OTA ROGUE Rates! Where do they come from?

Scales of Parity

Scales of Parity (Photo by Shopify Partners from Burst)

If you are in the hospitality industry, you have probably heard the phrase “rate parity” more times than you can count.  Tackling rate parity has become an annoyance of the job responsibility of a revenue manager.  We have all been victim to a parity or multiple parity violations that are not our fault. First wholesalers and now OTAs.  OTA rogue rates are all the buzz these days.

This isn’t going to be another post complaining about wholesale.  Everyone should know the wholesale problem and where those rates find themselves. We will have another post on that later and questioning the incrementality of wholesale.  Today, Epic Revenue Consultants has the inside scoop on a bit more sinister behavior through some of our favorite partners…the online travel agencies (OTAs).

Over the last five years there has been a not-so-silent war being waged for room nights between OTA juggernauts; Booking, Expedia and Agoda Priceline.  These marketing behemoths have been working on technology to advance their share in controlling the market.  Price has always been a significant factor regardless of segment and most importantly with leisure consumers.

Let’s go back to what gave the OTAs their claim to fame in the early 2000’s…” come to us for the lowest hotel prices and the best deals.”  The message has stayed the same  but the tactics have changed.  The “arms race” on price customization and audience targeting is literally a race to the bottom i.e. lowest price wins.  A tit-for-tat game potentially started with Expedia given their complex algorithms and scientists based out of Belgium and then copied in turn with other OTAs, mainly Agoda Priceline. But who is in the middle of this?  THE HOTEL!  The hotel is blamed for being out of parity while they are the innocent victim in the war for room nights.

So you’re wondering, what are some of the strategies and tactics that the OTAs are using and what should I be looking out for?

Here is a short list and just the tip of the ice berg:

  • Displaying a supposed “fenced” rate on the retail site and affiliates. Many OTAs have multiple products that they sell; retail, opaque and package rates.  Everyone knows that opaque and package rates are typically the highest discounted in the hotel, especially when you’re running low occupancy.  Expedia has been very open about it with their Add-On Advantage program, which unbundles your package rate and sells the hotel standalone at the discounted rate!  Agoda Priceline has also been found selling opaque and package which is typically marketed as a  “special deal, mobile deal, flash sale.”
  • Displaying a supposed Member rate on the retail site. Expedia has Member Only rates; Booking has Genius rates and Agoda Priceline have CUG rates.  These deals being only for our members is a farce; it’s a tactic that is used to get a better rate from unsuspecting hotels. Expedia claims the hotels.com app, which is downloaded, is considered closed user group and will display the Member Only rates to customers without sign-in.  Ridiculous! Booking.com & Agoda Priceline is not any better, they allow their members the same unqualified access to your member rates.
  • Cutting their markup, at times taking no profit at all. And here we thought, they were only doing this with marketing to their members. Not anymore!  You will usually see this displayed as a “coupon.” Both Expedia and Agoda Priceline have been found to do this.  Expedia through orbitz.com and Agoda Priceline on both agoda.com &Priceline.
  • Using IP and currency tricks. This is a big one for major international destinations. Hard enough to get potential guests to your brand.com or vanity site with translations and relevant currency but now having to worry about international point-of-sale and undercutting with currency exchange just to win the market share.
  • Metasearch referral, secondary hotel tricks. This is harder to find as it’s a “gateway tactic” that the OTAs use. Another way to trick your parity shops is through the MSE’s (meta search engine) the OTAs will lower the rate for the secondary hotel showing after you click through.  For example, customer goes to Google and searches for Hotel A.  They click the rate they desire for Hotel A.  Once taken to the OTA website they will display Hotel A and below that Hotel B.  Hotel B will be showing a rate that is lower than the brand website.
  • OTA’s receiving inventory from wholesalers. Claiming that the hotel rates are out of parity, all of the OTAs have started to turn to wholesalers and reselling those rates online and to their affiliates. These rates are called Booking.Basic on Booking.com, Basic Rate on Expedia and Basic Room on Agoda Priceline. rates typically designed for a package or travel agent is now being displayed online to the retail guest.

So much OTA rogue rate shadiness – what you can do you about?

  • Get a parity shopping tool. Many hotels rely on the tools that both Booking and Expedia give but having an independent parity shopping tool is the best way to find the sketchy OTA tactics.  Epic Revenue Consultants has several vendors that shop for the tactics.  Our distribution experts are trained to the T to identify and remove or take actions that protect the hotel’s best interests.
  • Do not participate in OTA programs. We have all succumbed to the marketing ploys by the OTAs with their various programs. It’s to get the lowest rate so they can continue to market their rates to potential guests while making the industry look like a bunch of fools. We’re smarter than that and there are ways to work with the OTAs vs. giving them the best rate.

Some people view these OTA Rogue rate strategies and tactics as helpful, as the bookings net rate is never impacted.  Others believe the over distribution of rates will cause them to miss their budget, as more package is being sold than expected.  Either way, at Epic Revenue Consultants, we will work to put a stop to these practices for your hotel and we have proven results of displacing these room nights from these high-cost programs to better business through displacement. Thanks for reading and reach out to us if you have any questions!

About Epic Revenue Consultants

Are you interested in learning more about what Epic Revenue Consultants can do for you?  Our team of experts has experience across the United States in primary, secondary and tertiary locations with hotels from economy to upper upscale.  Our track record speaks for it self, 32% growth in RevPAR Index, 18% growth in Revenue and over 25% savings in OTA compensation.  We drive top-line revenue but also look at the overall distribution costs to maximize profitability for your hotel.  Finally, our cloud-based business intelligence tool EPIC Reporting is bar-none one of the most sophisticated in the industry.  Give us a call today @ 973-356-8468 or e-mail us at info@epic-rev.com! Also, check out www.epic-rev.com for additional information on our products and services.

Written by Taylor Wong and edited by Inderpreet Banga.

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