OTAs and rate disparity: The problem with traditional price-checking tools

October 18, 2016

In recent years, the development of travel metasearch—sites which aggregate pricing to help users find the best deals—has transformed the way travelers seek out the best deals for hotels. Theoretically, metasearch sites display pricing from different vendors (usually OTAs or hotel sites) with links that take users to the vendor site to book. To earn revenue, metasearch sites have sold link placement positions to the highest bidder in a cost-per-click revenue model.

With their massive digital marketing budgets, OTAs have started dominating this space and winning most of the prized top spots on sites like Kayak, Hipmunk, and Trivago. Most hotels don’t have the budget to outbid these high-cost link placements, and have consequently not been able to capitalize on metasearch sites as effectively as OTAs.

In response, hotels have switched the metasearch model on its head, bringing metasearch into their own websites using price-checking widgets. As a user performs an availability check, the price-checking tool will shop OTA sites for the same dates and provide a price comparison in real time, saving the customer the hassle of shopping around.

This provides a layer of price transparency and reassures the customer that booking directly with the hotel will give them the best deal. Or so the theory goes.

The problem with price check widgets

In a small but significant number of instances, price check widgets end up finding and OTA rate that is lower than the hotels. At Travel Tripper, our data has shown OTAs undercutting hotel rates approximately 18% of the time. That’s almost 1 in every 5 availability searches!

And this is where the problem begins.

In cases such as these, most widgets will display a message asking a person to contact the hotel to resolve the pricing issue, as most hotels will employ a best rate guarantee to match the lower rate that was found elsewhere. But in reality, few people are likely to do this. Most people will choose the path of least resistance, and visiting an OTA to book a lower rate represents this easier route. In just a few short clicks, a customer knows they can quickly secure their booking at a price they know is the best available.

In contrast, calling the hotel comes with the potential of being put on hold or not getting through altogether. Recent studies have also found that phone use for customer service has dwindled steadily in the past six years. Instead, people are turning to digital channels and self-service as a faster alternative to resolve issues.

In essence, price-checking tools without automatic price matching do very little to solve the problem of OTAs undercutting hotels in price.

The advantages of automatic price matching

Travel Tripper’s automated best rate guarantee feature, now known as Rate Match, eliminates the flaw in traditional price-checking tools.

As well as conducting real-time price comparison with major OTAs, Rate Match can automatically adjust the best available rate to match any lower rates it finds, which then becomes instantly bookable. Hoteliers can also set Rate Match to offer additional discounts to further entice customers, same as with any best rate guarantee program.

The automatic price matching feature offers hotels a distinct advantage in the quest for direct bookings. For one thing, it makes life far easier for customers. By automatically matching an OTA rate when it comes out lower, the customer is spared the hassle of visiting the OTA site or calling the hotel to resolve their pricing issue.

Instead of uncertainty and hassle, automated price matching offers total transparency and the quickest path to booking. As well as being hugely beneficial in the short-term, this feature also gives customers the confidence to return to a hotel website in future knowing they’ll receive the lowest rate available.

Rate Match also acts as a safeguard for human error. For instance, if a hotelier has updated rates on a channel manager but forgotten to adjust those same rates on the hotel website, Rate Match will catch the discrepancy quickly and notify the hotelier about it.

How Rate Match is boosting direct booking revenue

To date, hotels that have adopted Rate Match have seen a significant impact on their direct booking revenue.

Capitol Hill Hotel, a 153-room boutique property in Washington D.C., implemented Rate Match into their booking engine. In the first month, the tool boosted their conversion rates by 20%. But significantly, the price match feature accounted for 10% of their direct booking business.

We’ve also helped dozens of other hotels significantly increase their direct bookings—equating to thousands of dollars in extra revenue. In one particular example from last year, a hotel using Rate Match earned $229,806 from price-matched bookings, which involved an additional $43,664 in profit resulting from costs that would have otherwise been lost to OTA commissions.

When you factor in these numbers over the course of several years, the overall impact price match can have is substantial.

A new era in price checking tools

For many hotels, the idea of integrating price checking tools into their own websites once seemed counterintuitive. But with the boom in metasearch sites and the dominance of OTAs in direct bookings, a more pragmatic outlook has started to take hold.

While traditional price checking tools help hotels deliver price transparency and incentivize direct bookings, they remain forever flawed because of their impassive nature. Whenever an OTA rate comes out lower, most customers will leave the hotel website to secure this lower price.

Rate Match has been designed to prevent this from happening, ensuring that OTAs are never positioned as the easiest and most desirable booking option.

Ultimately, if a hotel is willing and able to offer customers the best rate for booking direct, having a tool that automatically facilitates this can prevent thousands of dollars in potential revenue slipping through the net.

Interested in learning more about how to lessen your dependency on OTAs? Join our webinar on Oct. 26, 2016 hosted by Travel Tripper, StayNTouch, and TrustYou.