What is the meaning / definition of Rate Parity in the hospitality industry?
All individual hotels and hotel chains should seek to engender a positive affective commitment towards their brand. But loyalty felt by guests can, of course, take time to build up. One great way to foster allegiance over time is to build Rate Parity into a pricing structure. In fact, a revenue management team that fails to recognise the benefits of Rate Parity is making a mistake and should think again. Why? Well, let’s begin answering that by explaining more what Rate Parity actually is, before moving on to giving a clear example…
Simply put, Rate Parity is a way for an independent hotel or a chain of them to set the same price for each of their room types across all of their distribution channels. It is through these channels that rooms and services are advertised (through the hotel’s brand website, on Social Media platforms, via high street and online travel agencies etc.). If there is uniformity of rates across all channels, that conveys consistency. It also means that there is no need for prospective guests to make their reservations anywhere else but directly with the hotel itself, meaning that the hotel will not earn less money from the reservation through having to lose a percentage of the fee to another channel.
In truth, a hotel in Athens, using multi-channelling distribution to advertise available rooms, would rather simply make all reservations directly through its own website, over the phone or at Reception; but the online booking market is becoming increasingly popular as more and more people make reservations through online booking agencies (OTAs) and global distribution systems (GDSs), in their determination to find the lowest available price for specific hotels they wish to stay at. If the Athens hotel offers Rate Parity to encourage guests to book directly with them where terms/policies may be more flexible, they have a much better chance of winning the business.
Offering Rate Parity makes great business sense, therefore!
- Dynamic Pricing