Overcoming 7 challenges to maintaining rate integrity

In the world of hospitality, the price integrity of your room rates – what you advertise your hotel rooms for and what they sell for – is at the heart of customer trust.

So what do we mean by rate integrity? We think of it as a set and a subset. As it’s easier to define, let’s look first at the first set, rate parity.

Requiring close monitoring, rate parity is the strategy and policy of maintaining consistency of rates between Brand.com and other sales channels. 

Though it should usually be enforced by contractual obligations between hotels and third-party vendors, such as online travel agencies (OTAs), it can be abused by unscrupulous players. This is called rate disparity, and we combat it in the pursuit of consistency.

So, what of the subset, rate integrity?It’s a slightly more fluid concept but consistency plays a similarly important role. Rate integrity is all about transparency and consistency. 

But, in the case of the latter, it’s not necessarily consistent pricing from one day to the next – guests accept that rates fluctuate depending on demand but of the practices you adopt to control that fluctuation. 

Are they a fair price for what’s on offer, are they open, do they avoid opportunism and exploitation? These are the questions customers will ask. It’s your job to provide reassuring answers. 

Overcoming these seven challenges will help you in that endeavor and level the playing field.

1. Monitoring rate parity and integrity is a full-time job

Working with OTAs presents a double-edged sword: they’re necessary as part of your distribution and pricing strategy to increase reach but they create a multitude of problems for rate integrity in the world of hotel room pricing. And that’s before we look at the impact of the fees of such arrangements on your bottom line.

It’s tempting to think about OTAs solely as the bad guys but many aren’t, and they have a really important place in distribution. You just need to be smart in how you leverage these channels, focusing in particular on hard-to-reach customers.

But what about when it goes wrong across distribution channels and rate disparity creeps in? Who should monitor and police these discrepancies?

At the property level and on a day-to-day basis, it's likely to be your revenue team, because they’ll load your rates and pricing set-up. 

A rate-shopping tool such as Lighthouse’s Rate Insight can help with this because when you refresh and review your rates, you can take a look at its parity tab, which lists the dates with issues and which website caused them.

For a fuller view, Parity Insight comes into its own. It incorporates features like root-cause analysis and portfolio-wide monitoring. Its strategic use is more the domain of distribution managers, if your hotel is big enough to have such team members.

But it’s not all about numbers. The interplay between a hotel’s reputation and its revenue is important.

Reputation and revenue go hand-in-hand, with booking decisions factoring in both considerations. TripAdvisor and Google are as much reputation sites as metasearch sites. Not only do people compare prices and book through those websites, they rely on reviews.

Value and guest experience are primary drivers of a customer who wants to share their stories online.

2. OTAs have more negotiating leverage than small hoteliers

It’s an inconvenient truth that it can be difficult for small hoteliers to negotiate for better contracts. But it’s not impossible - there are ways you can clear this hurdle.

While you should put plenty of effort into direct bookings, there are some locations that OTAs just have a better handle of. So you should revenue manage your inventory and rates depending on business needs. 

By understanding the lead-time of each channel, the types of room being booked and the customer, you can create strategies for each OTA and manage them to get the right profit and the right mix for that hotel.

But if an OTA proves to be a bad actor, give them fair warning and, if you need to, switch them off. Their actions won’t reflect well on you or your brand through the inconsistencies they introduce, even if they bring in a fair amount of business.

As an independent hotelier, negotiating lower fees with OTAs starts with demonstrating your property's unique value and strong guest demand. By highlighting your ability to drive direct bookings through your website and loyalty programs if you wanted to, you’ll demonstrate some leverage in discussions.

And protect the days when you don't need these channels, and close them when you can get direct bookings.

3. Guests seek out the most competitive rates on OTAs

Distribution across OTAs is a challenge to maintaining hotel rate integrity whatever the market conditions. But it’s one you can face if you understand those challenges, many of which revolve around guests’ natural desire to shop around for the best available rate.

Customers are much savvier these days, comparing rates across different OTAs and cross checking directly on your website, which can make it challenging to keep rates consistent across all platforms. With many even prepared to contact hotels over the phone or online to play other channels off against you, using lower prices found on OTAs as leverage.

While operating in this landscape can be complicated for hoteliers, technology has emerged to help you protect yourself and monitor your parity - with Rate Insight for smaller and independent hotels and Parity Insight for chains, being prime examples.

The best software will alert you to issues with actionable proof which allows for quick fixes and smooth collaboration with OTA channels and third parties, so you can maintain healthy distribution.

4. Extended-stay agents present a unique hurdle

Extended-stay agents present challenges for extended-stay hotels. How can you overcome them?

Let’s start by defining an extended stay as one of seven nights or more, a large portion of which will comprise business travelers. In the ‘old days’ and to some extent today, you had extended stay agents, which full-service hotels would not be familiar with at all.

