Rate Parity: A Boom or Doom for Hotels
Hotel vs Otas; Need Not be a Battle, it is a Win - Win
By Bhanu Chopra CEO, RateGain | October 16, 2016
The relationship between Hotels and OTAs is that of Love & Hate. They can't live with each other; they can't live without each other. In fact, to put in another way, they exist in a symbiotic relationship. Hotels need OTAs for selling their inventory, and in return, OTAs extract a substantial commission from hotels to produce an enormous amount of bookings, which hotels hanker after.
No matter how much hotel prefers their own brand website, front desk or call centers to be the major channel for bookings, the matter of fact is it has become unimaginable for hotels to do business without OTAs. According to a phocuswright research OTAs capture close to 71% share of online booking.
One challenge of the hospitality industry in particular that we are going to talk about in this blog is the most debatable issue of Rate Parity. A revenue manager's major concern is about revenue and profits. Modern RMs are using cutting edge technology to ensure that their rate parity management vows are tackled while distributing their inventory online. Such tools make their everyday activities much less time consuming and easier.
A section of revenue managers has a different take on the impact of Rate Parity. They believe that Rate Parity offers a uniform playground for all distributing channels and strengthens a hotel's association with its distributors, ensuring no channel is being favored over another. The exercise of Rate Parity also allows a Revenue Manager to evaluate its partnership with an OTA and allow them to make conclusions if the association is profitable and whether the hotel should continue a business relationship with the particular OTA.
Another section of hospitality industry believes that rate parity ban restricts them in their price offering and they cannot effectually contest against the OTAs with respect to price. Revenue managers believe that all customers are not alike. For example, they would like to offer better rates for someone wanting a longer length of stay or for someone who books far in advance.They also agree that though technology advances have made it far easier for revenue managers to customize and deliver offers that are relevant to their target customers but the rate parity clause takes away their autonomy to be relevant in their pricing and their marketing approach.
Apart from this, there is completely a different angle to this debate, around 2014 and 2015, several anti-trust and fair trade organizations in Europe began reviewing rate parity to conclude if it is anti-competitive and akin to price fixing. More than a year back, in July 2015, France banned rate parity completely.