Source: How Wholesale Rates Affect Rate Parity and Hotel Revenue Strategy
In the article Jason Freed, managing editor of Duetto, explains how hotels violate Rate Parity without knowing it. In our analysis we summarize Jason’s findings and consider the broader issue of mass distribution. We also consider its effect on direct booking strategies and the role meta-search agents can play.
How Hotels Violate Rate Parity with Un-authorized Discounting
Maybe it has happened to you and you don’t know it. Maybe your accommodation is being sold on sites that you have may never have heard of and at rates they never authorized. It is happening more and more as distribution gets more fragmented. In the past, brands carefully selected distribution partners so that they were in aligned with their own brand. Alas those days are gone. Wholesalers, who supply rates and content to hundreds of affiliate sites, are largely to blame. This means that rates get published all over the place. That’s what you sign up for; it gives you much more visibility, more expose and more bookings.
The Downside of Variable Rates
But their is a downside. You don’t know where you are being seen and you don’t have control. Far worse is that some may publish discounted prices that will run foul of your Rate Parity requirement with OTAs. That will get you in trouble: Jason puts it into prospective when he says That wholesalers will often lower their margins or commissions. “If these rates are scraped or given to a public seller, your hotel can end up with multiple price points for the same room type available online. In many of your partners’ eyes, that’s breaking parity and a large no-no that comes with significant consequences.”
Metasearch engines have also made it worse as they seek out different prices for their price comparisons. “A Price comparison with all the same prices is not at all helpful. However, when Expedia or Priceline, run a price comparison test and find you have a lower rate that than you offered them, you will get a call from them. And if you cant fix it you might just get penalized. Sometimes there is a fine. Most often you will get depreciated in their listing, dropping rank or falling off the list entirely. All this results in less bookings for your hotel.
Steps to Control Pricing
Jason suggest that if your hotel is being low-balled by a wholesaler: “call and annoy the wholesaler until they stop publishing the rates.” He suggest you use a rate shopping tool that will show your rates and availability across channels. If you are using a Meta search agent service they will do this for you.
It makes sense for a hotel to control rates and not let others diminish the value of the brand by discounting it. Running occasional special is OK, but to be seen as a valuable brand, maintaining price is vital. It not just that you violate rate parity with your traditional partners, you are also discounting your brand and your own hotel direct booking strategies.
A Contentious Issue
Rate Parity is a contentious issue. It has been banned in Australia and in parts of Europe. But, it is alive and well in North America, with no signs of abating. In business, distribution partners expect some form of price protection. After all they are going to advertise you and pay for marketing. They don’t want you competing against them, because everybody knows; “you can’t compete with your supplier”. Well, nearly everyone knows that, but in travel it seems most shoppers think the best rates are offered by OTAs.
Source: Hotels: Don’t fight OTAs on rate parity, add value to direct bookings instead – Blog – Travel TripperBlog – Travel Tripper
Fight Rate Parity with Rate Cuts can Get Hotels de-Ranked
Rate Parity, where OTAs demand that hotel not undercut the rates they have, is now illegal in Europe, but many Eu hotels are opting to fight it without undercutting OTA. The reason is that they want to avoid being “de-ranked” by OTAs. In place of price cutting they are offering better value and playing up the Benefits of Booking Direct.
The TravelTripper article shows How Hotels Add Value to Direct Bookings to Fight OTA Rate Parity
Adding Value for Booking Direct the New Way
The pressure is on in America and in others parts of the world where Rate Parity is not yet illegal. Poinsettia Villa resort in St. Lucia is an example of a small Caribbean Villa Resort that is touting the Benefits of Booking direct.
Hilton Worldwide recently started its Stop Clicking Around advertising campaign where members earn HHonors Points, complimentary room nights, free Wi-Fi and access to exclusive events and experiences. In addition loyalty members can get the lowest rates when they book direct through the membership site.
Private Members Not affected
Rate Parity does not apply to private rates that are not made public. In Poinsettias case they require guest enter their email which automatically registers them in the VIP Membership program and shows rates that are private. The management change reduces the discount every few days to let shoppers know that today is the best rate; so reserve now to lock it in.
Website Messaging Strategy is Vital
says “One of the most important things that independent hotels should do to increase direct bookings is to strengthen their direct web presence. This means having a responsive modern website that works across all different types of devices, especially mobile. It also means having a user-friendly booking process that makes it easy and quick for guests to book, and reassures them that they are getting the best price available.”
It is also vital that hotel Websites make full use of proven sales strategies by using engaging videos and developing a messaging strategy that talks to the guest wants and needs. This requires some sole searching so that you can isolate your special difference and talk directly to a unique target market.
Craibbean Villas CASE Study
In the case of Poinsettia, a Caribbean OceanView villa resort in St. Lucia their market is the independent travel who is not looking to be seen or to mingle with crowds of tourist – Their tag line includes the phrase Holiday Away from The Crowds and their messaging talks about privacy, personalization, space and freedom.
