Hotel Revenue Management System: Pros and Cons of Rate Parity
In the competitive hotel revenue management system landscape today, the concept of rate parity is extremely important for every property. What is this rate parity anyway? The process of keeping up consistent rates for a particular room or product in the hotel’s inventory, across all the distribution channels online which are OTAs. This is unrelated to the commission percentage being charged by the channel in question.
Before diving deep, let’s understand the revenue management system definition first. It is basically the solicitation of well-ordered analytics in order to envisage consumer behavior. Generally, veterans and economics experts called ‘revenue managers’ handle this task at a micro-market level. They optimize the availability of hotel inventory as well as associated prices to make the most of a hotel’s revenue growth.
The complete exercise of establishing and maintaining rate parity, basically helps to avoid confusion over the hotel’s rates in a given market segment, with respect to the comp-set. Sometimes, doing business is required, when large distribution channel players are in question. Sometimes, down markets fail to break even as far as prices are concerned, without the balanced pour of traffic streams from leading OTAs like Expedia, Orbitz, Travelocity etc. and all other related subsidiaries of these brands. If your property is one of them, that is another strong reason to practice rate parity.
Powerful tools in revenue management systems for hotels assist in maintaining rate parity across most distribution channels linked to a property. A great question that arises here is how can one scrutinize the process over a given period of time? For the records, the ignorance of hoteliers has allowed OTAs to sell the same rooms at lower prices. This has necessitated several prominent hospitality brands to institute stronger rate parity agreements. Rules in the contract signed between an OTA and a hotel checks a rate breach. These points also prevent contracting across online travel sites for successful marking up of rates.
Let’s discuss the pros of a proficient revenue management strategy.
- First of all, a consumer cannot get confused about a specific site/brand as far as loyalty lies are concerned.
- Secondly popular OTA brands can actually “guarantee” the hotel’s best prices.
Yet, every dole comes with its own set of drawbacks, and this rule applies even in the arena of hotel yield management, which have been discussed as follows.
- Rate parity in hotels stops the hotel website from rendering instantaneous deals/incentives during a booking process.
- The process helps hotel brand sites to sell rooms at higher prices.
- Such a price does not indicate the cost because profit margins differ across platforms. Sometimes, rate parity stops hotel owners from reducing prices on low cost channels hence they fail to increase prices to establish higher costs in these channels. So, opening up to risks helps to sell rooms at a hefty loss.
Hence revenue management paves way for maximization of revenues. When coupled with rate parity, it allows hoteliers to benefit from implementation of revenue management as well as outlines all advantages for guests.