How to safeguard your hotel from OTA under-cutting

Protect hotel ratesThere was a time when transparency and trust were undoubtedly the pillars of a successful partnership. OTAs were, in the last decade, valuable partners for hotels and responsible for a more efficient distribution.

But, like all good things, some turn sour. OTAs are now feeling the pressure for growth and making sometimes doubtable decisions in order to keep the pace up. Nowadays, we live in times of uncertainty where OTAs are feeling cornered, becoming less competitive in the market and acting quite inconsistently when it comes to strategy, giving discounts for guests on ‘parity- breaking’ from unclear rate sources….

It turns out that the biggest issue impacting hotel rate integrity is, more than ever, contracted wholesalers who are are selling inventory to OTAs. Anything goes to get the best rates in marketplace!

Two recent events – both OTAs initiatives – use package or wholesale rates in clear violation of package and wholesale rates contract terms. They are Booking.basic and Expedia’s Add-on Advantage.

“Save more with just the basics”

Started in Asia and now spreading to West, pre-paid and non-refundable rates, out of parity and lower than Booking.com’s own rates coming from wholesalers, are being displayed in a sort of ‘experiment’ way – quite inconsistent actually, since we all wonder what they are based on.

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We recently learned that these rates are coming from Agoda and Ctrip – rates that were contracted for specific package programs, not for public use or unbundled sales.

What kind of rules determine which hotel will show it? Will this be a way to punish a hotel with a low Price Quality Score? If yes, it is not clear for anyone what even pushes it up or down!

“The Rate’s New Clothes”

Expedia, on the other hand, uses its own rates to reach the same goal via a shortcut. After customers book an airline ticket, Expedia promotes up-selling rates via email with ‘naked’ accommodation rates from package deals. We might say these rates have no clothes (and no shame!).

Just like the fairy tale by Hans Christian Andersen – “The Emperors’ New Clothes” – about an emperor who pays a lot of money for some new magic clothes which can only be seen by wise people. The clothes do not really exist, but the emperor doesn’t admit he cannot see them, because he doesn’t want to seem silly. Well…these rates do not really exist either. At least, they should not exist in this manner.

Who will tell the Emperor he has no clothes?

Action plan and beyond

There is a lot to do in this field… and it is better to start now! Hotels need to know who is selling their inventory and at what price, otherwise they will lose their brand’s integrity.

We have put together some actions we believe that can somehow fight back and safeguard your hotel:

  • Control your Price Quality Score: rate parity always! Review it on a monthly basis, investigate where and why your property is offering different rates. You should have discipline here and supervise, supervise, supervise;
  • Hotels need to better control the distribution of rates: do not neglect it and do not give it away for fear of losing visibility;
  • Explicitly disallow bed banks to offer the discounted package rates unbundled in any shape or form;
  • Amend your agreements with these OTAs and wholesalers to include provisions banning the use of group/wholesale rates for transient customers or selling discounted rates that are meant for packages in a “naked” form;
  • Many hoteliers are moving towards a dynamic wholesale strategy (vs static) because this can highly decrease the possibility of an expired, out-of- parity rate floating around on the Internet;
  • Don’t be afraid to invest in driving direct relationships and direct business: create perceived value to stimulate bookings through your brand.com website offering low cost but exclusive benefits with a high value to guests. Having said this, we strongly believe that what is happening is not even necessarily in the OTAs’ best interest.

When you feel you are losing control of your business, you will lose trust in your partner (in this case, the OTA’s and the Wholesalers) too. In the same way as it should be with the guest who has always relied on an effective booking method and who now does not know with whom they are booking, what kind of product they are going to experience, who to contact, etc.

Direct bookings are on track to grow to a 50% share by 2022. You just need to follow this turnaround wave and invest in campaigns that easily show your guests why to book direct. You should be the one in charge of your business!

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