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?
Not only is rate parity not obsolete, but it is more important than ever for hotels to prevent revenue leakages and ensure rate integrity across all online channels, including mobile web and mobile apps.
Here are the 8 reasons why:
- The percentage of travelers searching and booking online has increased dramatically, with Google searches for resorts and hotels at their highest levels in nearly a decade. (see fortune.com article)
- 70% of all travel searches are now conducted on mobile devices, with the majority taking place in-app.
- The pandemic has resulted in the collapse of revenue from B2B (business travel, corporates, and groups) and MICE (meetings, incentives, conferences, and exhibitions). With those segments taking longer to recover, the leisure market will be key to any hotel's success (or in some cases survival) in 2021.
- Faced with an unprecedented tsunami of cancelations at the start of the pandemic, OTAs were very slow to reimburse thousands of online bookings, which resulted in many consumers losing trust in those platforms.
- The extended lockdowns and travel restrictions resulted in increasing numbers of travelers switching booking channels in favor of hotels' brand.com websites, regarded as a trusted source of Covid-related information on cancelation policies, testing regimes, etc.
- Price is by far the most important factor affecting customers' decisions on hotel selection and booking.
- The most popular online channels (Booking.com and Expedia, along with the metasearch engines they own or control) will push a hotel further down in their ranking when they identify that the property has offered lower rates on smaller competing OTAs, severely affecting visibility and traffic.
- Hotel marketing budgets have been slashed at a time when the OTAs are now starting again to ramp up their advertising spend. Very soon, the major OTAs will once again dominate almost all travel-related queries on search engines and the only affordable way to generate traffic for a hotel's brand.com website will be the Google's free hotel booking links – where ranking is determined by the value offered to users and the historical accuracy of the prices provided to Google as measured in their Price Accuracy Policy, (see article)
As the pace of recovery is ramping up, hotels that do not defend rate parity will lose out to the OTAs, because guests will fail to find the hotel's direct booking link (buried on page 3 of search results) in the first place, or - even if they initiate their search by looking up content on the brand.com – they will not be impressed when they subsequently find cheaper rates on metasearch or on the OTA app.
Losing out on price and watching OTAs take over the online market once again is entirely preventable if only hotels deploy a rate intelligence platform to monitor, manage and improve their digital distribution across all contracted, uncontracted OTA and metasearch websites and apps.