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An overview of the rate parity issue between the OTA’s versus independent Hotels and how it continues to cause debate. After Booking.com created the promotion to override hotel direct rates, all OTA’s followed the lead, freeing them up to dictate their own rates, against independent hoteliers. This causes chaos in rate parity and inequality in direct Hotel rates. Independent Hoteliers are fed up with the issue and requesting penalization for these OTA companies.
Booking.com has started a debacle with hotel rate parity. The Online Travel Agent created the Booking Sponsor Benefit (BSB), which allows customers to book directly on booking.com and gives them an incentive of between 3% to 6% discount on the rate on the retail side if they pay directly with booking.com. This is an unannounced change to all hotels in the world with no authorization from the hotel operators. Therefore, booking.com arbitrarily reduced the hotel rates.
Simultaneously, Expedia is evaluating this situation as unfair, and therefore they produced their own competitive rate tool to reduce their rates to match booking.com. In the meantime, the affected hotels are questioning why they must reduce their rates against their will.
The hotel's direct rate is about 6% higher than the OTA’s. And while large hotel companies have the tools and competence to compete evenly with the OTA’s, independent hotels cannot keep up with the OTA’s algorithms and technologies to match a competitive rate on the internet with a direct sale, through their CRS.
Now Agoda is questioning the rates that Expedia is offering, which are lower rates than they agreed upon. And the rates keep stacking while other OTA’s (i.e., Hotelbeds) are examining these rates and claiming that there is a breach in the contract that conflicts with their Strategic Partnership Agreement (SPA Agreement). For instance, Expedia Member’s Pad is an additional 10% and Hotelbeds is requesting that they need to have 30% off that rate.
The situation has created a downward spiral in the price point for independent hotels. And therefore, they have lost control of its direct rates versus the OTA’s unauthorized rates. Meanwhile, the OTA companies keep claiming that they are doing the hotel a favor, with this competitive landscape, when in fact independent hotels are struggling. To worsen the situation, when the hotel decides to take charge and change rates disregarding their contracts with the OTA’s; hotel owners are penalized for parity issues, and they get dropped in the rankings.
For several decades, independent hotel operators and owners have put their trust in the OTA Companies to manage the price point accuracy. But now, the hotel owners are asking themselves what the purpose of the rate strategy is anymore if they get contradicting rates that diminish their direct rate.
Independents hoteliers have no idea what the price point of their rates is anymore. They are constantly shopping their rates through rate tools, like OTA Insight and Rate 360 Reports, but this issue is making the independents' jobs more difficult and creating high confusion among the customers.
Based on a survey executed by RevOptimum, 86% of hotel owners are requesting penalization for these OTA companies, to even the inequality of the rate parity issue. Hotel owners are requesting this situation to stop and asking the OTA’s, to not move their rates!
About RevOptimum.
RevOptimum is a Pioneering remote hotel revenue management Company empowering the hotel industry for 30 years. RevOptimum is dedicated to advancing hoteliers' and hotel organizations' achievement by pioneering remote hotel revenue management solutions and revenue platforms.
The Hotel Revenue Management Company enables revenue management transformation for the hotel industry and supports hoteliers through our expertise and innovative revenue increase structures and proprietary tools. RevOptimum builds and implements hotel management plans that drive continuous revenue increase results.
We are ready to work with your hotel to build a successful revenue management plan. Contact us to learn how you can quickly reach all of your hotel revenue goals - BIG OR SMALL.
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