What Is Rate Parity?

Rate parity, or price parity, refers to the policy of maintaining the same hotel prices across all sales platforms, irrespective of the fees levied by online travel agents (OTAs). This ensures that the rates displayed on OTA websites are identical to those on the hotel’s own website, even though the hotel may earn less profit from OTA bookings.

Rate parity is typically a component of the agreement that hotels enter into when they partner with an OTA. This agreement prohibits hotels from offering lower rates on their own websites compared to the rates offered through the OTA. Understanding rate parity is essential for hotel management as it directly influences pricing strategies, revenue management, and overall profitability. This article will explore the intricacies of rate parity and its impact on hotels.

Rate Parity Simplified: A Practical Example

The Bliss Boutique Hotel offers its mountain-view suite at a rate of £100 per night and wants to ensure consistent pricing across all its distribution channels. To achieve this, the hotel has implemented the following measures:

• On its website, the mountain view suite is listed for £100 per night.
• On OTAs such as Booking.com and Agoda, the same suite is also listed for £100 per night.
• A local travel agent offers the mountain view suite to her clients at £100 per night.
• For phone bookings, a guest calling the hotel directly is quoted £100 per night for the suite.

No matter how the guests discover the mountain view suite, the rate will always be £100 per night. This unwavering consistency across the board summarises rate parity.

What Are the Different Types of Hotel Rate Parity?

Rate parity is classified into two different types:

Wide rate parity

Wide rate parity refers to an agreement between a hotel or B&B and an OTA, in which the hotel agrees not to offer lower room prices than those charged by the OTA. This agreement typically extends to all distribution channels, ensuring consistent pricing across various platforms.

Narrow rate parity

Narrow rate parity allows hotels to offer rates to customers that are lower than those offered through other OTAs but not directly through the hotel’s own website. This means that hotels can provide discounted rates through indirect or offline channels such as email, phone bookings, and customer loyalty programmes. This type of rate parity gives hotels the flexibility to offer better deals to customers who book through specific channels while still maintaining consistent pricing across other distribution channels.

What Are the Pros and Cons of Rate Parity?

Pros

As a small accommodation provider, partnering with major players such as OTAs can enhance your visibility and attractiveness to travellers globally.

Giving priority to rate parity can prevent potential business complications. Inconsistencies in room rates across different platforms can result in customer dissatisfaction and strain relationships with distribution partners.

And lastly, rate parity helps to avoid overbookings, which can affect any hotel’s customer service. In a way, this creates a more seamless and positive experience for your customers and partners.

Cons

Rate parity can make it difficult for hotels to attract direct bookings. Hotels often depend on OTAs and their high commission rates to increase visibility, which means OTAs have the power to raise commission rates, and this can result in potential revenue loss for hotels.

Another disadvantage is that OTAs have the final say on room prices and can offer them at lower prices using their own commissions. Hotels must inform OTAs about promotional deals and have the option to choose not to list certain, be they single or double rooms.

Due to heavy dependence on OTAs, rate parity can impact revenue and profitability. Each distribution channel incurs varying acquisition and commission costs, and this is where a reliable hotel management system comes into play, taking the burden off you when it comes to optimising inventory and maximising profits.

What’s the Latest in Rate Parity?

The practice of rate parity is still in effect in the United States, the United Kingdom, and Latin America. In Europe, Booking.com has informed its hotel partners of the decision to remove rate parity clauses from its agreements in several countries, including France, Austria, Germany, Italy, and Belgium. This move aims to create a more level playing field between major online travel agencies and independent hoteliers.

This presents a great opportunity for hotels in these countries to increase their direct revenue. With RoomRaccoon’s high-converting booking engine, hotels can now:

• Offer lower direct rates and attract more guests to book through their own website.
• Collect valuable customer data to gain deeper insights into guests’ preferences and behaviours.
• Save on commission fees, as direct bookings mean more revenue stays with them instead of going to third-party platforms.

While rate parity is intended to maintain fair competition, at times, it may seem to be having a more negative impact. But, there’s no need to worry. By implementing the right strategies, you can effectively tackle these challenges and ensure your hotel’s revenue doesn’t take a nose-dive. Let’s get to the strategies:

How Do You Make Rate Parity Work for You?

Here are six easy-to-execute revenue management strategies with RoomRaccoon while ensuring rate parity.

1. Customise Your Rate Plans — You have the flexibility to easily customize rates and packages for your website and OTAs, which allows you to provide appealing and competitive options across all channels.

2. Promote Favourable Direct Booking Rates — Promote your hotel through Google Hotel Ads to attract more bookings compared to OTAs and only pay for stays that are completed.

3. Boost Direct Booking Conversions With a Price Checker — Our booking engine meticulously compares the rates for direct bookings with those offered through OTAs in order to enhance your direct business.

4. Use Discount Codes — You can enhance your website by featuring special discount codes for holidays or events. Also, you can connect with previous guests by offering personalized promotions to encourage direct bookings.

5. Keep Your Rates Competitive With Dynamic Pricing — Use dynamic pricing to automatically adjust your rates in response to market demand and competitive conditions. You can also increase customer engagement by offering exclusive promotions directly on your website, including early bird specials and last-minute deals.

6. Increase your average booking value with add-ons — Encourage customers to elevate their experience by taking advantage of your supplementary services, including convenient airport transfers and engaging guided tours, all easily accessible through RoomRaccoon’s user-friendly booking platform.

Balance Rate Parity and Direct Bookings With RoomRaccoon

Explore RoomRaccoon’s user-friendly channel manager and achieve your ideal hotel rate parity; our software simplifies the process of managing room rates across various distribution channels. It lets you easily update and synchronise room rates, availability, and restrictions in real-time, saving you time and effort. Take advantage of our free trial to experience the benefits firsthand.