What Booking.com parity play means for hotels
 
What Booking.com parity play means for hotels
23 APRIL 2015 7:34 AM
Booking.com amended its rate-parity agreements with hotels, a decision that some have branded bizarre, others not beneficial. This is what hoteliers need to know about the latest move in the distribution jungle.
REPORT FROM EUROPE— With its business models in Europe under increasing scrutiny by European antitrust regulators, Booking.com has agreed to amend its rate-parity agreements with hotels in France, Italy and Sweden.
 
In a news release, Booking.com said it is abandoning its “price, availability and booking conditions parity provisions with respect to other online travel agencies. This will create an environment that supports increased transparency and competition among OTAs which will ultimately benefit consumers, as well as hoteliers, by encouraging the freedom for properties to offer different pricing and booking policies.”
 
But it added “the commitments do allow Booking.com to require a minimum allocation, or some availability, from hotels.” The company expects to implement the new model throughout the European Union. Representatives from Booking.com did not reply to requests for comment prior to press time Thursday.
 
Hoteliers contacted by Hotel News Now view Booking.com’s amendment as one made from a position of strength and market dominance. They said independents and small chains, especially, might not want to post lower rates elsewhere from Booking.com if that might mean the OTA re-evaluates a property’s search-engine visibility.
 
Sources also said Booking.com, seeing the hammer falling, is clever in being the first of the large players out of the gate to test the new provisions.
 
Hoteliers respond
The reaction from hoteliers has been mixed. Some find the episode bizarre and unhelpful. Others acknowledge it is a good step, but the landscape has become more fragmented despite the opportunity for smart operators to produce increased loyalty and direct bookings.
 
Vassilis Syropoulos, director of demand management at Swedish hotel-management company Pandox, which has approximately 100 properties in its portfolio, agreed hotels pushing against rate parity could point to greater risks.
 
“Rate parity is very easy to manage to a certain extent, while rate integrity is a completely different skill requiring knowledge and data,” Syropoulos said. “If you manage a distribution strategy without rate parity, and the tech is not there, hotels will lose out.”
 
Syropoulos said the agreement between antitrust legislators and Booking.com was a “half-baked step.”
 
“Firstly, you cannot distribute to your website but only to other OTAs,” Syropoulos said. “Are you really going to risk going down (Booking.com’s) rankings, and what is to say that other OTAs would not potentially have higher commissions? More (distribution channels) is better, but the opposite is what is happening, consolidation is happening.”
 
Frank C. Braun, director of revenue management at the 278-key Hotel Palace Berlin, also said the move does not change anything, especially for independent hotels such as his.
 
“Essentially, it is good for overall competition, but a lot of hotels would want to stick to (rate parity) as it did not penalize them,” despite the high commissions charged, Braun said.
 
Braun’s take is hotels will not have the clout—or desire—to kill the goose that lays the golden egg.
 
Loyalty programs more than ever are key to hotels, but they are, too, to OTAs.
 
“Fifty percent of bookings at Booking.com come through its Genius loyalty scheme, already selling at 10% to 15% of best available rates,” Pandox’s Syropoulos added.
 
Many hoteliers are adopting a wait-and-see approach to Booking.com’s move.
 
“It is something that might be good in the long term, but tech today cannot sort that complexity. There is a need now to micro-manage and be granular, but hoteliers have never been good at this. Lots of things need to be done at hotels before they can scream victory,” Syropoulos added.
 
Opportunities open?
Raniero Amati, head of strategy and development at JSH Hotels Collection that has 17 properties in Italy, was surprised at the decision Italy made with Booking.com’s parent company Priceline Group for five years beginning on 1 July.
 
“It’s a compromise, and the winner is Booking.com. Yes, you can have different prices, but you are still forced to have parity with your own website,” Amati said.
 
“I think it is bizarre, but ultimately it does provide hotels an opportunity,” Amati said, who added to Braun’s concerns by saying hotels in large markets also will not want to annoy Booking.com and its search engine algorithms.
 
“It is not so bad for a chain such as ours (since) we have a good team in place to keep building up our database and providing more tools. Plus, probably in a few months, the other players will bring in new things that will once again change developments,” Amati added.
 
At press time, Expedia, Inc., had not made any statement concerning Booking.com’s action.
 
Amati paints a future in which he sees hoteliers working out new distribution strategies bypassing online technology and ramping up loyalty.
 
