Is Rate Parity Obsolete?
— 16 experts shared their view
The discussion around the pros and cons of rate parity has been around for almost a decade now. Regulations on the issue are, at best, patchy, with some countries where RP clauses are strictly prohibited (such as France, Austria, Italy, and Belgium), partially prohibited (Germany and Sweden), announced (Switzerland), or still unregulated (US and Latin America). With lower volumes of booking coming from OTAs during the pandemic, moreover, the debate about rate parity became even more heated: some properties decided to work in wide rate parity to avoid OTAs' dimming and improve their online visibility at the expenses of direct revenue, while other ones preferred to openly break rate parity on their top-performing channels. Both the OTAs and major hotel brands complicated the issue even further when they began offering out of parity “member only” rates, hidden behind an easily obtained loyalty program password. With so many different approaches and fragmented regulations, how should hotels deal with rate parity, especially after the whole industry has been severely hit by COVID-19?
Principal | Revenue Generation, LLC.
Oh boy! Are we tired of the game of whack-a-mole yet? Maintaining rate parity is a major effort and somehow OTA "partners" find a way to skirt the rule by offering member-only rates (with very few qualifications), bundling with air, or grabbing a wholesale rate and unbundling it. I think we, as an industry, have proven it is very difficult to achieve ultimate parity with all channels.
Who benefits from this? I would contend the beneficiaries are channel partners and those who are monitoring parity. When you look at cost models between OTA/GDS models one could argue rate parity and last room availability reduce profit for hotels and sustain profits of channel partners.
Now for the downside. The reality is most hotels are very dependent on OTA business and transitioning to a model that encourages discounting or higher commissions for volume and placement is a very real concern. It will take a strong discipline on understanding the risk of continued discounting and incentivizing OTA partners to drive more volume. If undisciplined, you will run into a situation where you are competing against your own direct channels.