Uncover common hotel rate parity issues to combat disparity

It not only erodes guest trust but also impacts your revenue and weakens your control over pricing.

This is the essence of the rate parity issue - where even small inconsistencies in room rates across your distribution channels can lead to guest frustrations, as well as revenue loss and reputation damage for your hotel and brand.

It’s a never-ending challenge for hoteliers, and in this blog, we’ll explore some common hotel rate parity issues and how you can address them to ensure you maintain consistent pricing across all your different channels.

A rate parity refresher

At its core, rate parity is the practice of maintaining consistent pricing for the same room type across all your distribution platforms, whether it's on your direct booking site or on any OTAs (Online Travel Agents) like Booking.com or Expedia. Simply put, the price a guest sees on your hotel’s own website should match the price listed on any OTA, third-party channel, or metasearch engine.

When the price is consistent across all channels, the rate is said to be in parity

Why is rate parity so important? Here are a few key reasons:

• Consistency builds trust:
  Guests expect consistency. When a guest searches for a room at your hotel and finds different prices on your hotel’s website and OTAs, it creates confusion. Price parity eliminates this, giving guests confidence they are getting a fair deal, no matter where they book.

• Avoid booking mishaps:
  Guests drawn to cheaper prices on non-contracted OTAs may face booking issues that reflect poorly on your hotel - even if the problem originated elsewhere. Typically, it’s your front desk that has to solve the issue.

• Keep your promises:
  Many hotels proudly offer a best rate guarantee, but if guests discover cheaper rates elsewhere, that promise is broken. Rate parity ensures your reputation stays intact.

• Prevent unnecessary revenue loss:
  Every third-party booking eats into your revenue, with OTAs charging commissions ranging from 15% to 30% for larger hotel chains and even higher for smaller independent hotels.
  
  When your rates are in parity across all channels, you’re not losing potential direct bookings to OTAs because of price discrepancies. You will still pay OTA commissions for those bookings, but you’re avoiding a situation where OTAs are undercutting your direct rates and pulling even more bookings away from your lower-cost channels.

• Staying visible:
  OTAs reward hotels that maintain rate parity. Undercutting them on your own site could result in lower search rankings, reducing your visibility and ultimately hurting your bookings.

• A healthy distribution mix:
  Maintaining rate parity across all platforms allows you to leverage OTAs' benefits while prioritizing higher-margin direct bookings.

While rate parity ensures consistency, rate disparity can quickly erode that trust.

What is rate disparity?

Rate disparity occurs when a hotel's room rates differ across various distribution channels - such as OTAs, your booking engine, or metasearch sites. Instead of offering a consistent price, guests encounter different rates depending on where they book.

These discrepancies can arise from a multitude of factors, some of which are beyond a hotel's direct control - ranging from wholesalers reselling inventory to unauthorized third parties or technical glitches (caching) causing delays in rate updates across platforms. But they can also be caused by more sinister motives that eat into your hotel revenue.

Typically, however, they stem from these two main reasons:

• Contracted OTAs: Even with a direct parity agreement, some OTAs run unauthorized promotions or discounts that undercut your brand.com price, creating pricing inconsistencies.

• Non-contracted OTAs: These platforms acquire inventory from wholesalers and resell rates meant for packages directly to consumers, leading to pricing discrepancies.

Why is rate disparity a problem?

• Hurts direct bookings and profits: Rate disparities hurt your profits by driving guests to OTAs offering lower rates, leaving your direct booking channel underutilized.

• Erodes guest trust and damages your hotel brand: Guests expect consistency. Finding different prices for the same room confuses them and undermines their confidence in your hotel, negatively affecting your brand reputation.

• Wasted marketing investments: Even if you’ve invested in SEO to drive traffic to your site, potential guests using search engines will likely choose the lower-priced option, making booking through your direct channel less effective.

Let’s explore what causes these pricing inconsistencies a little further.

Common issues that lead to rate disparity

Despite your best efforts, maintaining rate parity is a constant game of whack-a-mole. The dynamic and complex nature of the distribution landscape means that rate parity can be disrupted by several common industry practices. Below are some of the most frequent causes of rate disparity and how they impact your hotel’s pricing strategy.

1) OTAs and B2B partners (like bed banks) can resell rooms to third parties that use pricing as a differentiator

One of the main causes of rate disparity occurs when OTAs and B2B partners, such as bed banks, resell your inventory to third-party platforms, often without your knowledge. Wholesalers, who are expected to sell rooms as part of B2B packages, sometimes pass them on to non-contracted OTAs that use lower prices to differentiate themselves and attract more bookings.

This practice, often called rate leakage, creates pricing inconsistencies across platforms, undermining your control over rate parity.

In some instances, OTAs display promotional rates meant for specific channels or regions outside their intended scope, such as point-of-sale (POS) discounts showing up on mobile platforms or affiliate channels, further complicating rate control.

OTAs may also choose to reduce their own commission in order to offer lower prices than your brand.com, which can draw bookings away from your direct channels.

To make matters even more complicated, OTAs widely use loyalty programs such as Expedia One Key or Booking Genius, to give improved booking conditions and best prices while leaving hotels with little control over ensuring they are offering the best available rate.

2) A diverse distribution strategy complicates channel management

Hotels rely on a wide variety of OTAs, metasearch engines, and regional platforms to maximize visibility. However, the more channels you use, the harder it is to keep rates synchronized.

Technical issues like caching or lag in rate updates can lead to outdated rates being displayed, causing temporary disparities. The challenge is compounded when dynamic pricing is involved - rates fluctuate constantly based on demand, and not all platforms update these changes in real-time.

In addition, the more distribution partners you work with, the more complex it becomes to manage them effectively. Each partner may have their own policies, pricing strategies, and update speeds, making it harder for hotels to ensure consistent pricing across the board. This increased complexity can result in unintentional pricing inconsistencies, which in turn, can negatively affect your rate parity and ultimately your revenue.

3) Bait-and-switch tactics on metasearch engines

Bait-and-switch tactics occur when non-contracted OTAs advertise an attractively low price on metasearch engines, but additional taxes or fees are added later in the booking process. By the time guests realize the true cost, they’ve often invested enough time in the booking process that they proceed with the purchase.

This misleads guests and undermines your direct booking efforts.

So what can you do to address these parity issues and maintain pricing consistency across all channels?

3 ways to combat rate disparity

Fortunately, there are several effective strategies that can help you regain control over your distribution network and keep rates aligned across platforms.

1. Understand the role of a dynamic pricing strategy

Dynamic pricing offers hotels more control over room rates, allowing adjustments based on market demand. However, it also creates challenges in maintaining rate parity. Hotels often open up more of their inventory to wholesalers as part of their dynamic pricing strategy, believing that the flexibility of adjusting rates in real time will help keep prices competitive across channels. However, this can lead to wholesalers having access to more rooms, which they may resell to non-contracted OTAs at inconsistent rates.

What you can do:

• Ensure your contracts with wholesalers clearly define the distribution channels they can use and outline any rate parity clauses.

• Use real-time rate monitoring tools to ensure your dynamic rates are displayed accurately across all platforms, and regularly audit to identify discrepancies early.

2. Optimize internal processes

Maintaining rate parity starts with ensuring that your internal processes support better management of your wholesaler and OTA relationships. Without clear protocols in place, rate disparity issues can slip through the cracks. From how you vet wholesalers to how you handle contracts, it’s crucial to be proactive.

Hotels often offer wholesalers discounted rates under the assumption that these rates will be sold through approved B2B channels. Without the right processes in place, those wholesale rates can end up on non-contracted OTAs, creating price inconsistencies that undermine your pricing strategy.

What you can do:

• Conduct due diligence: Before entering into agreements, thoroughly vet potential wholesaler partners by seeking references and industry reviews. Avoid working with wholesalers that have a history of reselling inventory to unauthorized channels.

• Set clear contract terms: Ensure that your contracts clearly define where and how wholesalers can distribute your rooms. Consider offering wholesalers rates that are closer to OTA prices to reduce incentives for onward selling.

• Involve your team: Train your front desk staff to flag suspicious booking confirmations, which could reveal problematic wholesalers. This will help you identify patterns of disparity and take corrective action quickly.

3. Monitor and maintain wholesaler and OTA relationships

Consistent monitoring of your wholesalers and OTA partners is critical to maintaining rate parity. Even with the best agreements in place, issues like unauthorized reselling to third-party OTAs and bait-and-switch tactics can still occur. Regularly monitoring your distribution channels ensures that any pricing inconsistencies are quickly identified and addressed.

What you can do:

• Monitor regularly: Set up automated tools to track your rates across all channels. This helps you quickly detect unauthorized rate leakage from wholesalers and ensures OTAs aren’t undercutting your direct rates.

• Check for geo-based disparities: Use VPNs to view your rates from different geographic locations. Wholesalers and OTAs may alter prices based on a guest’s location, causing regional rate disparities that can go unnoticed without geographic monitoring.

• Perform test bookings: When rate inconsistencies are spotted, conduct test bookings to trace the source of the issue through your Central Reservation System (CRS). This helps identify wholesalers involved in unauthorized reselling or OTAs engaging in bait-and-switch tactics.

Resolve rate parity issues with purpose-built software for hotels

While the strategies outlined above can help reduce the risk of rate disparity, managing rates manually across multiple channels is time-consuming and prone to errors. That’s where purpose-built software solutions can really make a difference in maintaining rate parity and optimizing your hotel’s pricing strategy.

Lighthouse offers a range of tools designed to simplify and streamline this process for you:

Parity Insight is the leading parity solution in the hospitality industry and provides hotel groups with a powerful suite of tools to track, identify, and resolve rate parity issues across their entire portfolio. Monitoring over 2 billion rates daily, it automatically flags any discrepancies on OTAs and metasearch engines, ensuring that your prices remain consistent and that your brand’s reputation is protected.

• With advanced segmentation (by market, brand, source, channel, and price difference), Parity Insight helps you drill down on specific parity issues and opportunities.

• The platform consolidates all data into an easy-to-navigate dashboard, allowing you to identify the biggest problem areas - whether it’s a particular hotel or channel.

• Historical data collection helps identify repeat offenders in your portfolio, making it easier to address ongoing parity violations and ensure compliance from all partners.

• This insight allows you to prioritize the most impactful actions, focusing your resources where they’ll solve the largest number of issues.

At a hotel level, Rate Insight is the hotel industry’s leading market intelligence solution and offers real-time visibility into your hotel’s rates compared to competitors, helping you maintain both price competitiveness and parity. With detailed tracking of your rates across channels, Rate Insight helps you to ensure consistency across all platforms.

• The tool monitors your rates on both desktop and mobile, ensuring that mobile-only promotions don’t undercut your direct rates.

• By tracking parity issues up to 12 months in advance, Rate Insight gives you a proactive view of potential discrepancies before they impact your revenue.

• Its visual representation of parity gaps allows you to quickly identify and resolve any pricing inconsistencies, keeping your rates competitive while safeguarding rate parity

Guests appreciate fairness, and when they consistently find the same rates across platforms, you demonstrate to your guests that no matter where they choose to book, they are always getting the best value possible. With tools like Parity Insight and Rate Insight, you can uphold that trust while protecting your revenue and brand reputation.

Learn more about how Parity Insight can help resolve parity issues, or explore Rate Insight to maintain competitive, consistent pricing across all channels.