Price parity is a term that always alarms hoteliers and can even be a barrier to growth for small and new players. Price parity is the practice of maintaining the same and uniform rates on the same room type across all distribution channels / reservation platforms, whether it is the hotel's website or the OTA, whether or not commissions are earned by the OTA. The purpose of this practice is to create a level playing field for all players. Both hotels and OTAs must agree to set parity rates when registering with OTAs.
Sometimes this leveled field makes it difficult for new players to compete in this fierce competition and stifles them, even before they can spread their wings.
How should Rate Parity hotels be viewed?
Tariff parity practices have emerged to protect OTA interests from situations where hotels can lower their website rates and reduce OTAs.
Why do hotels rely heavily on OTAs?
OTAs provide a ready-made platform for every hotel to book reservations from the first day they enter the online booking world. They don't have to spend heavily on marketing, they just negotiate better deals with the right OTAs and they are ready to make money. Hotels can easily view OTA commissions as marketing costs, but with higher success rates. Therefore, the advantage that OTAs offer to hotels somewhat negates the disadvantage of rate parity over hotels.
What are the challenges of rates parity for beginners and small hotels?
In small and new hotels, each booking is crucial. Paying huge OTA commissions from already low margins becomes very difficult for hotels. Here, direct bookings can be a game changer. However, getting direct bookings can be a difficult task without a promotional campaign and price manipulation. Many times, OTAs will ask hotels to keep them in the loop when running any promotional campaigns or reduced rates on their websites. To prevent any violation of the Parity Rate clause, sometimes small hotels exclude the entire OTA room category and sell them on their website at their own prices.
Competing with OTAs for pricing is difficult for small hotels, as OTAs are known to reduce prices below contracted prices by reducing their commissions. We do not live in a perfect world!
This requires hotels to keep a check on the prices of different OTAs to keep their prices competitive with them. When OTA channels are not directly linked to a PMS hotel system through a channel manager, speed parity is even more difficult to manage. Then hoteliers have to log in to multiple systems to update their rates. However, it is much easier and faster for a hotel to use hotel technology tools to manage it all.
Few believe that in this situation, small hotels are stuck between a rock and a difficult place, as they say, since on the one hand, they do not have the marketing budget to reach the type of reach that OTAs provide. On the other hand, it is difficult for them to pay the big OTA fat commission. Moreover, OTAs bring them to business. Therefore, hotels want to make more direct bookings. However, this course requires more dollars to spend on marketing. They are in this vicious circle.
Here are some tactics that hotels can use to address the challenges of speed parity
Creating Batch Packages
Hotels can increase their bids by keeping the price the same as OTA by adding bonuses such as free parking, Wi-Fi, wine tasting sessions, free breakfast, sightseeing, free pick-up and more. This practice can help them have a clear edge over the OTAs without breaking the rate parity, since the hotel offers a better deal than the OTA for the same price.
Reduce your prices to a limited audience.
Hotels can reduce prices for age group, category, close Consumer Group (CUG) or mobile app users. Run email promotional offers for CUG members or mobile app bookings. This can help them manage direct bookings on their website and mobile app without breaking the tariff parity clause.
Customer loyalty and engagement program
Another way to encourage direct bookings is through loyalty programs. Loyalty programs provide many benefits, in addition to simply saving commissions on OTAs. Obtaining a repeat booking from a loyal customer is far cheaper than acquiring a new customer. On top of that, hotels are aware of their choices and preferences that allow them to serve them even better. This spreads the positive word of mouth of the brand and paves the way for more direct bookings.
Use the Meta search engines
Meta search engines like TripAdvisor and Trivago can be considered the savior of small hotels. Small hotels may even be at the top of TripConnect's list, as it operates on a PPC model unlike commissions, as in the case of OTAs. Metasearch engines are quite popular with consumers as they not only provide comparisons between different properties but also allow them to choose the cheapest channel to book a hotel. It is often observed that consumers resort to direct bookings, provided that the difference is not huge, as direct bookings are considered more reliable.
User friendly website and booking process
In order to stimulate direct bookings, hoteliers must ensure that they have the necessary infrastructure that triggers and triggers direct bookings, such as a comprehensive, user-friendly website with a clean interface that provides all the information you need without having to search for it. In addition, hoteliers should make sure that the booking process is simple instead of clumsy so that prospects do not bounce. OTAs have a clear advantage in this department, but hotels have no choice but to align their online infrastructure with that of OTAs.
From the above discussion, we can assume that while parity assessment agreements may delay direct bookings at any hotel; There are many factors that prove that OTAs are actually good partners with hotels. Hotels can adopt several bypass Rate Parity defect mitigation strategies while enjoying the vast array of OTA books