Keeping tabs on rate parity across all distribution partners poses an arduous task for any hotel and the reality is contracts with third party vendors often leaves them with wriggle room to out-compete a hotel on the initial price offered on meta.
For hotels affiliated with a soft brand or another marketing collective, inconsistencies in rate can have another financial consequence: Undercutting the organization to which the hotel is paying some form of membership dues. Hotels make an investment into the brand in order to benefit from broader distribution, but if hotel rates appear higher on the brand’s website than they do elsewhere, the investment quickly becomes an expenditure. Add to that, the fact that consumers are very well aware of what they want and where they want to book, and in cases where there’s a lack of rate parity, the consumer’s trust for a particular hotel will also be affected.
As we see in the graphic below, pricing differences and the search for value are precisely what drives consumers to metasearch engines. If the lowest rate is available on an OTA, chances are that’s where the consumer will make their hotel purchase. So, if a hotel is undercut by an OTA, especially one that’s a known brand—the consumer has incentive to book there.
Here are a few points to keep in mind to stay on top of your hotel’s rates across all channels.
RATES: Offer Rates that match the OTA’s
OTA Promotions: Ensure that Promotions granted to OTAs are matched on the Booking Engine
Taxes and Fees: Ensure that only the necessary taxes and fees are included in advertised prices
Net vs. Sell Rates: Ensure that the right rate type is being sent to distribution partners (i.e. rates with or without commissions included)
Pro Tip: Savvy hoteliers publicly advertise a Best Rate Guaranteed Policy – doing so helps identify rate leakage and drives more direct bookings\
INVENTORY: Save best inventory for the booking engine
Rates sent to OTAs: Set OTA rate plan inventory to close before direct channel inventory
High Occupancy Periods: Preemptively reduce lower value OTA inventory allocation
DAILY CHECKS: Check your preferred rate shopping tool daily to understand where undercutting is occurring
Email Notifications: Most rate shopping tools allow hoteliers to set daily email summaries that can serve as powerful reminders to check rates
Forming the Habit: Setting aside time daily helps proactively identify rate parity issues before they appear in the financial numbers
WHOLESALERS: Make the most of guaranteed revenue without sacrificing rate parity
Dynamic vs. Static Rates: Hotels should only distribute dynamic rates to wholesalers
Re-selling Offline Rates: If wholesalers re-sell offline rates, hotels should make test bookings and take action against offending wholesalers, including reducing or closing inventory
Research: There are many wholesalers to work with and each has different pros and cons
Pro Tip: Savvy hoteliers have no tolerance for violating contractual obligations and take action to resolve issues, including closing out inventory
KEY CONTRACT TERMS: Reach an equitable distribution agreement
Re-Selling Offline Rates and Margin Cutting: Partners should never be allowed to do so without express consent
Rate Parity Clauses: Never agree to a one-way rate parity agreement
Pre-Payment Clauses: Hotels should opt out of prepayment options. Guests will still be asked for credit cards at check-in and doing so prevents margin cutting.
Pro Tip: Savvy hoteliers implement a “three strike policy” against partners who are consistently out of parity and have a plan to gradually shift wholesaler volume to more profitable channels
LIMIT OTA BRANDS: Strategically choose the OTA brands you work with
Competition = Distraction: More OTAs with a hotel’s rates means a greater likelihood of losing direct booking and a greater probability that a distribution partner will undercut
The Correct Number: Hotels should only work with OTAs that deliver meaningful production and abide by contractual obligations
Thank you for reading. Until next time, this is Manuel Gil del Real (MGR).