Bet parity is a term that always alarms hoteliers and can even be a barrier to growth for small and new players. Rate parity is the practice of maintaining the same rates of the same room type on all distribution channels / booking platforms, whether it is the hotel’s own website or OTA, regardless of the commissions received by OTA. The goal of this practice is to create a level playing field for all players. Both hotels and OTAs must agree to evaluate parity rates when subscribing to OTAs.
Sometimes this leveled field makes it difficult for new players to compete in this fierce competition and stifles them even before they can spread their wings.
How should hotels look at Rate Parity?
The practice of parity rates has been created to protect the interests of OTA from situations where hotels may lower rates on their websites and reduce OTA.
Why do hotels rely heavily on OTA?
OTA provide a ready-made platform for any hotel to book bookings from day one when they enter the world of online booking. They don’t need to spend on marketing, just negotiate more profitable deals with the right OTA and they are willing to make a profit. Hotels can easily view OTA commissions as their marketing costs, but with a higher level of success. Thus, the advantage that OTA offers hotels, somewhat negates the lack of parity rates for hotels.
What are the parity rate issues for beginners and small hotels?
In small and new hotels every booking is very important. Paying huge OTA commissions with an already low margin becomes very difficult for hotels. Here direct bookings can change the game. However, getting direct bookings can be a challenge without an advertising campaign and price manipulation. Many times OTAs ask hotels to keep them informed if they are conducting any advertising campaigns or lowering prices on their sites. To prevent breaches of the “Rate Parity” provision, sometimes small hotels exclude the entire category of rooms from the OTA and sell it on their website at their own prices.
Competing with OTA for prices is difficult for small hotels, as OTA is known to lower prices below agreed prices by lowering commissions. We do not live in a perfect world!
This requires hotels to check prices for different OTAs to maintain their competitiveness. If the OTA channels are not directly connected to the hotel’s PMS system through the channel manager, parity management is even more difficult to manage. Hoteliers then have to log into several systems to update their rates. However, it is much easier and faster if the hotel uses all the tools of hotel technology.
Few believe that in this situation, small hotels linger between the stones and the anvil, as they say, because, on the one hand, they do not have a marketing budget to reach the level that gives OTA. On the other hand, it is difficult for them to pay a large fat commission to OTA. What’s more, OTAs bring them business. Therefore, hotels want to increase the number of direct bookings. However, this course requires more dollars to spend on marketing. They are in this vicious circle.
Here are some tactics that hotels can use to address parity issues
Create bundled packages
Hotels can increase their offerings by keeping the price the same as the OTA price by adding benefits such as free parking, Wi-Fi, wine tasting, free breakfast, sightseeing, free rental, etc. This practice can help them have a clear advantage over OTA without violating the rate of parity rates, because for the same price the hotel offers a better deal than OTA.
Lower your bids to a limited audience.
Hotels can lower prices for users of age group, category, closed user group (CUG) or mobile applications. Launch promotional offers via email for CUG members or when booking mobile apps. This can help them direct direct bookings on their website and in the mobile app without violating the parity provisions.
Loyalty program and customer engagement
Another way to increase direct bookings is loyalty programs. Loyalty programs provide many benefits besides the simple savings of OTA commissions. Getting a re-booking from a loyal customer is much cheaper than purchasing a new customer. In addition, hotels are aware of their choices and benefits that allow them to serve them even better. This spreads the positive word of mouth for the brand and paves the way for more direct bookings.
Use Meta Search Engines
Meta-search engines such as TripAdvisor and Trivago can be considered the saviors of small hotels. Small hotels may even be included in the TripConnect list because it operates on a PPC model, as opposed to commissions, as in the case of OTA. Metasearch engines are very popular among consumers because they not only provide a comparison of different properties, but also allow you to choose the cheapest channel for hotel reservations. It is often observed that consumers turn to direct bookings provided that the difference is not huge as direct bookings are considered more reliable.
Convenient website and booking process
To increase the number of direct bookings, hoteliers must ensure that the necessary infrastructure is in place that triggers and pushes direct bookings, such as a complete user-friendly website with a clean interface that provides all the necessary information without having to search for it. In addition, hoteliers need to make sure the booking process is simple rather than cumbersome so that prospects do not go back. OTAs have clear advantages in this department, but hotels have no choice but to bring their Internet infrastructure on a par with OTA.
From the above discussion, we can assume that although the Rate Parity agreement may lead to a delay in direct bookings of any hotel; There are many factors that prove that OTAs are actually good partners with hotels. Hotels can adopt multiple detour strategies to mitigate the rate parity deficit while enjoying a large number of OTA bookings