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New Research Finds Rate Parity is Still the Biggest Dilemma for Hoteliers

According to a new study by Ecole Hôtelière de Lausanne (Switzerland) and RateTiger, rate parity is the dominant factor affecting hotels’ distribution and revenue strategies today, and has resulted in hotels neglecting the fundamentals of revenue management but has also opened their eyes to alternative distribution techniques.

The multi-regional study (conducted in five countries), The Distribution Challenge 2012, found that revenue managers are using channel management tools and price shopping reports more than ever, up to 11 times a day on average, to drive revenue on their main channels. However as they struggle to maintain price consistency they are now seeking new ways to improve exposure, reach new markets and increase direct bookings.

"Retail sites are continuously monitoring rate parity placing a lot of pressure on hotels to update rates on their channels," observed Horatiu Tudori, Senior Lecturer, Revenue Management, Ecole Hôtelière de Lausanne, Switzerland. "Hoteliers are spending more time managing rate parity and ensuring rate integrity which is taking them away from defining more sophisticated strategies to reduce the cost of distribution and increase RevPAR."

The six-month study found that the top three issues revenue managers want to focus on continue to be: 1) increasing RevPAR, 2) controlling costs of distribution/e-business, and 3) increasing exposure. "The hotels defined the strategies they put in place for 2012 as being the need for RevPAR improvement to be achieved by higher rates and ADR, or by increasing LOS (length of stay). Their key challenge will be decreasing costs of distribution while raising rates and occupancy all at the same time ensuring rate parity across their distribution partners to avoid strict policy conditions," continues Tudori.

"OTAs are getting bigger and bigger and they have such a power that we cannot fight against them, so we are trying to find some other ways of communicating our offering and being exposed on the web. Of course we need to be present and we need to have some availability and rate parity with the OTAs," said one of the research respondents.

The challenge of rate parity and influencing nature of OTAs is challenging hoteliers to source new revenue and booking streams. The study found that hoteliers are focusing on direct sales by developing new corporate contracts, pushing own web sales, and maintaining faster availability and rates on non-conventional distribution channels to try to stay ahead of the game.

Research Methodology:

The intention of the review was to collect feedback from 3-star and 4-star hotels evenly distributed in five geographical markets: France, Germany, Spain, United Kingdom and USA. Among the 20 hotels participating to the survey, 65 per cent were chain and 35 per cent individual properties, with capacity spread between 25 and 392 rooms. All the interviewees are in charge of managing pricing and distribution, two thirds being Revenue managers and the remaining General managers or directors in either sales or reservations.

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