How to keep rate parity and why is it important
By Melissa Tatta
Rate parity management is part of your daily life as a revenue manager – making sure that all channels/partners have the same rate at the same time seems like a simple task, but then why do rate parity issues seem to still appear? One would think to just configure all your channels to derive off the same rate plan would ensure a fair and even playing field throughout your distribution channels, right?
Let's start with the importance of rate parity
Rate parity agreements began with third party companies wanting to ensure they are getting a fair opportunity to sell the hotel with the same rates being advertised by the hotel directly. Parity was a way to protect themselves and ensure they were competitive. If a hotel violates the rate parity agreement, it results in lower placement on the channel (meaning reduced visibility for the property). But what happens when those third-party companies start to undercut your hotel rate? Rate parity is essential to maximizing your hotel’s direct channel profitability, protecting your reputation, and avoiding confusion for potential guests. By being out of parity, you are driving away direct business and paying unnecessary commission to third parties, not to mention teaching your guests that booking directly does not provide the best deal.
With the continued rise of OTA business and the impacts of COVID affecting demand, we are seeing many OTA companies implementing rate matching programs to automatically out bid other channels selling lower rates. For instance, Booking.com has a program called Booking Basic which offers third party inventory on their site. This program is automatically added to your hotel if a lower rate is found on another platform. Expedia also has a rate matching program, which automatically opens your fenced rates to all consumers (if you normally have a member promotion, it will apply that discount to even non-members).
Another segment where hotels experience parity issues is through wholesale partners. Traditionally, hotels will work with wholesale companies to sell rooms in bulk at discounted net rates, with these rates not being publicly available. However, we are seeing companies selling their wholesale inventory online at discounted rates far below direct and OTA partners, which causes an issue for all other channels including your direct website.
Ways to win the "Rate" race
The first step to ensuring your hotel’s direct site has the most competitive rates, begins with having the right tools to execute your distribution strategy. OTA insight is one of the most popular rate shopping tools, providing hotels with real time rate intelligence on rate parity between their different distribution channels and rate comparison with the hotel’s competitive set.
Another option is Triptease, a technology platform that provides real-time rate monitoring for any given stay dates shopped by a guest on the hotel’s direct site. Triptease automatically provides a rate match if a lower rate is found on a third-party site – guaranteeing the guest is getting the best price when shopping the hotel’s direct site.
One of the most important resource is informing and educating your guests that booking direct is their best option. This involves both advertising directly to consumers via e-mail marketing, encouraging inhouse guests to book their next stay directly to get the best rates. During their stay, you can offer fenced promotions that undercut other publicly available rates but do not violate parity thus increasing your repeat business.
The last piece of the puzzle, once you have all your tools in place, is to begin implementing the right distribution strategy for your hotel. At Premiere Advisory Group, we specialize in helping hotels put together the most profitable distribution strategy that best fits your hotel. As we know, especially in the hospitality industry, one size does not fit all, so finding the right distribution strategy for your hotel is key to maximizing the hotel’s profitability, lowering your commission expenses, and raising your bottom line.