Price Parity Across OTAs – Why It Matters

Online Travel

One of the popular phrases in the online travel space lately has been “price parity”, an idea pushed by the OTAs (online travel agencies) and expected of the supplier, as outlined in this article

If I were an accommodation operator, I would ask myself, “why does it matter, surely I can play with prices across the sites I deal with, who will even notice?”  Not only that, as an operator I would naturally have better relationships with some OTAs than with others, and I would like to offer better prices on x site versus y site.  Factor in a variety of commission levels across OTAs and all of a sudden it is conceivable I would have a wide variety of prices online for even my core products.

Unfortunately, one of the immutable truths of online travel consumption is that people shop around, and price differences will be noticed by the online shopper. Usually, these differences will not matter – the traveller will merely take advantage of the lowest price they find and book there.  Aggregator sites have ensured that this is a simple task.

There are occasions where such a wide variety of prices across different OTAs and travel websites can erode trust in your property and may lose you a booking that you might otherwise have secured. I recently came across an example of this on my site, Travelbug, where travellers can make enquiries direct to the supplier. In one such enquiry, the traveller indicated that they were so confused and taken aback by the variety of prices they saw across the internet for what seemed to be the very same products, that they were compelled to ask the hotel why this was happening:

So how should you manage your pricing while allowing for your relationships with OTAs and managing profitability despite varying commission levels? I’d like to suggest a few things:

  • Commission levels on retail sites are a cost of doing business.  If you have decided that the audience provided by an OTA or a network of resellers is valuable to your business then you have to accept the commission level charged by that site or group of sites. If the commission level is too high for you, don’t participate in that network.
  • Your core products, eg ‘Standard room’, ‘Queen room’, ‘Studio apartment’ and so forth should have the same retail price across all third party channels and OTAs
  • Use added value products and multi-night rates to differentiate across your preferred sites. For example, offer a B&B rate on your favourite site that you might not offer elsewhere.  Shoppers making comparisons will not find this confusing or feel that you’re playing a game – it’s an entirely different product
  • Use channel management software to make your pricing updates easy and seamless
  • Lean on the account manager or support team of the OTA in question to help you configure your rates

If you follow these key points, you’ll have happy OTAs and happy online shoppers.

I’d love to hear your reactions to this, the first of my contributions to this blog site, so don’t be shy!

13 Comments

  1. Michelle Ackers February 3, 2010 at 3:10 pm #

    Some great points Daniel. I help a lot of accommodation operators with their online marketing and I have to say using a channel manager is the best way to get it sorted and automate the whole process no matter whether you are a hotel or a small B&B, it works for all.

  2. David Hancock February 3, 2010 at 3:20 pm #

    Daniel, I really wish more accommodation providers would see the retail world through these guidelines. I have tried promoting exactly these guidelines to our local operators but for the most part it gets howled down. Howled down to the point where some providers will not take bookings through the i-SITE because they will have to pay a commission. I guess this is one big difference between big hotel chains and smaller motel operations.

  3. Justin February 3, 2010 at 3:47 pm #

    These are all very good points. Articles and websites like this will hopefully help educate operators to market themselves better online. Is not good enough just to list on a sales channel and wait for the bookings to roll in. I suggest to operators to add value or try minimum stay rules for sale channels if any reluctance to pay a commission, compared to paid advertising commission based sites are easier to track success, “no bookings no cost”.
    More sites like Travelbug are offering booking availability all year round not just the traditional last minute bookings anymore. Operators need to plan their pricing and availability better. Don’t just think about the now. Use Sales channels to bring you bookings when you need them. Price parity should be thought about seriously in a good marketing plan.

  4. Motella February 4, 2010 at 12:44 pm #

    Great article Daniel.

    There is a mentality that seems to be particularly entrenched in the motel industry that is to add commission to tariff (or to avoid commission business all together). This unfortunately exasperates tariff integrity and is one of many reasons why the hotel sector has surged ahead of the motel sector.

    There is a reality that many operators will set tariff according to the level of the commission and will turn off channels over peak demand in order of the cost imposed on sales by individual OTAs.

    Your example of the potential confused guest emailing the hotel direct is interesting. Why did they not simply grab the best price on Expedia? After all, the customer is used to comparing the price of consumer items with various resellers and don’t seem to get confused with differing price offers? The cynic in me would suggest that this particular guest would never book online and would use OTAs as research before booking direct with the hotel with the expectation that the hotel would match or better the cheapest advertised online tariff;-)

    However, I couldn’t agree more with the benefits that you have outlined with rate parity across all OTAs. I do accept that differing offers from the same accommodation property IS confusing to guests and will put a lot off booking online.

    I would suggest that not only should operators set tariff the same across all OTAs; room types, room descriptions and cancellation policies should also be the same across all sites.

    I won’t even start on rate parity and those dreaded roadside rate boards…that’s another article.

  5. Daniel Bridges February 4, 2010 at 1:12 pm #

    Thanks for the comments. Motella – you’re probably right about that particular guest sounding like someone who was shopping around, wanting to book direct but confused at why the direct price was so high.

    I think the point holds true, however, as the variance in pricing across the sites they viewed led them to question even the very low price. It seemed too good to be true, but luckily for the hotel in this instance they decided to check rather than moving on entirely.

  6. admin February 4, 2010 at 1:59 pm #

    Would be interesting to hear from some accommodation operators on their thoughts.

  7. Kayne February 8, 2010 at 8:10 am #

    I agree with most of the above, however there are some sites, agoda venere etc that make it hard to have price parity as they will discount your rooms at the expense of some of their commisions. A good thing i know but still can make the consumer that shops around a little cautious. Maybe this is a trend some of the other sites could perhaps put into their structure. Fear not, in the not too distant future things will change, Time for change is upon us!

  8. admin February 8, 2010 at 11:58 am #

    Kayne can you elaborate on the comment you made about “in the not too distant future things will change”?

  9. Hazel Rigler February 11, 2010 at 9:20 am #

    Practising rate parity is essentially not a difficult thing if you have set rules in your channel manager, however the difficulty lies in how the hotel manages an OTA with an exclusive deal. This I belive it the most challenging issue in todays marketplace. If a property would like additional marketing exposure from an OTA to increase not only their bookings, but rankings and branding on a given site, then more often that not an ‘exclusive’ deal must be given, which in turn affects rate parity on other sites.

    • Daniel Bridges February 11, 2010 at 9:39 am #

      Thanks Hazel, I don’t think there’s anything wrong with short term promotions that require exclusive deals (as long as the site can justify the exclusivity). The issue is more with different rates on an everyday basis.

  10. Santiago December 8, 2010 at 4:58 am #

    Hello Daniel
    I found very interesting and simple the way you talk about this. I work in a hotel company and have parity issues almost every day, through the different channels.
    You talk about “Channel management Software” to deal better with Parity.
    What kind of software do you recommend to use?
    Thanks

    • admin December 8, 2010 at 6:48 am #

      Hi Santiago, try something like Siteminder or Eziyield. There are many out there if you research it and best to find one based in your own market that provides channel management to key distribution that works for you.

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