If you use online travel agencies (OTAs) to generate business for your hotel, you’ve inevitably come up against the term Rate Parity. In fact, you likely have a rate parity clause in your contracts with some or all of your OTAs. What does Rate Parity mean? It means that wherever your guests book a room in your hotel, the rate must be the same. It doesn’t matter if they book on HRS, Expedia, Lastminute.com, your own website or they phone up your call center. In all cases, they should get the same offer at the same rate.
At first glance, this sounds like a good policy to follow. Guests may feel comfortable booking your brand anywhere at any time, knowing that they are always getting the best offer.
On the other hand, this strategy doesn’t work well if you want to convince guests to book over certain channels such as your own website. After all, the guest has no incentive to shop around.
But in fact there are some ways to motivate guests to book directly and still maintain rate parity. Let’s look at a few.
- Rate parity only applies to “published rates” that do not have special qualifications, like, affinity rates or limited audience rates. Examples might be negotiated corporate rates, special email offers to a non-public list or your in-house special offers list. Also, opaque channel rates, like Priceline, are not subject to rate parity rules. So you can increase direct bookings by explaining to your corporate customers, for example, that they only get their special rate by booking directly.
- On high-demand nights, close off the OTAs completely and take only direct bookings. If the city is full, people will still find you via your website. With proper demand forecasting or sometimes just common sense, you can predict which nights will have high demand long in advance and close off the OTAs early on.
- Since the OTAs have to fit your rates into their booking engine, they may not have the wide variety of product offerings that you have on your own site. For example, they may not offer some of your value-added packages. Obviously, there is no possibility for rate parity on these packages. Train guests to book at your site by offering special packages that are not available at the OTAs. For example, you may have a standard room on your site and on the OTA at the rate of €100. But you could offer that same room on your website as part of a package with free internet and free breakfast for €109 and still maintain “rate parity.”
- Standard is not always standard. You may have a lot of standard rooms in your property, but some of those standard rooms are slightly better than others, e.g. higher floor, better view, more recently renovated. When your direct bookers arrive at your hotel, assign them one of the better standard rooms as thanks for the direct booking.
With these techniques, you can shift some of your indirect business to direct business. Considering the savings in third party commissions, this can add up to a lot of additional revenue in a short time.