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Hotels: Don’t fight OTAs on rate parity, add value to direct bookings instead

The legality of rate parity has become a major talking point in the hotel industry of late, especially in Europe. It all began in 2014 when the German Federal Cartel Office banned the agreed rate parity clauses in place between Hotel Reservations Service (HRS) Germany and German hotels.

The French National Assembly took similar action in 2015, becoming the continent’s first country to enforce an outright ban on rate parity practices. Regulators in a number of European nations including Belgium, Hungary, Poland and Sweden are all now considering changes to their own legislation.

But for now at least, rate parity remains legal in the U.S. That said, it is fair to assume the issue will continue to remain under the microscope, with calls for industry reform only likely to intensify as the European market continues to be shaken up.

And yet even with the option to undercut OTAs, many hotels in Europe are choosing not to do so. The reason? It could result in them facing a costly “de-ranking.”

OTAs like Booking.com have the ability to simply “de-rank” a hotel on their listings page, hiding it away on the 4th or 5th page, for example. This obviously drastically reduces visibility and can often harm a hotel’s bookings through the site.

The European marketplace has particular cause to tread carefully. According to research, OTAs account for 71% of all online bookings gained by independent hotels in the region. But in our personal experience, we’ve found that for many small hotels in the UK area, OTAs can account for up to 85% of business! Understandably, that makes the decision to undercut OTAs one that many European hoteliers shy away from.

But that doesn’t mean to say hotels have lost the stomach to fight for direct bookings. Far from it. In fact, a number of chains are implementing hard-hitting strategies to encourage direct bookings through their own website.

Fighting back with direct booking campaigns

Earlier this year, Hilton Worldwide launched a bold campaign advertising the fact that loyalty members can now get the lowest rates when they book direct at Hilton.com. Members can also earn HHonors Points that can be redeemed against extras such as complimentary room nights, free Wi-Fi and access to exclusive events and experiences.

Hilton Stop Clicking Around Campaign

This follows on from Marriott’s own campaign titled “It Pays To Book Direct.” Launched last year, the chain also promised that Marriott loyalty members would receive the very lowest rates when they booked their room with Marriott.

In both instances, the big brands are taking advantage of the “closed group” clause in OTA contracts in order to undercut rates with their loyalty members. But this kind of approach isn’t easy for everyone to replicate. Independent hotels obviously don’t have a large loyalty program to target, which means finding other ways to persuade guests to bypass the OTAs.

How independent hotels can compete

One of the most important things that independent hotels should do to increase direct bookings is to strengthen their direct web presence. This means having a responsive modern website that works across all different types of devices, especially mobile. It also means having a user-friendly booking process that makes it easy and quick for guests to book, and reassures them that they are getting the best price available. Platforms such as Travel Tripper Web and RezTrip CRS make this incredibly easy for hotels.

Introducing TT Web

A number of other tools are also available that link to a hotel website and encourage guests to make direct bookings.

For example, companies such as Voyat has developed their own methods to keep customers engaged with the hotel brand. Guests can log on with their social media profiles to use the hotel website, and in doing so, will receive personalized greetings and special booking offers as they use the website. As well as making life easier for customers, this allows hotels to acquire valuable online data that can be used to devise tailored offers and deals that incentivize future direct bookings.

Taking a slightly different approach, StayWanderful is helping hotels’ turn browsers into bookers with an incentive-driven approach. By installing StayWanderful’s “incentive engine,” the hotel website encourages a customer to book direct using curated deals that range from free Gogo Wifi and free Uber, to discounts at local restaurants, retailers and nearby attractions.

Another tool that has been very important in the encouragement of direct bookings is the price checking widget. Built into the booking engine, these price checkers compare a hotel’s rates with rates found across various OTAs to ensure the customer gets the lowest price possible. Triptease’s Price Check is one such tool, as well as Travel Tripper’s Rate Match. Tools like Rate Match also have the added benefit of offering an automatic best rate guarantee price match if it finds a lower price on an OTA.

Travel Tripper Rate Match
Example of Travel Tripper Rate Match in action on a hotel website

These examples highlight a wider trend of hotels standing up to OTAs, maintaining rate parity while devising new ways to bring added value to the overall booking.

Getting creative with incentives

Beyond seeking out support from technology providers, hotels can encourage direct bookings using their own incentives and promotions.

Offering guests a package deal is one such way to provide additional value, tying in a room booking with deals on hotel amenities. This might include offering free breakfast and Wifi on your direct rates, but not on rates sold by third-party sellers. However, it’s important that hotels advertise clearly and explicitly on their websites that only direct bookers receive these amenities—otherwise you might end up with angry customers who think they are being scammed for having to pay extra fees.

A study carried out by Software Advice looked to discover what incentives would most persuade customers to book direct with the hotel. The survey found that 48% of people would value a room upgrade above anything else, with 23% choosing free room service.

Devising targeted offers

Another way to encourage direct bookings is to target rates and special offers to specific segments of customers. Through tools such as RezTrip’s dynamic pricing module, hotels can develop fine-tuned offers based on variables such as geography, length of stay, lead time, and more.

For example, a Spanish hotel looking to attract the UK market could potentially develop a special rate plan and package that only shows up to 1) web users in the UK, 2) who want to stay one week or longer, 3) who book at least 30 days ahead of time. This sort of specificity in pricing allows hotels to experiment with special marketing promotions and target new market segments without having to dilute pricing across all markets.

It’s no longer about price, it’s about value

On both sides of the Atlantic, the issue of rate parity will continue to cause debate. After the landmark decision in France, further European nations may well follow suit, freeing up hotels to dictate their own pricing. In the U.S., the idea of banning rate parity also appears possible, although any decision to do so seems a little way off for now.

But even if rate parity is “dead,” or at least fading away, undercutting OTAs may prove a risky tactic that hotels choose not to pursue. Instead, offering greater overall value rather than lowering rates seems to be the best possible solution. For those hotels that provide added perks and benefits as an incentive for booking direct, they stand to enhance the entire customer experience, helping to build long-term relationships and nurture repeat business.

Gautam Lulla

Gautam Lulla

Gautam is CEO of Pegasus and an outspoken expert in hotel technology and distribution. When he's not busy disrupting the status quo, you can find him ripping powder on the slopes. Contact him at gautam@pegs.com.

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