What is hotel rate parity?
While it is considered the cost of doing business, the practicality of rate parity poses several challenges for hotels.
Hotel rate parity is the practice of maintaining consistent rates across all distribution channels – regardless of online travel agent (OTA) commission.
This means that the rates that travellers see on OTA websites are the same as those on your own hotel’s website, even though you are making less of a profit from OTA bookings.
Rate parity is usually part of the agreement signed by hotels when they partner with an OTA where Hotels are not allowed to undercut OTA rates on their own websites.
Hotel rate parity challenges
While it is considered the cost of doing business, the practice of rate parity poses several challenges for independent hotels.
OTAs are allowed to cut into their own commission to offer a lower price – and when more bookings come from OTAs, hotels lose out on revenue.
Hotels rack their brains to figure out how they can get more direct bookings to increase their revenue share from their bookings. This can be tough because even when running discounted promotions, hotels are obligated to tell OTAs.
Some hotels exclude entire rooms from OTAs in response, but they then risk having those rooms going unsold.
Responding to rate parity challenges
Hotels still need OTAs for marketing, but want more direct bookings. How can hotels strengthen their direct booking strategy?
- Beat OTAs on value. By adding perks like free parking, WiFi, or event tickets, hotels can entice guests to book direct. OTAs may offer only a dollar value, but you can beat them on experience.
- Market to limited audiences. You can run exclusive promotions to targeted audiences, like your Facebook fans and Twitter follows, or your private email database. Just make sure you keep building up these audiences so the list keeps growing.
- Use metasearch sites. Metasearch engines traditionally allow you to use a pay per click ad bidding model to get your hotel to the top of the list, getting travellers to click through to your own website where you can get them to book direct. Now, there are commission-based instant booking models that you can take advantage of. These are still offering lower commissions than OTAs.
- Improve the booking process. Your online booking process needs to be as smooth if not smoother than that of OTAs. Make sure you follow website design best practices and that it is a secure, convenient, and seamless process.
- Use a channel manager. Channel managers can connect you to all your distribution channels so that you don’t have to log into multiple extranets to update your room rates. This is time-consuming and not the best use of your time.