Hot buttons and neurosciences triggered are used to grab attention, with words that trigger action and are familiar, problematic or unusual. This is covered in the book on Hotel Website Marketing Strategies recently published on Amazon- see related link at end.
Tools of the Trade
Also noted by Traveltripper are many other useful tactics and solutions from companies like StayWanderful which is “helping hotels’ turn browsers into bookers with an incentive-driven approach. By installing StayWanderful’s “incentive engine,” the hotel website encourages a customer to book direct using curated deals that range from free Gogo Wifi and free Uber, to discounts at local restaurants, retailers and nearby attractions.”
Triptease’s Price Check and Travel Tripper’s Rate Match are also another way to show guests that your rates are the best, but these are not liked by the OTAs who have threatened to de-rank hotels using them.
A Better way
It probable is more sustainable to accept that OTAs are here to stay and in fact are preferred by some travellers. What we need to do is help travelers understand that OTAs do not have an exclusivity on best rates and that their are many benefits to booking direct.
There is a good list of these on the Poinsettia Site, which tells guest to “Signup now to receive our specials, our island Guide and Poinsettia Holiday Planner >>>>> Get Alerts on Offers & Events” See Benefits.
They also tell travelers who Prefer to book with their agent or one of the hotels travel partners that they can still loyalty benefits if they register for VIP Membership. And then points out a few things they might miss.
Ultimately undercutting OTAs is risky business and one get further ahead by offering better value, perks and benefits as an incentive for booking direct. Also hotels reservation and management must reminding guest that they are locals who know the destination better and certainly know their own hotel better that anyone else.
Related – eBook – Website #1 in Marketing hotels and tourism series.
The book covers hot buttons and sales funnels, website strategies, mobile messaging, video tactics, blogging, search and reputation branding. It is part of a series that includes Website strategies, digital media and technology.
OTA Rate Parity Banned in France and Germany
First Germany enacted legislation that will put a stop to OTA demanding Rate parity in contracts with hotel suppliers, then France followed. We can imagine that others will soon follow and what then. This blog looks at what End of Rate Parity in OTA Contracts means for both hotel marketing, OTAs and the average travelshopper. It also begs the question is this the end of rateparity?
The legislation makes it illegal for OTAs to insist that hotel cannot offer better prices than they have negotiated. Expedia and others are having to revise contract with hotels. What it means g=for hotels is that they now have more control over the rates that OTAs offer and can for the first time offer better rates on their own site. Best rate guarantees now have real meaning on hotels sites. as we noted in a previous blog; “Often OTAs have used their special net costs and deep discounts to their advertized rates, sometimes below their costs, to create loss leaders. All this has put them into top spot on the best price radar. But that too is ending. It is a fine time for hotel to jump into the drivers seat.”
Benefits to Hotels and Tourism
Hospitality net Europe summed up the new move by the french to legislate against OTA Rate Parity as follows
“With this decision hoteliers in France regain their entrepreneurial freedom and will be able to offer their customers any trade or tariff advantage they consider appropriate. France is thus the second country after Germany, where public authorities decide to ban rate parity clauses from OTA contracts.”
The article goes onto say it puts tourism into the 20th century on pare with “distribution channels, like telephone, fax, letters, etc., this voted amendment follows the realities of current times.”
Roland HEGUY, President of HOTREC’s French member association UMIH. calls it a revolution in the French hotel industry and for its hotel members and there guests. “This vote will contribute to the establishment of a renovated contractual framework to restore conditions of a commercial relationship based on trust between hotels and booking sites in the interest of consumer”. The European hotel industry expects that this pave the way for full entrepreneurial freedom in the hospitality sector that reach far beyond the French and German borders.
Impact on OTA Contracts and Business
Most importantly this along together with the earlier German court ruling earlier, “seriously question the relevance of the recent announcement of Booking.com and Expedia for the alignment of their terms and conditions similar to the formal commitments of 21 April. OTAs are of course notably upset with the rulings claiming that it will disrupt competition nad put small hotels at the mercy of the big brands. They claim Rate-Parity was a means of stabilizing rates across all sectors but in-fact this si not at all the case. Many OTAs used their special discounts to sell off hotels as lost leaders and to make sure they eliminated competition for their suppliers. It limited hotel suppliers from offering better rates in any channel which is an unfair advantage to the OTA and actually not in the hotel control. Hotels should have the right to set their own room prices and charge for accommodation according to the laws of supply and demand just as the OTA themselves do along with airlines and just about every business.
Other Countries to Follow
In Europe, rate parity is on the agenda at many legislative and associate level.
Britain, Italy, Sweden, Ireland, and Austria are amongst those who plan to investigate rate parity and other contracts terms that might not allow hotels to offer best rates and special deals on their own websites.
Rate parity Definitions: http://hotelrevenuetools.com/?page=parity
How booking.com and Priceline react http://www.tnooz.com/article/pricelines-booking-com-eases-rate-parity-european-pressure/