How sprouts and small hotels mitigate the impact of interest rate parity

Rate parity is a term that always warns hotel operators and may even become a barrier to growth for small and new players. Rate Parity is the consistent and same rate of the same room type across all distribution channels/reservation platforms, whether it is the hotel's own website or OTA, regardless of the commission earned by the OTA. The purpose of this approach is to create a flat playground for all players. When they sign an OTA, both the hotel and the OTA must agree to rate the parity specification.

Sometimes, this level of field makes it difficult for new players to compete in this fierce competition and smother them before they expand their wings.

How do hotels view rate parity?

The practice of interest rate parity to protect the interests of OTA, so that hotels can reduce website rates and reduce OTA.

Why is the hotel heavily dependent on OTA?

OTA provides a ready-made platform for any hotel to start booking on the first day of their online booking. They don't have to spend too much on marketing, they just need to negotiate better deals with the right OTA, and they can earn income. Hotels can easily view OTA commissions as marketing costs, but with a higher success rate. Therefore, the advantages offered by OTA for hotels have somewhat offset the disadvantages of hotel price parity.

What are the challenges of rate parity for emerging and small hotels?

In small and new hotels, every booking is crucial. It is very difficult to pay high commissions to OTA from already very thin profits. This is where direct booking can prove to be a change in the rules of the game. However, in the absence of promotions and price manipulation, obtaining direct bookings can be a daunting task. Many times, OTA will ask the hotel to keep them in circulation while conducting any promotions or discounts on their website. To prevent violations of the Rate Parity clause, small hotels sometimes exclude the entire room category from the OTA and sell it on their website at their own price.

Because OTA is known to lower prices, it is difficult for small hotels to compete with OTA for price. Negotiate prices by reducing commissions. We are not living in a perfect world!

This requires the hotel to check the prices of various OTAs in order to keep their prices competitive with them. When the OTA channel is not directly linked to the hotel's PMS system through the channel manager, the rate parity is even more difficult to manage. The hotel operator must then log in to multiple systems to update the rate. However, if the hotel uses hotel technology tools to manage all of this, it is easier and faster.

Few people think that in this case, small hotels are trapped between a rock and a hard ground. As the saying goes, from the beginning, they have no marketing budget to achieve the coverage provided by OTA. . On the other hand, it is difficult for them to pay large commissions to OTA. In addition, OTA brings them business. Therefore, the hotel hopes to promote more direct bookings. However, this course requires more money for marketing. They are in this vicious circle.

The following are some strategies that hotels can use to solve the interest rate parity challenge

Create bundles

By adding free parking, Wi-Fi , wine tasting, free breakfast, sightseeing, free shuttle and other benefits, hotels can increase their product prices in line with OTA prices. This approach can help them gain a clear advantage over OTA without violating the rate parity specification, because the same price hotel offers better deals than OTA.

Lower your rates to a limited audience.

Hotels can lower the price of age groups, categories, closed user groups (CUG) or mobile app users. Run an email promotion offer for CUG members or mobile app bookings. This can help them make reservations directly on their websites and mobile apps without violating the rate parity terms.

Loyalty Program and Customer Participation

Another way to improve direct booking is the loyalty program. In addition to saving OTA commissions, the loyalty program offers a number of benefits. Getting duplicate bookings from loyal customers is much cheaper than getting new customers. Most importantly, the hotel understands their choices and preferences so they can better serve them. This has spread a positive reputation for the brand and paved the way for more direct bookings.

Using a meta search engine

Meta search engines such as TripAdvisor and Trivago can be considered as saviors of small hotels. Small hotels can even be the first choice for the TripConnect list because it works for PPC models, not commissions like OTA. Meta search engines are very popular among consumers because they not only provide a comparison between different attributes, but also allow them to choose the cheapest channel to book a hotel. Since direct bookings are considered more reliable, consumers are often seen as using books directly.

User-friendly website and booking process

Direct booking hotel operators must ensure that they have the necessary infrastructure to trigger and promote direct booking – a comprehensive user A friendly website with a clear interface that provides all the necessary information without searching. In addition, hoteliers must ensure that the booking process is simple and cumbersome so that potential customers do not rebound. OTA has a clear advantage in this sector, but hotels have no choice but to compare their online infrastructure to OTA.

From the above discussion, we can assume that although the Rate Parity protocol can slow down the direct booking of any hotel; there are many factors that prove that OTA is in fact a good partner for the hotel. The hotel can use a variety of bypass strategies to alleviate the pessimism of interest rate parity, while enjoying a large number of OTA reservations

Source by Sudhir Kumar Singh