A Parity System That Helps Hotels Uncover and Overcome Parity Issues

As a hotel revenue manager, you’ll be well-versed in the hospitality industry’s most significant pair of quid pro quos: working with online travel agencies (OTAs) and with wholesalers.

These entities take a cut of your hotel room sales in return for a wider reach in the case of the former or the guaranteed shifting of significant chunks of inventory in the case of the latter.

In return, they take a cut of your hotel room sales. This arrangement is standard in most revenue and distribution management strategies.

But when these partnerships malfunction, whether through accident or design, it’s not fair on you, your hotel’s brand reputation and your profit margins, and it’s not fair on your guests or potential guests and their user experience. And the most crippling way that things can break down is when disparity creeps into the machine.

By that, we mean when prices advertised on Brand.com – as in your hotel’s website and controlled by your channel manager – don’t match those published elsewhere on OTAs and metasearch engines, such as Tripadvisor. This undercutting is prohibited in most contracts between hotels and their partners, yet different prices are a common feature of the hotel business.

These discrepancies cost hoteliers millions in lost revenue, first because it diverts guests away from Brand.com and your booking engine, where hotels keep 100% of the hotel room’s price, to channels where they must surrender a cut, and second because the cut the hotelier keeps is a portion of a lower price.

The solution: A parity system

The so-called ‘parity system’ is the framework around which you can monitor hotel rate parity, enabling hoteliers and revenue managers to navigate OTA relationships to avoid parity issues.

In this blog post, we take a look behind the curtain at how a parity system works, outlining our top tips for staying in control, leveling the playing field and avoiding price wars.

Acknowledge the relationship between parity and revenue management

While some online travel agencies are moving to remove rate parity clauses in certain jurisdictions, it remains the norm. Where such rules exist, it’s usually a sign that the threat of violation is ever-present. This issue continues to be a significant problem in the hotel industry.

Rate parity and revenue management are inextricably linked, with a direct relationship between parity problems and taking a hit to a hotel’s bottom line. So how does it come about?

The two main causes of disparity are either: contracted online travel agents or non-contracted OTAs/wholesalers. Contracted OTAs have a direct relationship with hotels, and work together on a net merchant or commissionable model, while non-contracted OTAs have no contractual obligations to hotels. When OTAs buy from wholesalers (or other OTAs), pricing is at their sole discretion.

Disparity with contracted OTAs occurs for a number of reasons including when ‘stale’ cached data is fed into external systems, as well as other tax and currency miscalculations. OTAs can also approach property-level managers at chains and offer to reduce their room rates as part of promotions.

In the case of non-contracted OTAs, disparity usually arises when a wholesaler undermines their agreement to sell rooms as packages and “de-packages” them to be sold on to OTAs at a margin that undercuts them.

Understand how OTA partnerships impact hotel rate parity

In order to take effective action on parity, it’s important to first understand the current landscape and the size of the issue.

In recent years, the once-beneficial coexistence between OTAs and hotels has deteriorated. Many hoteliers no longer feel the relationship is win-win. