Pegasus Research: How your conversion rate is affected by parity performance

One of the challenges with case studies is that it’s very hard to determine whether the results that one organization is able to achieve can be replicated for your organization. On the contrary, when we analyze e-commerce performance across multiple organizations, we have an opportunity to generate more robust data that is more likely to be broadly applicable. In the hotel industry, that means gathering data from large and small properties, resort and city properties, branded and independent, casino and regular hotels, and more. 

With that in mind, we recently looked at a dataset of 67,000 availability searches across multiple hotels segments, sizes and segments to determine the impact of parity performance on booking engine conversion rate. The question we wanted to answer is:

How is your conversion rate influenced by the price of your hotel on major OTAs, with the exclusion of any direct booking or OTA comparison tools? 

In order to answer this question, we needed to access a relevant data set across large and small properties as well as resort and city properties.  We also needed to make sure that this data set was not influenced by our conversion optimization tools, so we found some properties at Pegasus not yet running Rate Match™. This is what we found:

The Result: 56% higher conversion rate when direct rates were the same or better than OTAs

While the conversion rates themselves varied significantly across specific hotels and brands, the pattern was clearly visible and it revealed the following insight: The conversion rate for availability searches in the booking engine when direct prices were at least equal or lower than one major OTA was 56% higher versus availability searches conducted when direct prices were higher than all major OTAs. 

Statistical significance was greater than 99%

The statistical significance for this data was greater than 99% with a P value of 0.0000. For availability searches where the hotel direct rate was higher than major OTAs, we saw 16,260 visitors and 485 conversions. For availability searches where the hotel direct rate was the same or lower than major OTAs, we saw 51,318 visitors and 2,393 conversions. 

What are the implications for your hotels?

We have known for quite some time that the guest booking journey is multi-channel and can involve multiple steps and price comparisons, but now we have a clear indication that a material number of visitors are comparing your hotel direct rates with the prices that they can get for the same stay dates for your hotel on major OTAs. 

We recently analyzed the business opportunity available to hotels to improve parity performance. When we did a deep dive for one chain with about 500 hotels, we saw that even a 1% improvement in parity performance was worth about $1.8 million in additional bookings. How much additional direct revenue could you capture if you lowered the number of parity violations for your hotels and proportionally raised your conversion rates by 56%?

 

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