If you’ve been following the news lately, you’ll notice a lot of changes happening in the rate parity landscape.
Here’s a breakdown of what that means for your small hotel, bed and breakfast, inn, or guesthouse.
The French National Assembly brought ‘Macron Law’ into play, ending rate parity for French hotels. The law states that “the hotelier is free to consent to any customer discounts or tariff advantage whatsoever” (source). The change is significant, as around 70% of hotel bookings in Europe are made through online booking platforms.
This law is in direct contrast to the standard rate parity clause in hotelier-OTA agreements that prevent hoteliers from undercutting the rates online travel agencies (OTAs) display for rooms on their websites.
HotelNewsNow predicts that the US might follow suit, and that at the very least, the increasing availability of different booking rates in Europe will train international travelers to use meta search engines to locate and compare different OTA rates.
Why did it happen?
Both hotels and consumer groups are worried that OTAs are building a monopoly for themselves that is ultimately anti-competitive. A monopoly in terms of hotel distribution means more fees for hotels, which will be in turn passed onto the guest.
Many hoteliers resent the rate parity clause to begin with, because OTAs can and do reduce prices below minimum contracted margins by reducing their commission margins. Hoteliers then lose out on direct bookings because consumers choose to book through the OTA for the cheaper price, while hoteliers have to pay commission fees.
What does it mean for small hotels?
Unless you’re a small hotel in France, not much has changed. You can still use the existing ways of facing rate parity challenges:
Packaging room rates
You can enhance your offering by adding elements like free parking, wifi, and tickets to a local event. Your OTA may be selling the room at a discounted price, but with your full price there are extras that are more valuable than the discount your guest would be getting if they booked with the OTA.
Excluding certain room types entirely
Some hotels choose to exclude specific room types simply to maintain some control over which rooms get sold. This isn’t a great idea, because it ultimately limits the awareness of your rooms.
Offering private rates to select groups of consumers
While you can’t publicly advertise lower room rates, you’re allowed to do so to a limited audience. This means that to drive direct bookings you can offer deals to Facebook fans, Twitter followers, your email database, and phone enquiries.
Improving the booking process
MMGY global’s 2015 survey of 3300 leisure travelers found that while third party sites remained popular for comparing vacation hotels and prices, there was noticeable drop compared to 2014 in how often rooms were actually booked through sites.
The ease of booking directly with you needs to match if not be smoother than booking with OTAs. Make sure it’s easy to understand what rooms are available and at what rate (don’t overwhelm with too many choices), and that it looks and feels secure to make a booking with you.
Partner with channel managers
At the end of the day, you can still use technology to simplify the booking process. A good channel manager will allow you to easily push the most up to date room rates (and inventory) to all of your connected OTAs. For example, Little Hotelier connects you to hundreds of online distribution channels.