Hoteliers are used to giving these agents a fixed rate, regardless of who the end customers are, as one might with a wholesaler.

So when a guest looks on your website, you might have a higher rate because you've given the agent a fixed contracted rate. If you had a guest looking online on those websites and also your branded website or OTAs, the lowest rate might have been the extended-stay website.

Where a full-service hotel would only lose one or two nights in parity, for a long stay you might be losing out on 30 nights that were actually booked through an agency. So your revenue loss is much greater.

There’s no one-size-fits-all solution to this problem, but you can incentivize direct bookings  by offering:

• Exclusive perks

• Value-added services

• Loyalty rewards

Regularly auditing your rates across all platforms, while negotiating more flexible agreements with agents can also help minimize revenue losses.

5. Lack of direct bookings hurts brand loyalty

OTAs are as interested in their reputation as you are, and will make efforts to build loyalty. 

This is often at odds with your hotel’s own brand loyalty initiatives, at least in generating direct bookings. So how do you encourage the latter?

Adopting technology that facilitates intuitive bookings seems obvious but it’s not always put into practice, particularly in serviced apartments and extended-stay properties. 

Couple this with brand names that aren’t well known, and it can be hard to compete with the likes of Booking.com or Expedia, who also participate in the OTA membership program and offer lower rates compared to their own websites.

You might want to get involved but don’t become over-reliant on these schemes. Once you remove your property from them, you might see your ranking falling or reduced bookings, so be prepared for that and don’t act in haste. 

But this is a storm you can weather, with good sales and revenue teams helping you to plug the gap. And whatever you do, avoid anything that will damage your relationship with parties that could be important partners in the future.

Think carefully about whether to participate in the likes of the Booking.com Genius or Expedia VIP programs. 

Either way, you can draw in business from your own member rates and book-direct rates, which you can make available on your website to guarantee the lowest rate promise to your customers. Or consider closed user group rates, like giving out special codes or joining one of your hotel loyalty membership schemes.

Your aim is to make sure that when the customer lands on your website, they feel like they have a better deal.

6. Local taxes become surprise costs on OTA booking sites

Things can get a little tricky from price parity and price integrity perspectives when guests book from abroad or in different tax jurisdictions (which applies in some US states, for example).

One Lighthouse customer we spoke to has hotels in Amsterdam, for example, so they have a VAT rate of 6%. But also they have a 4% city tax, which is paid by the guest. On their website, when they quote for the final estimated cost, they would put the total cost of the hotel including VAT and the city tax.

On other hand, third-party websites sometimes put the VAT in but only write the city tax in a written description. Ultimately, they will show a total price that doesn't include the 4% tax and guests automatically think that the OTA is cheaper. When they come to the hotel, the 4% has to be paid and that gets added on to their own total bill – which becomes a surprise for them.

There’s no guaranteed way to prevent guests from going through the OTA because they think it’s cheaper and just sucking up the extra cost at checkout, giving that channel an unfair advantage. 

But there are two lines of attack that can go some way to reducing this problem:

• Being as transparent as you can on Brand.com in such circumstances in an effort to demonstrate rate integrity, true rate parity and consistent pricing

• Having a friendly word with the OTAs in question to improve their own transparency; if you have a good relationship with your rep, this feedback might make its way up the chain

7. Exchange rates complicate guest reservations

In a similar vein, exchange rates can cause a headache for customers comparing your prices with those advertised by other distribution partners. This often occurs with advance-purchase rates. 

When an International traveler wants to know how much a room will cost them in their local currency, they might use your hotel’s website currency converter if you have one. However, your hotel won’t necessarily be able to guarantee the exact amount to the guest until the payment is taken on the hotel payment system if you don’t use the right systems.

Part of the solution to avoiding lost business to OTAs is to offer transparent, real-time currency conversion options on your website. But ultimately, it’s a technology issue: by integrating a reliable currency converter, guests can view rates in their local currency, eliminating confusion over price differences. 

Additionally, you can offer price guarantees or incentives like exclusive price discounts for direct bookings and other perks as described above, which can encourage guests to book directly, even when currency rates fluctuate.

Overcome hurdles to rate integrity with a robust tools

As with so much in revenue management the basic theory is relatively straightforward but, without the right data and tools, you can’t make the reliable decisions on which your hotel depends.

Lighthouse empowers you with the tools to detect when you’re being undercut on OTAs and meta search sites.

Ranked as the #1 parity management solution in the hospitality industry by HotelTechReport, Parity Insight serves as your central hub for monitoring, diagnosing, and managing parity issues across your hotel portfolio.

If you’re managing one hotel, Rate Insight, recognized as the top market intelligence solution for four consecutive years by HotelTechReport, can seamlessly address parity issues. It enables you to spot discrepancies in your room rates on OTAs up to 12 months in advance. 

Interested in learning how you can eliminate disparity at your hotel? Discover more here.