Rate parity refers to the practice of maintaining consistent and same rates for the same room types across all the distribution channels platforms whether it is the hotel’s own website or OTAs, irrespective of the commission percentages being charged by an OTA. Hotels and OTAs both have to agree to rate parity norms while signing up with an OTA.
The practice of rate parity is there to safeguard the interests of the OTAs. If rate parity did not exist, hotels could keep very low prices on their websites and thus more and more people would start booking from the hotel website, effectively cutting out OTAs from business.
Challenges Relating to Rate Parity
Rate parity can pose several challenges for small and new hotels. In small hotels, the profit margins are usually thin and it can become difficult to pay hefty commission fees to OTAs on the room bookings.
If hotels do not want to associate with OTAs and want to do direct bookings, they would need to do lot of promotions in order to bring in more customers. Moreover competing with OTAs for prices can be super-difficult for any hotel since OTAs have been known to sometimes reduce prices below the agreed-upon amount by reducing their commissions. This can pose a big problem for the hotels as people would hesitate to book directly from the hotel website and would prefer to book through the OTA channel due to the price difference and also for other reasons and benefits.
So hotels are not left with much choice but to try their best to maintain rate parity across all the channels, otherwise they may stand to lose more than they can gain in the short run. However this again poses potential challenges.
Maintaining rate parity across multitude of platforms is usually not easy. In order to overcome the problems of constantly checking, updating and maintaining same rates across multiple platforms and systems, hotels need to invest in reliable PMS and CRS systems.
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