Hoteliers share the obstacles they face in their efforts to achieve rate parity across OTA and other third-party channels in markets around the world.
GLOBAL REPORT—Many hoteliers are trying to achieve rate parity with online travel agencies and other third parties, but there are obstacles to doing so around the world, sources said.
One of the biggest parity challenges is the move toward the marketplace model, said Dan Wacksman, principal at hotel and travel advisory and consulting firm Sassato.
OTAs channel hotel room inventory from multiple sources to present the lowest price to consumers, and by doing so violate parity, he said.
There are two main groups undercutting rates: wholesalers and wholesaler partners, Wacksman said.
“So an example of this is HotelBeds gets a net rate. They give that net rate slightly marked up so they make money on it to a third party like Amoma.com, then Amoma.com takes a small mark-up and displays it on their website at a rate that is lower than the hotel sell rate,” he said.
Hoteliers look to their OTA partners for help controlling bad players, but the OTAs aren’t always willing to do that, Wacksman said. Hotels often have no choice but to actually book the rate to determine the source of the rate, which can be time-consuming.
Expedia Group did not respond to HNN’s request for comment on how the company addresses rate parity.
There seems to be a lot of activity in Europe to level the playing field of rate parity for hoteliers vis-à-vis OTAs and other disruptors, but some say state and European Union legislators aren’t doing enough.
“While there has been a lot of press releases and presentations, the state of parity on rate distribution is getting worse. Expedia and Booking.com play a large role in the disparity of rates both with hotels and between themselves and other OTAs,” said Clinton Campbell, commercial director at United Kingdom hotel company Apex Hotels.
“On the face of it, the OTAs claim that they don’t enforce a parity rule, but in practice hotels that don’t meet and exceed parity to both parties are being penalized,” Campbell said, adding that only the larger hotel companies have been able to negotiate good global agreements to prevent that from happening.
“Expedia, through their Expedia Collect model, has access to net rates from hotels; and immediately from the point these rates are sent to Expedia, they are being passed on, without control, to their Expedia Affiliate Network, where other OTAs are supposed to comply with standard markups. This doesn’t happen,” he said.
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He cited the Competition & Market Authority’s April blocking of the proposed merger of two U.K. supermarkets due to fears of price increases, which he said parallels what he considers a duopoly enjoyed in many parts of Europe by Expedia and Booking.com.
Metasearch popularity has accelerated the challenges hoteliers face, too, Campbell said.
“Often we will see cheap ‘clickbait rates’ to win the initial lead,” he said. “When you move through to the actual availability and rates, they will often display higher than original (rates). OTAs claim this has to do with cache on rate, but I believe it’s a tactic they use to win the guest on to their platforms.”
Some might value OTA partnerships now with platforms such as Google and Amazon coming into the space, but Campbell said there still is a desire among his peers for things to change.
“The scenario I use is if a new OTA competitor came into the market and offered hotels the same reach and volume for just a 25% reduction in commission to what Booking.com offers, I expect those hotels would drop Booking.com without much thought,” he said.
“The problem is the barrier to entry for new OTAs. They don’t have the same spending power that Expedia and Booking have. They can’t win the placement on paid search. They need to offer commission levels at the same or higher than existing OTAs, which places a major hurdle on the decision for hotels. Accept another OTA in your distribution mix and risk diluting your direct web business further.”
Campbell added that he believes OTAs are “moving to not only process the accommodation booking transaction but to own and engage with guests prior (to) and after the stay.”
“I expect to see them offering transactions for several other types of transactions like restaurants, activities and experiences in isolation from hotel accommodation,” he said.
To fix these problems, Campbell said hoteliers need to step up and lobby appropriate organizations.
“We have become lazy because of the OTAs. We love to argue about how much they charge, but we don’t behave proactively with strategies and tactics to retain guests once they stay with us,” he said.
Hoteliers need to have a retention plan in place before thinking about new entrants such as Amazon and Google, he said.
“Understand what your guests’ needs are and cater to them,” Campbell said. “This could be post-stay in the type of communication we send them. Keep news interesting, and keep guests engaged with your online profiles, particularly social media.”
In North America and Latin America, rate parity is unregulated, said Greg Duff, a shareholder and chairman at Garvey Schubert Barer, P.C., who focuses on hospitality law.
Antitrust regulators in these areas have shown no interest in taking on rate parity, he said. Similar to the situation in Europe, large brands are usually able to leverage their size into better contractual terms than smaller hotels or companies, Duff said.
Parity has traditionally been applied to availability, rates, terms and conditions by the big brands, but it is now being applied to loyalty program benefits, sourcing and content, he said.
Asia/Pacific and the Middle East
Marcos Cadena, VP of digital marketing, distribution, CRM and loyalty and head of data privacy at Minor Hotels, said via email that “rate parity is a big concern that is evolving as the travel industry goes through consolidation and considerable technological changes.”
That evolution is being driven in part by the growing popularity of metasearch engines, he said.
“Today, more and more partners are able to display their rates publicly, which is creating a totally new way of doing business and rate disparity,” he said. “Also, as meta becomes more and more popularized, and OTAs transform themselves to become more metasearch engines, and technological partners are selling wholesalers, this is bringing a new dimension to the equation.”
Rate parity is more present in Asia and the Middle East than it is in Europe and America because wholesalers and destination management companies “have less presence in the day-to-day operations,” Cadena said.
“But we see a huge change in Asia, where there are signs that dynamic rates are starting to work, and more and more partners are willing to work with them,” he added.
Wholesalers are an important part of Minor’s business, Cadena said, but the company is seeing a good balance of wholesale and retail business as “retail has grown significantly over the last five years.”
“As (wholesalers) become more dynamic with their pricing, we are getting better and better rates,” he said.