“What will happen is the same rate will be on your own website and on Booking.com’s, and then the hotel will say ‘give me a call, it will be cheaper.’ That’s bizarre, too, but it’s something that will happen, especially in our (portfolio), which contains six or seven leisure resorts, and in the domestic market where people still book by telephone and email,” Amati said.
 
Amati said, though, ultimately things would be getting a little worse in an ever more fragmented landscape.
 
Tobi Evennett, founder of revenue management consultancy Evennett Hospitality Services, who has worked at Radisson and The Hotel Collection, said rate parity is a vital part of any hotel’s business.
 
“To be frank, if you cannot show parity across all channels, it undervalues your product. You confuse buyers,” Evennett said.
 
“Rate parity is a great policing tool. I do not believe in one rule for one, another for another, but having said that, even though this potentially makes it easier to work with Booking,com, it has been very aggressive in recent years. I’ve seen hotels lose their preferential agreements. This move also opens the floodgates to rogue agents,” Evennett said.
 
Rules to follow
Evennett said revenue managers now need to police their own rate parity, despite the fact that no revenue manager would be able to check all existing rates on all sites all the time. Previously, rate parity agreements made this requirement moot.
 
Evennett suggested hoteliers follow some simple steps:
 
  • Implement your own terms and conditions on contracts to ensure you are not undercutting your own pricing.
  • Constantly spot-check rates over all channels all the time. Evennett said weekly he discovers new distribution websites he’s never heard of.
  • Ensure a good channel manager is in place.
  • Install a payment management system with a good channel-manager function.
 
Evennett added rates undercutting the hotel’s own would now be even more likely on rogue sites that cannot be fully controlled by wholesalers.
 
“If you find a rogue rate, book it and hold the wholesaler accountable. Wholesalers will not want to lose a hotel in these turbulent times, even if they do not compete officially in the online market,” Evennett added.
 

6 Comments

  • skooshhotels April 23, 2015 5:16 AM

    That 'Golden Egg' cost the world $2.5bn in online advertising last year. Anyhow who thinks that's good value shouldn't be in revenue management.

  • skooshhotels April 23, 2015 5:16 AM

    That 'Golden Egg' cost the world $2.5bn in online advertising last year. Anyone who thinks that's good value shouldn't be in revenue management.

  • Max Starkov - HeBS Digital April 23, 2015 6:32 AM

    The rate parity provision is not an OTA invention. It was a hotelier’s invention and was imposed over the OTAs by the hotel industry. Since 2002-2003 all major brands have enforced severely rate parity among their managed and franchised properties. Ex. Marriott would “punish” a franchisee that is out of parity IN ANY CHANNEL, not only via the OTA channel, by a hefty fine and even kicking them out of the Marriott CRS and distribution machine. This provision has always existed here in the U.S. since late 2002. What Booking.com had in Europe was an explicit paragraph in their agreements that a hotel cannot provide another OTA with a lower rate than what they provide to Booking.com. Ex. A hotel in Vienna could not have an exclusive 24-hour sale on Expedia without extending the same offer to Booking.com. Now Booking.com is removing this provision in the 3 countries in question, but is keeping the most important provision in their agreement with the hotel, namely the one where the hotel website and direct distribution efforts have ALWAYS to be in rate parity with Booking.com. In other words, I don't see anything significantly new here. Booking.com will use its significant distribution power to keep hoteliers in line even without this “new” provision. So in my view, the ultimate winner is Booking.com since it has the regulators off its back, and its “concessions” are negligible and ultimately would not change the status quo in Europe.

  • RHCaldwell April 23, 2015 11:14 AM

    I find this article vague and unhelpful; I'm not sure from it what Booking.com has even done. I hope someone will write a follow-up that more clearly explains what's going on and what it means to hoteliers.

  • Confused Hotelier April 23, 2015 1:25 PM

    So if you run a hotel in France, Italy or Sweden you still need to ensure rate parity between your own website and booking.com, but not other OTA's - how exactly is this a win for Hotels. Seems more likely it is a win for booking.com, unless you wish to price EVERYONE ELSE lower than booking.com and yourself....

  • Alessandro April 26, 2015 8:18 AM

    What's about parity avaibility?

Comments that include blatant advertisements or links to products or company websites will be removed to avoid instances of spam. Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site. You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please report any violations to our editorial staff.