Hotel Rate Parity Trends

By: EyeforTravel

Keeping track of competitors’ rates and monitoring parity or disparity across channels of distribution is something hoteliers must be familiar with. Having access to the right data is fundamental and using detailed reports can help.

Aggregating and analysing parity and pricing information for cities and regions can give invaluable insight into the impact of economic factors and local market variations. This is often hard to get at a hotel direct competition set level. By understanding current trends, it is possible to glean information on where the market will go next by looking at a wider set of hotels in your city that are segregated by star ratings.

All this can help hotel companies to support and inform their macro revenue management strategies. For marketing and representation organisations it is essential to have access to data in order to support business planning with individual member hotels.

EyeforTravel’s Ritesh Gupta talks to Vishal Jain, chief products officer at travel technology company RateGain, which produces reports that allow hotel companies to assess pricing trends, conduct parity analysis and more.

EFT: What are the key metrics used to depict trends?               

VJ: For pricing, the key metrics revolve around the range of rates available in each hotel category for arrivals in the upcoming two to three months. Minimum, maximum and median rate values are available. For parity analysis, the reports provide city level comparisons between cheapest rates available on brand or hotel websites compared to popular OTA channels of the region. This highlights the percentage of hotels in each city and category that are maintaining parity. Parity is defined as the brand site having either the cheapest rate or being equal to the rate being offered through third-party intermediary channels.

EFT: Tell me about the latest pricing trends from reports released for the Asian market and what do these signify?

VJ: The graph (shown above) is an extract from the December report for the four-star category. Overall, rates were higher for December and January and began to reduce in February reflecting seasonal changes for holiday periods.  There is wide variation in rate ranges across different locations, particularly in Hong Kong. The range between minimum and median is even wider in the five-star category reflecting the variability and market pressures of the luxury segment. Minimum rates show some unusually low values in certain markets in the early part of the reporting period; this could be an indication of lower than expected occupancy leading hotels to take steps to offload distressed inventory closer to arrival dates.

EFT: RateGain’s rate parity reports for Asia from Nov 2012 to January 2013 highlight that in Phuket 92% of hotels were cheaper on online travel agency (OTA) sites. Are some hotel companies missing a trick in certain places?

VJ: In some locations, particularly key resort destinations, the competition for business between distributors is fierce. In these situations, hotels firstly need to ensure that they are equipped with accurate information covering all levels from property to region.

It is also vital to be able to track the cost and productivity of distribution channels in order to make informed decisions and exercise a greater level of control over the distribution strategy.

The traffic and bookings generated by OTA sites can be significant but further to the immediate impact hotels can also determine the subsidiary benefit of visibility in OTA channels and the knock-on effects on traffic through their own website. When rates are consistently lower on OTAs this tends to reinforce consumer behaviour in the direction of finding the cheapest rate. Hotels can choose to change the balance and take more control by identifying overall distribution costs and by identifying ways to differentiate products offered through the website.

Also, if the hotel doesn’t have direct distribution reach into the source markets from where the partners are generating demand (in case of Thailand, Australia, China, India, Germany) then they need to better equip their SEO strategy to ensure the billboard effect of visibility on partner sites actually has a good trickle down effect on the direct channel as well.

EFT: Give us an example?

VJ: So for example, if Wotif is producing for the Australian source market for your resort in Phuket then you need to focus on your visibility on google.com.au and other search engines to benefit from that.

EFT: The Asian report also shows that in New Delhi around 35% of hotels are cheaper on brand sites but this goes down to as low as 3.5% in Hong Kong. Is this trend witnessed in other key cities?

VJ: Over time, the general trend is towards greater levels of rate parity across all channels. If they are not doing so already, hotels should start to look at other aspects of their distribution strategy such as inventory and value parity to ensure that they retain control and maximise the available revenue opportunities.

We have also found that lot of times parity issues also crop up due to inefficiencies in managing channels and updates to these channels. If the hotels are managing multiple channels manually or through multiple extranets then it is common for a hotel user to not be able to update all channels at the same time as they have other operational tasks that keep them busy at the hotel. This left unchecked can cause long-term damage as the direct channel suffers a catch 22 situation. Normal user behaviour is: to update, in such situations, first the channels that are producing today versus channels that have potential to produce in the future if nurtured properly.

EFT: How accurate are these reports? Are there any limitations?

VJ: There is a wealth of published and accessible information available and this forms the core of most reports. It is important that errors and inconsistencies are identified and eliminated to ensure that the reports are not misleading.

One way of increasing the accuracy of trend reports is to ensure that data is gathered from multiple sources and covers as many different hotels as possible. Larger sample sizes lead to greater accuracy when trends are analysed.

EFT: How has pricing and rate parity shaped up in 2012? What can one expect in 2013?

VJ: The above table provides a summary of the main pricing measurements for key locations in Asia in 2012 (four-star category).

Hong Kong and Singapore show the widest range of minimum rates and the highest rates overall. For median values Hong Kong and Phuket show the widest ranges. Minimum pricing in Indonesia and Thailand shows the least variability. These trends are calculated across a range of arrival dates throughout the year so do not reflect seasonality.

For parity (see table below) the most consistent levels are achieved in China. Across other parts of Asia the level of parity is lower. Overall, lower prices are found on OTA sites; however in India there is a noticeable trend for up to 30% of the rates included in reports to be lower on brand websites. Even in India you can see a big difference between cities like Mumbai or Delhi and a resort destination like Goa.

(Data is based on aggregate data from the whole of 2012 reports published by RateGain).