How Hotels Can Maintain Rate Parity, Drive Revenue

NEW YORK—At the risk of stating the obvious, the relationship between hotels and third-party online travel agencies (OTAs) such as Expedia, Priceline and Travelocity is complicated. Some hotel companies tout the strength of their brands and see OTAs as just another distribution channel, while others see them as a threat to their businesses.

With a rate parity agreement, hoteliers and OTAs can meet on an equal playing field, so to speak: The hotel rates are the same, no matter where the customer goes in search of the best price for his or her stay. However, there are instances when hotels may fall out of parity and the results can be damaging, resulting in customer distrust and a lack of incentive for travelers to book directly with the hotel because the OTAs appear to be offering a better, lower rate.

“We’ve done thousands of campaigns for hotels and we often do an analysis on what drives performance in terms of direct bookings. One of the things we identified is that when not in rate parity, a hotel’s direct bookings are down by 20%. Not being in rate parity has a material effect on campaign results,” said Scott Falconer, general manager, TravelClick, a global provider of revenue-generating solutions for hoteliers.

How do you stay in parity? Having the right data is key. Data is used to drive bookings, target the right audiences who, in turn, may become prospective clients, and to identify what creative messages will drive conversions and bookings, according to Falconer. “The data we collect also helps us identify what online channels are most effectively driving conversions and bookings for clients and how cost effective our campaigns are, a combination of channels and creative to generate the best ROI,” Falconer said.

It can be challenging to determine the hows and whys of falling out of rate parity, but Falconer noted there is one thing hoteliers should consider to further dissect the issue. “When someone is not in rate parity, it’s not an easy statement to make. There are a number of things we need to look at. Are the rates correct? It’s the most important thing,” Falconer said.

Don’t let a disparity in pricing eat up your revenue. There are tools out there to help hoteliers sift through all of the data and create revenue-generating outcomes. When looking for a solution provider, do your due diligence and ask the right questions. Does the provider have access to the data? Is the data specific to the hotel industry? Do they have scale in terms of deep data related to hotels?

According to Falconer, TravelClick’s new Media Suite is specifically designed to use data to increase a hotel’s overall direct bookings and offers a platform to enable campaign managers to take actions on the data. The Media Suite integrates Rate360, a proprietary database on hotel rates through a single media subscription model through a mix of paid search and paid display media. Essentially, the new product aims to help hoteliers and TravelClick’s media campaign managers to monitor and ensure that a hotel remain in rate parity with the OTAs.

“We use Rate360 data to establish the hotel is in rate parity with OTA partners and there’s a big impact rate parity has on the performance of media campaigns. By marrying Rate360 with single media, we are able to ensure there’s parity. It’s valuable in terms of rate information and rate parity to drive the best results in terms of rate bookings and high revenues for hotels,” he said. “At TravelClick, we have sanctioned relationships with all of the major brands and a direct feed in our Rate360 product, which is extremely accurate. Within Rate360, we’re careful about categorizing rates. We do it by AAA or AARP rates or restrictions that are not refundable and a rate description where in the product, the client can drill down and see if the rate included free parking or free WiFi. It covers a large swath of hotels and detailed information about the rates and comparison rates.”

Falconer noted that the results of TravelClick’s new Media Suite has proved promising for their clients. “We had a client see an 81% improvement in conversion and 71% in direct bookings, which was the most important. The result can vary from client to client. We’re seeing increased results because of the Media Suite product,” he said. 

—Corris Little