Rate disparity occurs when a hotel’s room rates differ across various distribution channels – such as OTAs, your booking engine, or metasearch sites.
NB: This is an article from Lighthouse
Subscribe to our weekly newsletter and stay up to date
Instead of offering a consistent price, guests encounter different rates depending on where they book.
These discrepancies can arise from a multitude of factors, some of which are beyond a hotel’s direct control – ranging from wholesalers reselling inventory to unauthorized third parties or technical glitches (caching) causing delays in rate updates across platforms. But they can also be caused by more sinister motives that eat into your hotel revenue.
Typically, however, they stem from these two main reasons:
- Contracted OTAs: Even with a direct parity agreement, some OTAs run unauthorized promotions or discounts that undercut your brand.com price, creating pricing inconsistencies.
- Non-contracted OTAs: These platforms acquire inventory from wholesalers and resell rates meant for packages directly to consumers, leading to pricing discrepancies.
Why is rate disparity a problem?
- Hurts direct bookings and profits: Rate disparities hurt your profits by driving guests to OTAs offering lower rates, leaving your direct booking channel underutilized.
- Erodes guest trust and damages your hotel brand: Guests expect consistency. Finding different prices for the same room confuses them and undermines their confidence in your hotel, negatively affecting your brand reputation.
- Wasted marketing investments: Even if you’ve invested in SEO to drive traffic to your site, potential guests using search engines will likely choose the lower-priced option, making booking through your direct channel less effective.
Let’s explore what causes these pricing inconsistencies a little further.
Common issues that lead to rate disparity
Despite your best efforts, maintaining rate parity is a constant game of whack-a-mole. The dynamic and complex nature of the distribution landscape means that rate parity can be disrupted by several common industry practices. Below are some of the most frequent causes of rate disparity and how they impact your hotel’s pricing strategy.
1) OTAs and B2B partners (like bed banks) can resell rooms to third parties that use pricing as a differentiator
One of the main causes of rate disparity occurs when OTAs and B2B partners, such as bed banks, resell your inventory to third-party platforms, often without your knowledge. Wholesalers, who are expected to sell rooms as part of B2B packages, sometimes pass them on to non-contracted OTAs that use lower prices to differentiate themselves and attract more bookings.
This practice, often called rate leakage, creates pricing inconsistencies across platforms, undermining your control over rate parity.
In some instances, OTAs display promotional rates meant for specific channels or regions outside their intended scope, such as point-of-sale (POS) discounts showing up on mobile platforms or affiliate channels, further complicating rate control.
OTAs may also choose to reduce their own commission in order to offer lower prices than your brand.com, which can draw bookings away from your direct channels.
To make matters even more complicated, OTAs widely use loyalty programs such as Expedia One Key or Booking Genius, to give improved booking conditions and best prices while leaving hotels with little control over ensuring they are offering the best available rate.
