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.