Ever since OTAs became popular, the hotel industry has faced the challenge of incorporating them into their marketing strategy, which has created new issues, such as rate disparities. Do you know how rate disparities affect your hotel and your bookings?
In this article, you will find all you need to know about this topic so you possess the right information to help you identify rate disparities and create a strategy to solve them.
What is a rate disparity?
Imagine you are a traveler who has just sat down to look up a hotel for your family vacation. While scrolling through various OTAs and metasearch engines, you have found several great deals.
Later on, when you meet up with your family to decide where to stay, you realize you have clicked on the same hotel four times, each time leading to different rates and booking information.
This situation is called a rate disparity, when a OTA is showing a lower rate than your own website by reducing their commission.
What causes a rate disparity?
A rate disparity can occur at any time, even if you have a signed contract (net price or BAR). Why? The distributor is free to change the retail price, even if it hurts your business, as a strategy to increase sales through their platform.
How does a rate disparity affect your hotel?
If a traveler who knows nothing about OTAs realizes this situation, they will see the disparity as a typing error or a lack of professionalism from your hotel. He or she will likely look for a different accommodation that allows them to be completely sure of the costs and conditions of the reservation.
In other words, disparities can create a negative image for your hotel and even lose you clients. Disparities cause other problems as well, including:
- They attract guests that do not match your target market.
- They prevent you from creating loyalty programs. How can you do so if you don’t have the best prices?
- They create a false illusion that certain channels generate more reservations, when these are actually due to the disparity.
- They affect your direct bookings. Who would reserve on your website if other sites offer the same rooms at a lower rate?
Considering that 75% of hotel reservations come from OTAs, rate disparities can negatively impact your revenue and profitability, as well as your brand image, so you should know how to react if you notice a problem.
How to fix a rate disparity
Despite these issues, OTAs are very useful platforms for the hotel industry, so you should take precautions to ensure they create more benefits than problems for your hotel.
One of the best ways to counteract the negative effects of working with OTAs is to use a channel manager or hire a revenue manager.. This person or program can help you have a clear picture of the different pricing of your hotel online so you can negotiate rates with OTAs if needed.
You can also reduce rate disparities by promoting direct booking through your website; for example, you can offer discounts or special deals for people who book directly.