How to Maintain Hotel Online’s Rate Parity

When we perform a Google search on a hotel, we can see the selling prices of that hotel that are sold through several sales channels/Online Travel Agents (OTAs). From the displayed list, it will be clear whether the prices displayed are parity or not.

The current advancements in IT technology allow for clear price comparisons from each channel, posing a potential threat to hotels. This threat lies in the possibility of reduced and suboptimal revenue. Analogous to the natural flow of water, where it seeks lower ground, guests tend to book rooms where prices are lowest. 

This concentration of bookings at the cheapest rates leads to suboptimal revenue for the hotel.

Therefore, it is very important to maintain parity rate so that room purchases do not flow to lower-priced places. Below is one of example hotel that is able to maintain parity rate on OTAs.

Upon examining the presented information, several questions arise: How can price balance be maintained? What strategies does the hotel employ to achieve this parity? What are the key factors?

It turns out that achieving price balance is not that simple, there are several conditions that need to be prepared to be able to answer these questions above. Here are the conditions that need to be prepared:

Note: CM=Channel Manager, BE=Booking Engine, PMS=Property Management System

With the presence of the Distribution Platform, the management of Rates and Inventory can be done by the system centrally. Sales made through various sales channels will take Rates & Inventory from one source in real-time. With this, overbooking conditions can be avoided. Prices determined on one sales channel cannot be exchanged or moved to another channel.

1. Setup Distribution Platform. The existence of a distribution platform is a must for maintaining price balance.
   

   Note: CM=Channel Manager, BE=Booking Engine, PMS=Property Management System

   With the presence of the Distribution Platform, the management of Rates and Inventory can be done by the system centrally. Sales made through various sales channels will take Rates & Inventory from one source in real-time. With this, overbooking conditions can be avoided. Prices determined on one sales channel cannot be exchanged or moved to another channel.

2. Rate Structure & Dynamic Rate. The prices applied to each sales channel are determined based on the rate structure designed from the beginning. It is very important to be able to design the price structure well. When the price structure has been input into the Distribution Platform, the system will implement it based on the input data. With the existence of the Distribution Platform, it is possible to apply Dynamic Rates so that prices can change dynamically following occupancy trends. In this case, the price structure needs to be designed well so that when prices move dynamically, there is no overlapping of sales prices between channels.
3. Static Rate Contract & Leaking. When the Distribution Platform is available, the existence of contracts with static rates is prohibited. Because Static Rate Contracts will cause other distributions outside the Distribution Platform, which potentially become sources of other prices besides those determined by the Distribution Platform. The presence of the Distribution Platform, which should be the only distribution channel, is not created.
4. Price Cut. Every OTA has promotional programs. Promotional programs that reduce selling prices will create price disparities with other OTAs. Therefore, promotional programs that create price disparities should not be conducted.
5. Single OTA VS Multi OTAs, API Connection is the game changer. The advancement of current technology allows for API Connections. API stands for Application Programming Interface. With API Connections, one application can connect to another system. In its application, between one OTA and another, they can sell or share rates and inventory. With this, it is possible for one party to find lower prices and sell them. With this condition, the hotel does not need to have direct cooperation with all OTAs anymore. Just one OTA per regional market. For example, 1 OTA for the local domestic market. Then one OTA for international Europe, one OTA for the China region, one OTA for the India region.