As more hotel bookings are made online and the number of third-party booking sites rises exponentially, hotels are often finding that their rooms are being sold on sites that they’ve never even heard of.
It can be a strange occurrence to find your hotel listed on a site that you’ve never partnered with. It can be even more peculiar when a reservation comes in from a distribution channel you’ve never heard of — and downright alarming when a guest walks in with a reservation you never knew about.
But so go the trials and tribulations of working with third-party distribution partners. The big dogs, Expedia and Priceline, each have hundreds of affiliate sites that they can share your exclusive rates with. That’s all fair and good, and they’re contractually obligated to do so.
But what gets hoteliers in trouble is when wholesale rates — or private rates that are negotiated and offered exclusively on a large-scale basis to an individual channel — begin showing up on public channels.
Wholesalers will often lower their margins or commissions in able to drop these rates even further. And then if these rates are scraped or given to a public seller, your hotel can end up with multiple price points for the same room type available online. And, in many of your partners’ eyes, that’s breaking parity and a large no-no that comes with significant consequences.
How is this happening?
Wholesaler rates began showing up on public sites around 2008, when financial markets crashed and hotel industry fundamentals followed. Because hotels were drastically cutting public rates, wholesalers at that time could not mark up as usual their pre-negotiated rates.
They then started opening websites to sell inventory out of rate parity when demand was sufficient.
The rise of metasearch sites has enabled the practice to thrive, as metasearch sites with the same prices on all channels is not very interesting.
Now, even though a hotel’s revenue manager might think they’re offering rates in parity, once a rate is pushed, the control of inventory is essentially out of the revenue manager’s hands.
When wholesalers get that inventory and then flex their margins, new rates become available. How those new, lower rates end up on public sites is where the issue gets complicated and difficult to track.
The fragmented nature of online distribution is often the cause. Because there are so many players and distribution channels — literally thousands of places your rooms can end up — it’s difficult for hotels to monitor each and every one. Even if a revenue manager does find a rate out of parity, tracking down the origin of that rate can be nearly impossible.
The issue is becoming so common that one large Chinese distribution channel has reportedly begun asking hotels to give them their wholesaler rates outright.
What’s all the fuss about?
A tiny website that drives little or no bookings offering your rooms at a slight discount might not be the end of the world. But if representatives from Expedia or Priceline, who run competitor-shopping programs just like the best hotels, find a rate on a public channel selling at a lower rate than you offered them, they’re going to call you on it.
In fact, Booking.com rates each of hotels based on a number of characteristics, and whether the Booking.com rate is in parity with competing sites is part of that rating. If your hotel is out of parity above a certain percentage of time, you will no longer be eligible for Booking.com’s “Preferred” program, which allows for better placement.
The type of punishment an OTA might levy against a hotel that is offering rates out of parity depends on a number of factors. Sometimes there is a heavy fine involved. But most assuredly the OTA will punish you by, at the very least, dropping your property in list rankings or dropping your hotel from the site altogether, both of which result in less demand for your hotel.
For an independent hotel, losing placement on an entire booking channel can be catastrophic.
Lastly, sites that publish wholesale rates on public channels are undercutting your own channel, which could mean a loss of direct business as well.
While being in parity might not concern you as a revenue manager, be certain that ownership and management groups care. If you’re out of parity, be prepared to have an explanation why.
For revenue managers, the issue is relatively easy to control, as long as your hotel has decent demand (not an independent hotel on an island where flights are bought by wholesalers). With simply a credit card, revenue managers can book a room and see which site is behind the out-of-parity rate. Revenue managers can call and annoy wholesalers until they stop publishing the rates. Having a rate-shopping tool that shows your rate and availability on multiple channels will help you monitor and ensure parity.
- When Should An OTA Get Your Best Rate?
- Europe Cracking Down On OTA Dirty Tactics In Hotel Pricing
- How Rate Parity Changes Will Affect your Revenue Strategy (email required)