Managing Rate Parity: Just When You Thought You Had It Sorted

By Michael McCartan Managing Director Europe, the Middle East, and Africa, Duetto | December 08, 2013

What is Rate Parity?

Rate Parity is generally included as a primary clause into online travel agents’ (OTA) agreements which makes it the hotel’s responsibility to ensure that a given hotel room on a given day is selling for the same rate on all channels. For many industry pundits, this is a direct violation of competitive pricing and is against consumers’ best interest. In August 2013, the U.K.’s Office of Fair Trading (OFT) directed major OTAs to relax contractual restrictions, which would allow other booking agencies to provide discounts on “room only hotel accommodations”. Closer on the heels, German and French regulators are also keeping rate parity under the microscope. So does that signal a death sentence for rate parity?
At the cost of being risqué, I would like to play the role of the devil’s advocate and examine what would happen if there was no rate parity.

A World Without Parity

In the absence of rate parity mandates, the hotels - especially the independent properties, would be in a better position to manipulate rates. But does that ensure better rates and higher revenues? As a consumer, you might not mind paying extra for the experience of shopping in a luxurious mall but I would argue that the online purchasing experience through the majority of travel websites is very similar and ultimately the buyer’s final decision will be driven by price.

For years, the hotel industry has been under the impression that rate parity is the root-cause for everything that has gone wrong with pricing. It’s high time they do a reality check. The truth is that at a time when the majority of the world population is connected through the internet and information is readily available, consumers today have a plethora of options to find the best deals. A hotel room for a given night can be researched and booked through multiple avenues, such as the hotel’s own brand website, online travel agencies, flash sites, opaque sites, review sites and in many cases, social networking sites.
OFT ruling & its long term implications

Much has been written about the recent OFT ruling, and its long term implications. Without going into the finer details, the verdict gives hoteliers and third party distributors in the UK, the right to offer discounts to “closed groups” such as members of their loyalty program. The most common ‘deals’ usually revolve around advance purchases or no-cancellation policies, adding an extra night or value added services into the rate, as well as offering preferential rates to specific customer types, such as loyalty program members. It is widely expected that mature markets like the rest of Europe and US will go the same way.

Coming up in February 2018...

Social Media: Engagement is Key

There are currently 2.3 billion active users of social media networks and savvy hotel operators have incorporated social media into their marketing mix. There are a few Goliath channels on which one must have a presence (Facebook & Twitter) but there are also several newer upstart channels (Instagram, Snapchat &WeChat, for example) that merit consideration. With its 1.86 billion users, Facebook is a dominant platform where operators can drive brand awareness, facilitate bookings, offer incentives and collect sought-after reviews. Twitter's 284 million users generate 500 million tweets per day, and operators can use its platform for lead generation, building loyalty, and guest interaction. Instagram was originally a small photo-sharing site but it has blown up into a massive photo and video channel. The site can be used to post photos of the hotel property, as well as creating Instagram Stories - personal videos that disappear from the channel after 24 hours. In this regard, Instagram and Snapchat are now in direct competition. WeChat is a Chinese company whose aim is to be the App for Everything - instant messaging, social media, shopping and payment services - all in a single platform. In addition to these channels, blogging continues to be a popular method to establish leadership, enhance reputations, and engage with customers in a direct and personal way. The key to effective use of all social media is to find out where your customers are and then, to the fullest extent possible, engage with them on a personal level. This engagement is what creates a personal connection and sustains brand loyalty. The February Hotel Business Review will explore these issues and examine how some hotels are successfully integrating social media into their operations.