What is Rate Parity?

Rate parity for the hotel and accommodation industry is ensuring that your room pricing is consistent in accommodation channels – as well as your own website.

For example, David is the reservations manager at an independently owned hotel. David wants to sell his hotel rooms online. He does this by signing up to major channels. He then starts to distribute his room inventory online through those channels at the same rate, in every channel.

David has achieved Rate Parity because his room prices are consistent across the all of the channels.

The problem for David is that many of the channels that he has signed-up for has an agreement whereby he is contractually bound not to provide his hotel’s room rates a cheaper price.

Scenario 1

However, David later advertises the rooms at a lower price on his hotel website. Despite reaching Rate Parity in the channels, by then offering a lower price on his hotel’s website has a lower price,

Scenario 2

This means that if David offers cheaper rates on his website or another channel for example, he has lost Rate Parity as well.

The effect

In both Scenario 1 & 2 listed above, David has lost Rate Parity in which case the hotel may be in breach of his contract with the channels. This means that the other channels may then terminate his contract – in which case he will no longer be able to distribute his rooms to the channels. This could present a serious issue for the revenue of the hotel, as it will likely result in less online bookings.

The real question that I often get asked is “But how will the channels find out, they have so many clients that they could not realistically catch us doing that – the risks would be quite low – wouldn’t they?”

This is a question of risk if the channels will find out. The real question is: would you risk losing the ability to publish to one or more of the major channels by breaching your agreement with the channels in the hope that they will not find out?

By asking yourself this question out aloud, I am sure that you can come up with the right answer yourself. Especially while the channels may not find what you are doing, you would be surprised at what your competitors will do to have less competition – including dobbing you in to ALL of the major channels for them to investigate for themselves.

What are the challenges of maintaining Rate Parity?

There is no doubt that achieving Rate Parity is important. However, it does present some challenges for accommodation managers.

Adjusting room rates in the major channels can be a very time consuming task. Apart from knowing what rate to set, this is one of the most difficult areas of hotel room distribution management.

If you are attempting to yield manage your rate by increasing or decreasing your rates often to suit market demand keeping all channels the same is a huge job. Allotz Autopilot changes the rates on every channel at the same time automatically to maintain rate parity across all channels, even your own website.

Further issues with achieving rate parity is some channels require net rates whilst others require retail rates, some channels also drop their commissions occasionally to stir up the market so rate parity is difficult.

Having a system such as Allotz Autopilot, means that you will be able to have the benefit of setting rate parity across the major channels automatically. You will also be able to have the benefit of having Allotz Autopilot’s yield management technology find you the best rates in real-time, based on consumer supply and demand.

Further to this, some properties do have special deals on offer with certain channels, Allotz Autopilot allows you to switch rate parity off for certain channels should this be required for special exclusive deals.

Such a system has been hugely beneficial to reservations teams because it means that they can allow Allotz Autopilot to fully manage what they used to.

For more information on Allotz Autopilot, visit the home page, or you can arrange a demo to the right of your screen.

 

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