If you are an accommodation owner who utilises Online Travel Agents (OTAs) to secure more bookings, you’ll (hopefully) already know why your OTA content score is important and how you can improve your OTA content score to help make your listing appear towards the top of the search results.
So, with your OTA listing optimised and your accommodation enjoying more exposure as a result, it’s just a case of sitting back and watching the bookings flood in, right? Not exactly…
That’s because there is another consideration when listing your accommodation with an OTA that you should know about: hotel rate parity. By the end of this blog post, you’ll have a better understanding of what hotel rate parity is and what it means for you as an accommodation owner.
What is rate parity?
First and foremost, rate parity is, unfortunately, a rather complicated subject and something that can differ depending on where your accommodation is physically located.
In a nutshell, rate parity is an agreement made between the OTA and the accommodation owner stipulating that the latter agrees to offer the same price for their rooms across all online channels i.e. on every OTA and their own hotel website.
Why do OTAs insist on rate parity?
Let’s say there’s a hotel room listed on an OTA for £50 a night. However, the same room was available directly on the hotel website for £40 a night. Which one are potential guests more likely to choose? The cheaper one, of course.
That’s why OTAs don’t want hotels and other accommodation owners to list lower rates on their own websites because it will mean fewer bookings (in theory) through the OTA. And fewer bookings mean less commission for them.
Is rate parity legally enforceable?
Across much of Europe, rate parity is outlawed, including in France, Austria, Italy and Belgium. That was after a European Commission investigation in 2015 ruled that the practise was unfair.
Switzerland has also promised to follow suit in the near future, while Germany has applied regulations to certain OTAs.
In Australia, New Zealand and the wider European Union, some OTAs have adopted narrow rate parity clauses, which basically allow hotels to offer lower rates through other OTAs but not their own websites.
How do OTAs encourage rate parity adherence?
Now you might be thinking, what’s stopping hotel owners from just ignoring what OTAs say and advertising whatever prices they want online? Well, OTAs now actively penalise properties that do not adhere to rate parity agreements by lowering their position in the search results.
This detrimentally impacts the number of conversions the hotel gets through the OTA and that in turn affects their bottom line.
What does rate parity mean for me?
First, it is important to understand how OTAs price your property listing. There are two main ways:
1. You give them the price directly
2. The OTA gets the price from another OTA (usually a sister company)
Now, as rate parity has the ability to affect your OTA listing and the number of conversions you get as a result, it is a huge consideration. Especially when you consider that some OTAs can even apply discounts to your room prices without your knowledge, and when other OTAs find out, your property’s listing on their websites could be punished.
For example, some OTAs can afford to display a lower price for your room because they accept payments directly from guests and use virtual credit cards to pass the payments on to the hotel. In the process, the OTA takes a hit on their commission, while the hotel gets the full room rate they want.
Sounds fair enough, right? It’s not…
That’s because rate parity demands that hotels offer the same rate across all online channels. But how can they if OTAs are taking pricing into their own hands and applying discounts as they see fit!?
The result is a hotel may get penalised by an OTA and see their listing drop because the OTA has seen a similar room advertised on a competitor at a lower rate – even though the hotel didn’t even know!