What is Hotel Rate Parity: The Essential Guide

In this article, we'll explore the concept of hotel rate parity in more detail and discuss why it's essential for hoteliers to maintain consistency across all distribution channels.

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Hotel rate parity is a critical concept in the hospitality industry that every hotelier must understand. It refers to maintaining consistent rates for the same room type across all distribution channels, including the hotel's official website, online travel agencies (OTAs), wholesalers and other third-party booking platforms. Rate parity is essential for ensuring guests receive a fair and consistent rate, regardless of how they book their accommodation. It also helps to prevent rate undercutting, which occurs when a hotel offers a lower rate for a room type on one channel compared to another. Hoteliers must understand the significance of rate parity because it can impact their bottom line, reputation, and relationship with OTAs. Failure to maintain rate parity can result in paying more commission and affect you profitability and hotels EBITDA/ In this article, we'll explore the concept of hotel rate parity in more detail and discuss why it's essential for hoteliers to maintain consistency across all distribution channels.

What is Hotel Rate Parity?

Hotel rate parity refers to the practice of maintaining consistent pricing for hotel rooms across all distribution channels. In other words, hotel rate parity ensures that the rate of a hotel room is the same regardless of where it is booked. This is important because it prevents rate discrimination and maintains a level playing field for all hotels and guests.

The Customer's Journey in Hotel Booking and the Significance of Rate Parity

Understanding the customer's journey in the hotel booking process further underscores the critical role of rate parity. When potential guests decide on a location and start researching specific hotels, one of the first touchpoints they encounter is a comparison of prices between the hotel's website and online travel agencies (OTAs) via platforms like Google Hotel Ads.

The customer's perception of value can be significantly influenced at this stage. If the hotel's direct booking rate exceeds the OTA's, customers might perceive that the OTA offers better value. Consequently, they may visit the hotel website for more information about the rooms and amenities. Still, their initial impression—that booking through the OTA is cheaper—can have a lasting impact. This scenario can result in increased traffic to the hotel's website but a low conversion rate, as visitors only use the site for information gathering before booking through the OTA.

An additional consideration relates to the appeal of OTA loyalty programmes, such as Expedia Rewards or Booking.com Genius.

Hotels need to ensure they match OTAs on price and offer attractive incentives to compete with these loyalty benefits and encourage direct bookings.

This is where rate parity evolves into a broader consideration beyond price alone. For instance, if a hotel can match an OTA's room rate and offer additional perks for direct bookings, such as a members discount, free mini bar, social drinks, or complimentary use of facilities like electric bikes, they can create a more compelling proposition for customers to book directly.

Therefore, hotels must strategise effectively to ensure they provide comparable, if not superior, value propositions to their guests, enabling them to compete effectively against OTAs.

Types of Hotel Rate Parity

There are several types of hotel rate parity that hoteliers should be aware of:

Best Rate Guarantee (BRG) parity

BRG parity ensures that the hotel's direct booking channel, such as its websites booking engine, offers the best available rate for a particular room type. If a guest finds a lower rate on a third-party site, the hotel must match or offer a better one.

Availability parity

Availability parity means the same number of rooms and room types are simultaneously available across all distribution channels. This ensures that all guests have equal access to the same inventory, regardless of where they book.

Room type parity

Room type parity means that the same room type is available at the same rate across all distribution channels. This ensures that guests can book the room type they want at the same rate, regardless of where they book.

Loyalty parity

Loyalty parity ensures that guests who book through loyalty programs or directly with the hotel receive the same benefits and perks as those who book through third-party sites.

Best Practices for Hotel Rate Parity

Implementing a Hotel Rate Parity Strategy

It's crucial to have a well-defined strategy to ensure compliance with hotel rate parity. This strategy should clearly define what parity means for your hotel and how you'll achieve it. You should consider which channels you'll use to distribute your rates and what restrictions you'll apply to them. You should also have a plan for monitoring and enforcing parity compliance.

Managing OTA contracts to maintain parity

It's essential to manage your contracts with OTAs to ensure parity compliance. This means negotiating favourable contract terms for your hotel and providing sufficient protection against non-compliance. You should also regularly review your contracts to ensure they are relevant and enforceable.

Using technology to ensure parity compliance

Technology can be a valuable tool in ensuring parity compliance. Various software solutions can help you monitor parity across different channels and detect any discrepancies. Some of these solutions can even automatically adjust your rates to maintain parity. It's essential to choose a solution that's appropriate for your hotel's needs and budget.

Monitoring parity on an ongoing basis

It's crucial to monitor parity compliance on an ongoing basis. This means regularly checking your rates across different channels and monitoring your competitors' rates. You should also have a system in place for reporting any instances of non-compliance and rectifying them promptly.

By implementing these best practices, you'll be well-positioned to achieve and maintain Hotel Rate Parity. This, in turn, will help you maintain brand integrity, protect direct bookings, and ensure consistency in pricing.