Hotel revenue managers today face myriad of challenges while devising a holistic pricing strategy, driving top-line growth, and plugging revenue leakage.
NB: This is an article from RateGain
Maximizing revenue has become increasingly difficult due to the proliferation of multiple distribution channels including brand sites, Online Travel Agents (OTAs), and new-age channels such as mobile apps. Revenue managers need to constantly track prices across channels to ensure they are ahead of the competition, and sales are not being hurt due to the existing pricing strategy.
Once the pricing strategy is in place, the other critical function performed by the revenue manager is that of identifying and fixing rate parity violations. The idea is to ensure no OTA is undercutting your price, causing revenue leakage, and harming your brand reputation. However, there are scenarios where revenue managers would overlook parity violation alerts due to revenue considerations, channel preference, or concerns around deep discounting by OTAs. Here are three common scenarios where revenue managers take that call.
Scenario 1: Parity Violation on Brand Website
There are times a revenue manager will receive an alert about a parity violation on the brand’s own website, implying that the price on the website is lower than what is being offered across OTA sites and other channels. Considering the cost of distribution is the lowest for direct channels of sales, the revenue manager may choose to not fix the violation. The lower price is still more profitable as the OTA’s margins do not have to be considered. Such a disparity may actually drive sales via the brand’s own website, resulting in better brand engagement and retargeting opportunities in the future. Moreover, it gives the brand the much valuable data about customer preferences based on how they navigate the website and select the rooms.
Scenario 2: Parity Violation on Preferred OTA’s Website
Large hotel chains and hospitality conglomerates tend to have one or more OTAs that drive maximum sales for their properties. In such a situation, where the hotel’s revenue stream is closely tied with the OTA’s performance, revenue managers disregard parity violations by the OTA in question. For instance, one of the largest hotel networks in the world by number of rooms keeps its prices the lowest on two leading OTA websites in Indonesia. This is done so the hotel continues to appear on the first two pages of the search results on the website as it has been proven that 70% hotel bookings are made on those pages.
Scenario 3: Parity Violation with Respect to Add-ons
Going back to the point of promoting direct channels of sales, revenue managers may maintain rate parity on their own website while offering extra add-ons not available on other OTA websites at the same price. By doing so, the hotel attracts new and existing customers to their own website to complete the booking process. Leading new-age channels that help customers compare prices across platforms—including the brand site and OTA sites—have had a positive impact on sales when such a strategy is implemented. In the absence of those platforms, such parity control measures would have little or no effect on buying behaviour, unless the customer religiously checks multiple OTA websites and the brand sites to make an informed decision.
Conclusion
While rate parity control is an essential tool in a hotel revenue manager’s arsenal, there are times when they must rely on their judgement based on the market situation and past experience to make pricing decisions. In the case, decisions to act on a parity violation alerts.
Rate parity control can be a tremendously effort intensive exercise, often prone to errors. However, there are ways in which future-ready, rate integrity platforms such as PARITY+ are enabling revenue managers to monitor rates across channels and identify violations in real-time. With end-to-end rate integrity management using data analytics to track travel sellers’ flows, hoteliers can ensure transparency across sales and distribution channels, including both accredited and unaccredited OTAs.
