Rate leakage.
Due to the growth of the online sales, it is more important than ever to mantain parity. While we used to give higher rates to OTAs with higher % comission, the OTAs started to look for a loop to legally display third-party rates – like wholesalers rates for example.
Am I frustrated? Just a little bit. It is a global parity nightmare.
Wholesalers had no attention whatsoever from hoteliers. Those days are over. And i was really hoping that they will get my attention soon, just in a different way. The negative impact on hotels is even greater since Google decided to compare prices.
I noticed the rates leak for the first time in 2017 – AMOMA (nowadays bankrupt and closed). My leak was GTA`s dirty game – the one and only with net and low rates due to uncommon high sales – now i also know why such high sales. The bigger the sales, more often the calls “Can we get a better rate or at least some kind of offer?”. But that`s ok, it`s business and at that time it was not yet such a big problem.
Of course, there was no way to contact AMOMA and if you managed somehow to get in touch with them – they will answer the same as any other OTA – “It is not us, it is the wholesaler”. If you call the wholesaler, they will say – “It`s not us, it is the OTA”.
No.1 Challenge for hoteliers in 2019 & 2020.
Well, exactly the same thing happens today. For exemple, with Agoda which is Booking.com`s excuse to sell Booking.basic rate. Agoda and Booking share the same bed, it`s just bad publicity for Booking to leak rates just like that and this is where the other OTA gets in the game – in my case taking the rates from no one else than Hotelbeds. The same supplier that commits to support hoteliers in the No.1 Challenge for hoteliers in 2019 & 2020.
Distributors like Trip.com, Nustay, FindHotel, ZenHotels and Ebookers are the ones who took Amoma`s place compromising the hotel`s integrity.
It might have many names, yet it is the same problem.
I was most shocked when a travel agent called me to request availability and nightly rate. After my confirmation of both agency rate and availability, the lady told me – “I`ll book online, there is a better rate”. An agency that books on Booking.com. Is that even possible? It is with Booking.basic, Hotelbeds and some discounts. Or with Basic Rate on Expedia or with Basic Room on Agoda.
The power is in the hands of the hotels.
It is pretty hard to control the distribution, it takes a lot of effort, yet is possible. There are a few temporary solutions – contract termination immediately, stop sell on high demand, closing out inventory, rate parity monitoring or dynamic pricing.
I`ve been trying to introduce dynamic pricing for a while now, i managed to do it with most of the suppliers. This was when a new problem appeared – any discount you offer – like Opaque / Early Booking / Stay 2, Get 1 Free / etc – takes you back to where you started. Also stay away from OTA`s programs such as Risk Free Reservations on Booking.com.
Let`s sum up:
- Check rates parity daily.
- Stay away from OTA`s programs.
- Set up only dynamic pricing for wholesaler.
- Stay away from any discounts as Early Bird, Opaque, etc
- Do not tolerate contract obligations violation and take action by closing out inventory.
- Do not allow re-selling if you do not agree.
- More OTA`s = Less direct bookings.
- Work only with partners that bring you value and integrity.
- Check if only the necessary taxes are included in the final price.
- If you agree to promotions on OTA`s, make sure you have those on your website too.
It is a new era.
These practices will push hotels out of the online market and it will grow local tourism and direct bookings. I`ve been waiting for a very long time to say that. I`ve been testing on my own properties how it is like to have less and less online sales. It turned out it is great, it exceeded my expectations.
Instead of focusing on lowering my rates to get more online guests – i did exactly that: lowered my rates with 5 – 10% to direct guests. The result: better occuppancy, 0% comission, more revenue.
If you sell a room to an OTA with 55 euro – the hotel actually gets only 45 euro (if there is no additional discount such as mobile discount, etc.). You do not notice in the beggining since you pay the 18% at the end of the month. Also in Romania you pay VAT and City Tax, a total of 6% from 55 euro, not from 45euro. In total you pay aprox. 13.2 euro and you get aprox. 41.8 euro.
What if you sell directly to the guest at a lower rate? Let`s say 50 euro. You get 47 euro. You are happy, the guest is happy – it`s a win-win purchase.
Why try so hard?
Because if you set a habit from checking parity, you will identify any issue before it will show up in your bank account.
Even better, let`s keep in mind that a wholesaler or an OTA without any hotel rooms to sell is not going to be in business anymore.
To conclude, the hotels need to stand up against such practices / such partners.
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