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rate parity

September 21, 2018

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Knowing Rate Parity and What You can do About It

The term rate parity might be a stranger to some people, but for those wanting to delve into the world of hotel management, rate parity is something that those interested in managing hotels should know. For today’s article, we are going to talk about parity rate and what is rate parity in general.

What is the best short explanation to rare parity?

To put it in the simplest form, rate parity is a parity a rate. For those working not as an accommodation provider, this is a very strange word, but if you are working in a hotel, you will surely know what rate parity is. Obviously, as this article is implying, the term is closely related to hotels.

If you are to find the meaning of the term, you need to do some word ‘surgery’ on it. From the term rate parity, the words ‘rate’ and ‘parity’ can be taken. Rate, in hotel terms, means the price that a customer needs to pay so that they can stay at your hotel. Parity is a different matter altogether, having the meaning of ‘being equal’. If you are to combine the meaning of the two words together, you will get an equal price that customers need to pay.

But from there comes another problem: why does the word exist? If people visit your hotel, they will usually go f book and will forget about it. Each type of room in your hotel has its own prices, and if a deluxe room is priced at 200 USD per night, the rate would stay that way, right? Why should they care about rate parity? In fact, how does the term rate parity come into play when all types of room already got a fixed price that would not change?

It involves a certain online platform

In this era, if you got a hotel that is not available to book online, chances are that you got a shady hotel or your hotel is too old for everybody’s liking. The availability of smartphones and the easily accessible internet means that booking a hotel is as easy as visiting a travel website and book from there.

That is if you are seeing from the customers’ point of view. If you are seeing it from a hotel manager point of view, rate parity is a more complex system to work with than to theorize. Take for example you own a hotel which is registered at an online travel agency website. Said online travel agency will charge you for a commission fee while at the same time helping you promote your hotel to a wider audience. You assigned a fee of 100 USD for a deluxe room, both through direct booking or through said travel agency. That way, you got a rate parity in the works. Pretty simple to work with, right?

Not if you are trying to squeeze profit, though. You see, when you put the price tag of a 100 USD at an online travel agency, you need to understand that the online travel agency will take a commission out of that 100 USD. That means that you will be less profitable if people chose to book your hotel through an online travel agency.

What if you do not use an OTA

Then you will lose potential customers, especially if you are managing a small hotel. An OTA is pretty helpful to small hotels in advertising their businesses, after all, and by closing your hotels to OTAs, you are risking a lower profit.

The challenge lies within keeping your hotels afloat on OTA websites while also managing a profit from it. The easiest way to do it is to keep your hotel rates high in those OTA websites while keeping a low fee when customers choose to book directly from you.

Consumers can avoid rate parity and book hotels at up to 75% off with closed user groups such as Hotels Etc.

 


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