotels to sell their rooms at a lower rate offline.
Different countries deal with price parity differently. For example, in India, OTAs who ask for a Price Parity Clause in their contracts only expect it amongst their competitors. Hotels often offer the best price for booking directly on their website. The insistence on maintaining Metasearch price parity has declined.
Causes Of Rate Disparity Among OTAs
Hotel Rate disparity is caused by various factors. One should deal with these causes as soon as possible to avoid issues.
1. You Have Missing Room Types
If you have a standard room as the base category in say, Agoda and have a deluxe room on Booking.com, you are bound to have rate disparity because the customers and the internet will look that the lowest rates of the hotels will be displayed for the potential guests.
To avoid this issue, you need to have all the room categories on all the OTAs. It is only then the customers will get the uniform rates of the rooms.
2. Wrong Prices By Mistake
When you are manually changing the prices of your room inventory on the various OTAs, you can genuinely make the mistake of putting the wrong prices of your rooms or putting the price of another room category in place of the intended one. A solution to this issue is using a channel manager to update the rates on different OTAs.
3. Uneven Discounts
While offering discounts helps get more sales and better rankings, this can lead to rate disparity. Give discounts on all OTAs to avoid rate disparity.
4. Discounts By OTAs
There will be times when the OTAs will provide a discount on their ends. You may have put on a uniform rate on the channel manager, however, the OTA’s discount causes rate disparity without you knowing. To get more sales on their platforms, various OTAs will run promos, flat sales, flash sales, weekday sales etc. Parity checker tools used by other OTAs will detect the rate disparity and it can lead to loss of trust and business.
To avoid these issues, tell them to stop the promotions on their end to prevent hotel rate parity.
Ways To Avoid Hotel Rate Disparity
If one wants to avoid hotel rate disparity, here are a few things hotels need to keep in mind:
1. Use Technology
There are rate shoppers which will check are different rates of a hotel room and point out rate disparity. OTAs use these tools, and it is available for hotels as well. Many channel managers have rate shoppers built into them. This tool checks rates for the defined time frame on different OTAs. It can prevent revenue loss by ensuring that rates match across all OTAs.
2. Dynamic Pricing
By using dynamic pricing, you will prevent OTAs from manipulating the price. Dynamic pricing tools adjust prices based on demand and occupancy.
3. Daily Monitoring
The best way to keep a track of things is to monitor the rates of OTAs on a regular basis. Doing so will ensure that you will keep a track of OTAs and rectify errors.
4. Beat OTAs Using Different Strategy
If we cannot beat OTAs in pricing, we can beat them in other ways. We can offer them additional perks such as free early check-in, free late checkout, complimentary breakfast, room upgrade etc. With these, you can maintain a higher ranking on the OTAs as well as get additional benefits to the customers.
Maintaining Hotel Rate Parity has become really important in order to maintain OTA rankings and revenue. Make use of revenue managers, channel managers and technology to maintain price parity and run your hotel smoothly.
We at Bigfoot Hospitality are here to ensure that you have great hotel marketing and a steady and increasing flow of hotel revenue. Read our blogs to know about hotel revenue management, hotel marketing and other important hospitality-related topics.