In this post, we will be talking about an issue known by many yet still unresolved, currently having come no closer to a solution. Price disparity is the main problem for many hotels and correcting this situation is essential in order to outline a correct direct-sales strategy.
What is price disparity?
Finding a price for your hotel on the Internet lower than what you authorised. It could be a markup not applied correctly or an retail price on which they are reducing part of their commission.
Do price disparities hurt me?
No, unless you are worried about the final price your hotel is sold at, what type of client sleeps in it and that your website and Booking.com are selling everything that they can.
Otherwise, yes. The reasons are:
- Unfair treatment. Price disparities benefit channels who pay on credit and damage those who pay directly, which ends up penalising you.
- They bring in clients who aren’t part of the target clients you are interested in. A client who pays 100€ is not the same as a client who pays 85€.
- You portray an image of lack of control in prices, just like a Turkish bazaar.
- It precludes the creation of a customer-loyalty programme since you no longer have the best price.
- It makes you believe that certain channels provide value (because they generate bookings) when in fact it’s not that way, since most of what they sell comes from price disparities.
- It distorts your revenue-management work since you are varying prices without having the certainty of how much of this price change actually reaches the client.
- It has a hugely negative impact on your direct sales: Why would clients book on your website if there are lower rates out there that are easier to find?
- It generally drives towards lower profitability for your hotel, since the channels that give you the worst levels of profit are, at the same time, those which have more margin to create price disparities. Therefore, the channels which interest you the least will sell more than those that interest you the most (such as the direct one).
Are price disparities legal?
In many countries like in Spain, a distributor can fix the retail price, reducing his profit margin if necessary, in the interest of free competition and to the benefit of the final consumer. In other words, a producer (whether he is selling hotel rooms or tomatoes), no matter how much it pains him, cannot impose the retail price of his product to a distributor.
If you have contracts signed with your distributors in which there is a binding price acceptance and they do not comply with it, it’s quite simply a breach of contract. Legal or not, the contract that you have signed is worthless.
What no law requires is to work with all of the market’s distributors. You have freedom to choose the channels with which you want to work. Work by yourself and choose those who exclusively comply with your criteria. The rest, leave them out.
