Rate Parity….if it disappears….. So what?

This is a guest post by Heiko Siebert, managing director of  HSTC and an expert in hotel distribution..

What if… you woke up tomorrow and rate parity as we knew it for years was gone? The topic is still very hot – although has not had as much PR coverage as before -one reason may be that companies and organisations are simply afraid of getting exposed – to the extent that colleagues had to cancel participation at meetings and conferences where this topic was on the agenda.

The German authorities moved first – on Dec. 20th 2013, HRS’s respective contract clauses were declared illegitimate, and proceedings were also launched against Expedia and Booking.com .  Similar proceedings are currently on-going in several countries – so let us think for a moment that rate parity that hoteliers knew (and initiated in the first place) has actually disappeared…

You could say “So what – what’s the difference to today?”. In fact for many hoteliers online distribution is already a huge challenge – and it is quite a time consuming and laborious task to keep rates under control (here we talk about lack of interfaces, onward distribution and net rates).

So what?
So What? What’s next and how do I manage it?

On the OTA side – some companies have become so large that the right hand does not know what the left is doing – you may have a willing and genuine OTA Account Manager, but they may have little say in other parts of their organisation.  Every day an OTA is doing a promotion somewhere and asking for an additional rate commitment – and by the way who is paying for the reward programmes – such as Genius  from Booking.com, Welcome Rewards from Hotels.com and other rewards and programs?  – Losing rate parity – how can you lose something you do not have?

All this will not change regardless whether rate parity disappears or not. Accept it if you want OTA distribution (which you should!). Hotels must become more knowledgeable and simply better in monitoring which Distributor sells at what rate – Metasearch will become stronger, better and therefore raise the bar.

However, should rate parity officially vanish, Merchants selling “room only” will be the ones being carefully observed – because this business model enables distributors to immediately start playing the “margin for volume” game. Those Merchants with a large share of packaged business could be preferred. The commissionable model seems to be safe(r), until someone comes up with a “dynamic commission” model that also works operationally – which may not be that far away.

Another consequence could be closer cooperation with fewer distributors. Distribution and pricing will be more targeted and accompanied with marketing on selected distribution channels – the best Distributor “package” of reach, marketing opportunity and conversion wins.  To compete in this game, hotels must become much better in understanding where their business comes from and how/where/when they can stimulate demand. Most of these points are valid, irrespective of the development of the rate parity discussion – some governmental moves will just add more urgency to them.

The point is, it does not matter whether rate parity is officially buried or not. Hoteliers must accept reality and responsibility for their distribution. Part of that is investing in proprietary channels – on- and offline, distribution technology, marketing and education. If we do not we will lose the game, even if rate parity stays.

What do you think? Do you adopt a “So What policy?”

This is a guest post from Heiko Siebert, MD of HSTC and based in Switzerland. He can be contacted at http://www.hstc.ch

Heiko Siebert
Heiko Siebert – Distribution Expert and Managing Director of HSTC Consultancy

Heiko Siebert is currently in the process of founding a company in Switzerland. The focus of his consulting and training services will be online marketing and distribution in the hospitality industry and tourism, including strategic questions, planning, technical requirements, implementation, and training support.

Until June 2013 Heiko worked 12 years at Moevenpick Hotels & Resorts, first as Director Reservations and Revenue Management, and later as Vice President of Distribution. His activities included the development and implementation of distribution strategies, the management of the MH&R Reservation Systems and Reservation Offices, and maintenance and development of the corporate website site. He was also in charge of the analysis, contract negotiation and integration of new distribution technologies and channels. You can contact Heiko via his web site.

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