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?

Max Starkov
Max Starkov
Hospitality & Online Travel Tech Consultant

Rate Parity is not a new pricing strategy nor is it a hospitality industry-specific invention. It has been used in retail for many decades: fashion clothing, perfumes, appliances, golf equipment, smartphones, automobiles, etc. Today there are thousands and thousands of products in the marketplace where the manufacturers of the goods/services control the retail prices paid by consumers.

In hospitality, if 100% of your guests book directly with your property - through your website or reservation center - and they do not shop around before they make the booking, then you don't have to maintain rate parity. Why would you?

The issue is that travel consumers shop around like crazy - in 2019, the last “normal” year before the pandemic, hotel bookers visited on average 45 times various websites via various devices before making a hotel booking (Google). These are 45 touch points throughout the Digital Customer Journey i.e. 45 potential exposures to different pricing for the same hotel stay if your hotel is out of parity.

And guess who dominates these 45 touch points? Who invests heavily to engage, acquire and retain the traveler throughout the Dreaming, Planning, Booking, Experiencing and Sharing Phases of the Customer Journey? Hoteliers who are systematically underinvesting in technology and marketing and spending on average a measly 2.5% of net room revenue on marketing? Or the OTAs who are spending lavishly in each of the 5 phases of the Customer Journey? Ex. In 2019 Expedia spent 41% and Booking 33% on direct marketing expense as percentage of their revenue.

The answer is obvious. The situation has worsened even more: due to the pandemic, in 2020 hoteliers slashed their marketing spending by 51.5% and technology spending by 50% compared to 2019 (STR, 2021). Unfortunately, many hoteliers are continuing with similar shortsighted budgeting decisions in 2021, without considering the long-term implications.

So until that time when hoteliers will start spending on marketing and technology on par with the OTAs and achieve at least an equal exposure to them in each of the phases of the Digital Customer Journey, my recommendation is for hoteliers to maintain strict rate parity for all publicly available rates.

All discounts or promotions you provide to the OTAs should also be promoted in the direct channel: Hotel website, content marketing, SEM, online media, social media, CRM and loyalty marketing. Travel consumers are shopping around and omni-channel marketing gives the hotel an equal to the OTAs chance to engage the travelers throughout the Digital Customer Journey and its five phases (Dreaming, Planning, Booking, Experiencing and Sharing Phases), and eventually acquire and retain them.

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