Is rate parity good or bad?

Is rate parity good or bad?

Rate parity is good for hotels. If hotels are still in a position to enforce it, then they should. Without it OTAs now have the freedom to cut into their own commissions when necessary in order for them to maximize their chances for guests to book on their site/app.

Why is rate parity for bookings important for a hotel?

Why is rate parity so important? Rate parity is important because disparity cuts into your hotel’s profits, confuses customers, and causes tension between distribution partners. Rate disparity is not only damaging to your hotel’s profits (the cut will often be in excess of 20\%), but also your hotel’s brand reputation.

Why is rate parity important?

Hotel rate parity is important in the hospitality industry because it provides price transparency to consumers, and ensures that customers see the same price for the same room across all channels.

What is hotel parity rate?

Rate parity is the practice of maintaining consistent rates across all distribution channels. If the quoted price on hotels’ own websites is the same as the price shown by OTAs and other third-party channels then there is rate parity.

Why is rate parity bad?

The most harmful result of the rate parity is the price the hotels often have to pay to the OTAs. Since the rates have to always stay on the same level, the OTA can raise the commission and therefore earn more while the hotel loses.

What is the rate parity rule?

Rate parity is a legal agreement between hotels and online travel agencies (OTAs) in which the hotel guarantees to use the same rate and terms for a specific room type, regardless of the distribution channel.

What is parity value?

Parity value refers to the exchange rate between the currencies of 2 countries so that the purchasing power of both countries is equal.

How do I find my parity rate?

You can sign up to a free trial of it here. The rate parity checker does an automatic daily scan of your online listings on all the major OTAs (booking.com, Expedia, Agoda) as well as on meta search results. It then displays this data in a table so you can easily and quickly see any rate parity issues.

What is economic parity?

In economics, the term parity can be used to describe either of the following. An equality in the prices of discrete securities. An equal bid offered by various brokers bidding on the same security. An equal rate of exchange between two currencies traded in a foreign exchange (forex) market.

What is parity pricing strategy?

Parity pricing is the theory that the selling price of a product or service should ideally increase proportionately or rather by the same amount as the increase in the prices of raw materials or inputs. The commodity’s average price over an immediately preceding 10-year period is often established as the parity price.

How does interest rate parity work?

Interest rate parity is the fundamental equation that governs the relationship between interest rates and currency exchange rates. The basic premise of interest rate parity is that hedged returns from investing in different currencies should be the same, regardless of their interest rates.

What is rate parity and why does it matter for hotels?

While it’s part of doing business, rate parity may pose several challenges for small and budget hotels. More often than not, OTAs are allowed to offer a lower price by cutting into their own commission. As such, when more bookings start pouring in from OTAs, hotels tend to lose out on revenue.

Why do OTAs want rate parity clauses?

Most OTAs want pretty solid rate parity clauses to prohibit hotels from ‘stealing’ guests with discounts or other tricks. However, if you consider the hoteliers’ point of view, rate parity seems like a way to stop hotels from attracting direct bookings.

Should hotels strive for rate parity with Ota bookings?

Since OTAs are significantly pulling in more bookings for hotels than traditional brand distribution channels, rate parity can be a good thing to strive for. In fact, OTA bookings increased by 9.7 percent in the second quarter of 2015, while bookings through hotel websites increased by only 5.8 percent.

How can hotels increase revenue share from OTAs?

To increase revenue share, direct bookings are the most important factor. But because of rate parity clauses, hotels are obliged to tell OTAs about running discounted promotions. While some hotels exclude entire rooms from OTAs’ listings, they risk of having the rooms going unsold. Hotel rate parity poses certain challenges.