The problem of rate parity is only becoming more serious. Travellers are constantly comparing rates across channels – especially Millennials and Gen Y, who hold the largest travel market share at 33% of the market. When you consider that 52% of Millennials prefer to book using an online travel agent, the problem becomes clear.
Rate disparity can seriously impact your hotel’s bottom line. Hotels often find themselves with lower rates on OTAs and other third party channels than they do on their own website.
Rate parity, or disparity in the case of the hotel industry, is the difference between prices quoted on a hotel’s branded website versus the prices quoted by an online travel agent such as Booking.com.
Why is maintaining rate parity a big deal? If you leverage third-party channels to sell inventory, then rate parity matters. Online travel agencies like Booking.com ask for rate parity in their contracts. If you work with these major channels, then you’ve signed contracts that state that you will make your lowest rates available to them.
Why does rate disparity actually matter?
There are two parties rate disparity matter to: you and the customer.
For customers, it can be a matter of trust. If rates on your own “Best Rate Guaranteed” site are more expensive than those on the OTA, you might lose their trust or lead them to believe that an OTA is offering ‘discounted’ prices.
For hotels, when OTAs offer a lower price than your own website, there’s no incentive to book direct – and you’re still paying those OTA commission rates.
Causes of rate disparity
If your hotel frequently experiences rate disparity issues, it’s important to know that it isn’t always deliberate. In fact, it’s probably mostly accidental.
Rate disparity is usually caused by administrative issues.
There are many channels your hotel is probably active on, and third-party channels have been known to change their prices based on factors like price and location, putting tremendous pressure on revenue managers to spend time they don’t have monitoring OTA prices in an attempt to continue matching them.
Here are 10 factors that can lead to cheaper rates on OTA websites:
- Promotions might have been created directly with an OTA Market Manager or through an OTA extranet, meaning it isn’t available on the hotel website
- A property has an out-of-date rate code still running on an OTA. Remember to close them!
- The OTA has failed to change the rate they were given , for technical or other reasons – this may apply across the board or only to certain geographic markets
- The OTA is using a different currency conversion rate than your hotel
- The OTA has a base allocation, and you’ve sold out all other rooms of that grade and below
- Your Channel Manager is tracking inventory from your PMS, and the CRS is suffering latency errors and showing inventory that’s no longer available
- The revenue manager might have linked the wrong OTA rate from their CRS
- Your CRS does not support length of stay rates, but they are used on the OTA
- Wholesale rates have been put on sale by the OTA – they might have sold them to third party sites. Unless your hotel has specifically agreed to the rates being sold, you can insist on the rates being removed
- The OTA is using their commission to discount the rate or is applying a lesser markup to a net rate – this might happen all the time or only certain times, and may only happen for specific markets
Human error during manual room and rate uploads to OTAs often occur, and it’s common for managers to forget to revise OTA rates during an update, or to accidentally leave old rates on certain sites. A decent channel manager can solve this.
How can you combat rate disparity?
If you’re advertising a “Best Rate Guarantee” or similar on your own site, which we recommend, it’s vital to follow through on that.
- Make your hotel website's booking process as easy to complete as possible so you don't lose anyone along the way. This is also why investing in your hotel tech stack is so important
- Leverage metasearch channels like Google Hotel Ads - if your own site isn't visible on these highly popular and frequently used platforms, then all your traffic will be given to OTAs
Target all of your various audiences with the right kind of promotions that may attract them via email and/or social media
Depending on your hotel’s room types, you could choose to sell some room types exclusively on your own website
Invest in the right technology that will monitor and update your rates if OTAs lower or raise them in certain times or locations. To comply with your contracts and avoid legal risks, it’s also important to monitor your own rates.
There are many creative ways to manage your rates, but you should always have one eye out for rate disparities. Correcting rate disparities only costs you time in the short term, and it can save you thousands in revenue.
When you overcome rate disparity issues, you encourage guests to book direct, maintain control over your property and prices, and give yourself the chance to capture more revenue.