The discussion around the pros and cons of rate parity has been around as long as the OTAs. But what was the impact of COVID on rate parity, and is this still something hoteliers should focus on in 2021?
Here are the key findings of the 3rd episode of "The RevenueManager," organized by HospitalityNet and FunnelTV. The show is a live event, where the best revenue managers and hospitality personalities of the world discuss the famous HospitalityNet World Panels.
The event starred Hanna Lak (Founder of Nordic Revenue Forum), Scott Neslage (Director of Revenue Management at The Indigo Road Hospitality Group), Raul Mateo Lapuente (Senior Director of Revenue Management Meliá Hotels International at Melia Hotels International), Derek Martin (Founder & CEO at TrevPAR World), Thierry Collard (Global Commercial & Partner Manager at OTA Insight), Ujjwal Suri (Head of Revenue and Distribution at Fornova), and Paprika Lebourgeois (Director Customer Success and Product Design at Infor). This episode has been sponsored by Ota Insight, Fornova, and Infor.
Make sure to tune in for the next episodes.
THERE'S NO SUCH THING AS PARITY RATE
Parity should be more than simply making sure your channels are showing the same rates online, as rate parity is more about the rate architecture itself than the price point. What it's hard to recognize is the real distribution costs and the real profit coming from each reservation. OTAs are very good at getting hotels onboard with their campaigns, even though this sometimes means giving over 50% of the profit away. On the other hand, few hotels understand the true cost of acquisition of their direct revenue: from hosting to metasearch ads, all these investments can easily account for over 50% of the booking value, so it's not necessarily always cheaper to insource than outsource. Remember there's also a benefit from business coming from OTAs, as you only pay for the business you actually get.
THE ROLE OF OTAs
Hoteliers should consider OTAs as acquisition channels. Once the guest books on Booking.com the first time, it's the hotel's responsibility to turn that guest into a direct booker for his/her future stays. And don't think about commission as just an expense, but as a cost of sales with many benefits. When you go to war, you may want to take any ammunition you can with you, and OTAs are, right now, the most effective ones. Technology is very important, and your PMS should be able to track correctly things such as rate codes, market segments, Country of origin, and distribution channels. You can use the tool you have, such as PMS/RMS reports, BI, survey results, and Excel sheets. Equally important is calculating the cost-per-acquisitions of your reservations: operational, distribution, and marketing are all costs that should be taken into consideration.
METASEARCH AND DIRECT REVENUE
Price is the main factor in booking decisions, and since we have metasearch engines in combination with a wide range of distribution, all of a sudden users can see all the rates in one place. The first line of defense is direct bookings, as most of the main parity issues come usually from channels with the highest cost-per-acquisition, such as bedbanks. This can be achieved by leveraging first-party data. More flexible cancellation policies and refundable rates are also effective means to decrease the dependency on third parties. A key problem in metasearch, when it comes to rate disparity, is the one of cached prices, so that the rate looks cheaper on the metasearch engine, but then it's impossible to book it on the final channel. A simple hack that can be used to fight this issue is creating metasearch deeplinks with a promocode on one's booking engine, offering discounted rates to the direct booker.
You can see the full episode here
Do not miss the next episode of The RevenueManager, titled "Focus on Productivity," on May the 20th. More info at this link.