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.
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.
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.