The term room price parity always shocks hoteliers, and may even become a growth obstacle for new and old players. Room rate parity is the practice of maintaining consistent and the same room rate on the same room type across all distribution channels/booking platforms (regardless of the hotel’s own website or OTA), regardless of the commission earned by the OTA. The purpose of this exercise is to create a level playground for all players. Both the hotel and the OTA must agree to rate parity when signing the OTA.
Sometimes, this flat field makes it difficult for new players to participate in this fierce game, and even suffocates to death before they spread their wings.
How should hotels treat price parity?
The emergence of room rate parity is to protect the interests of OTAs, in case hotels can lower their website rates and cut OTAs.
Why do hotels rely heavily on OTA?
OTA provides a ready-made platform for any hotel to book from the first day it enters the online booking world. They don’t have to spend big money on marketing, they can make money just by negotiating better deals with the right OTA. Hotels can easily consider OTA commissions as their marketing costs, but the success rate is higher. Therefore, the advantages provided by OTAs to hotels offset the disadvantages of hotel price parity to some extent.
What are the challenges facing the price parity of emerging and small hotels?
In small and new hotels, every booking is critical. It has become very difficult for hotels to pay huge commissions to OTAs from the already meagre profits. Here, direct booking can prove to be a game changer. However, in the absence of promotions and price manipulation, obtaining direct bookings can be a daunting task. Many times, the OTA will ask the hotel to keep in touch with any promotions or discounts on their website. In order to prevent violations of the “rate parity” clause, sometimes small hotels exclude all room types from OTAs and sell them on their websites at their own prices.
For small hotels, it is difficult to compete with OTAs for prices, because it is well known that OTAs will lower their prices below the agreed price by reducing commissions. We are not living in a perfect world!
This requires hotels to check the prices of various OTAs to maintain their price competitiveness. If the OTA channel is not directly linked to the hotel’s PMS system through the channel manager, the rate parity will be more difficult to manage. Then, hoteliers must log into multiple systems to update their room rates. However, if the hotel uses hotel technology tools to manage all these functions, it will become easier and faster.
Few people think that in this case, the small hotel is trapped between a rock and a difficult place. As the saying goes, because on the one hand, they have no marketing budget to achieve the effects provided by OTA. On the other hand, it is difficult for them to pay huge commissions to OTAs. In addition, OTA brought them business. Therefore, the hotel hopes to attract more direct bookings. However, this course requires more dollars for marketing. They are in this vicious circle.
Here are some strategies that hotels can use to meet the challenge of price parity
Create a bundle
Hotels can add free parking, Wi-Fi, wine tasting, free breakfast, sightseeing, free pick-up and other services to increase the same price as the OTA price to maintain an advantage. Charges to OTAs without violating price parity regulations, because at the same price, the hotel offers more favorable prices than OTAs.
Reduce your price to a small audience.
Hotels can lower prices for age groups, categories, close user groups (CUG) or mobile app users. Run email promotions for CUG members or book via mobile apps. This can help them promote direct bookings on their website and mobile apps without violating the rate parity clause.
Loyalty programs and customer engagement
Another way to promote direct booking is loyalty programs. Loyalty programs can not only save OTA commissions, but also bring many benefits. Making repeat bookings from loyal customers is much cheaper than acquiring new customers. Most importantly, hotels are aware of their choices and preferences so that they can better serve them. This has won a good reputation for the brand and paved the way for more direct bookings.
Use meta search engine
Meta search engines like TripAdvisor and Trivago can be seen as the savior of small hotels. Small hotels can even rank first in TripConnect because it applies to the PPC model, which is different from OTA commissions. Metasearch engines are very popular among consumers because they not only provide comparisons between different attributes, but also allow them to choose the cheapest channel to book hotels. If direct booking is considered more reliable, then the difference is usually not large, and it is usually seen as a consumer who uses direct booking.
User-friendly website and booking process
To facilitate direct bookings, hoteliers must ensure that they have the necessary infrastructure to attract and promote direct bookings, for example-a comprehensive user-friendly website with a clean interface that provides all necessary information without searching. In addition, hoteliers must ensure that the booking process is simple and not cumbersome, so as to avoid potential customer backlash. OTA has obvious advantages in this sector, but hotels have no choice but to make their online infrastructure comparable to OTA.
Through the above discussion, we can assume that although a parity agreement can reduce direct bookings at any hotel; there are many factors that prove that OTA is actually a good partner with the hotel. Hotels can use several bypass strategies to alleviate the conflict with rate parity, while enjoying a large number of bookings from OTA