Is Rate Parity still “The Law of the Land”?

There was a recent discussion on LinkedIn about the need for maintaining rate parity in hospitality and its implications.

Just to clarify for the non-revenue management folks here, Rate Parity traditionally means maintaining the same publicly available rate for the same room/same stay across all public distribution channels i.e. channels available to any member of the public that is not a loyalty member or member of some guest appreciation or reward program. Rate Parity is not a new online policy specifically designed for the OTAs. It existed long before the «commercial internet» came into being and there was only one reason for its existence: it made revenue management and management of distribution channels much easier. All major hotel chains and smart hoteliers applied rate parity across all offline distribution channels: voice, walk-ins, GDS/brick-and-mortar travel agents, etc. With the advent of the online channel, this business policy was applied to the hotel website and the OTAs as well.

Rate parity in the OTA – hotel relationship means the OTAs have access to any publicly available rate a hotel might have. Rate parity does not preclude hotels or OTAs to offer lower rates to their loyalty or reward program members such as Marriott BonVoy or Expedia One or Booking Genius members. Some hoteliers argue that without rate parity the industry would be better off because hoteliers would be able to sell at whatever rates they want, unencumbered by the OTA rate parity restrictions. No rate parity, in theory, gives the right to publish lowers rates on the hotel website.

I believe that hotels should have the freedom to set different rates across their distribution channels, including OTAs, without being bound by rate parity agreements.

Firstly, allowing hotels to set their own rates enables them to respond more dynamically to market conditions and tailor pricing strategies to different customer segments. This flexibility can lead to increased direct bookings, as hotels can offer exclusive deals and incentives on their websites. By removing rate parity, hotels can foster stronger relationships with guests, providing a personalized experience that goes beyond price.

Secondly, while some may argue that ending rate parity could lead to OTAs discontinuing their partnership, hotels should carefully consider the trade-offs. While OTAs provide exposure and the so-called «billboard effect,» they often come with significant commission fees that eat into hotel profits. By shifting focus to direct bookings, hotels can improve their bottom line by reducing dependency on third-party platforms.

In conclusion, removing rate parity gives hotels the freedom to develop pricing strategies that align with their business objectives and market demands.