Rate disparity, if left unchecked, can seriously impact your hotel’s bottom line. Hotels often find themselves with lower rates on OTAs and other third party channels than they do on their own website – that’s not good! So what can hotels do?
This article will cover:
- The impact of rate disparity on your hotel’s bottom line
- Causes of rate disparity
- How hotels can combat rate disparity and encourage direct bookings
If you’re not particularly familiar with rate disparity, or how it affects your pricing strategy, this guide is for you. We’ll be reviewing what rate disparity is, how it affects your revenue strategy, and what you can do about it.
Let’s get started.
Why Does Rate Disparity Actually Matter?
What does rate parity mean, exactly? According to Eye for Travel, it can be thought of as “maintaining consistent rates for the same product in all online distribution channels – Expedia, Orbitz, Hotwire, etc. – regardless of what commission the OTA makes.” It also applies to rates on your own website compared to third party sites. Put simply, you’re maintaining the same rate across all your publicly available rates. This means private loyalty rates, corporate or group rates, and inventory offered through GDS are unaffected.
Rate disparity, then, is when wires get crossed and lower rates are offered on some or all OTAs than the rates your own site.
Note: The reverse is much rarer. Rate parity clauses in OTA contracts usually prevent you from offering a lower rate on your own site. However, that’s not always the case – check your contracts to see, as not all of them will require rate parity, and recent legal changes may affect where OTA’s can require rate parity in any case.
Why is rate disparity important? There are two parties it matters to: you and the customer! It also affects OTAs, but they are mostly protected from harmful effects by their contracts – and if the price is lower on their site, it gives them an advantage.
For customers, it can be a matter of trust. If rates on your own “Best Rate Guaranteed” site are more expensive than those on the OTA, you might lose their trust or lead them to believe that an OTA is offering ‘discounted’ prices.
For hotels, when OTAs offer a lower price than your own website, there’s no incentive to book direct – and you’re still paying those OTA commission rates.
There are circumstances and strategies where different public rates will be encouraged, where possible. Open pricing is one example of this, and we’d encourage looking into it (along with more flexible public rates, open pricing advocates yielding up discount sites as demand increases, rather than closing them off. This is the same strategy airlines use).
However, if your hotel is following a fixed-tier strategy centered on BAR or other length of stay restrictions across all your channels, you’ll normally want rate parity. Even if you’re following an open pricing strategy, rate disparity should still be at your discretion, not due to a third party’s choices or an error.
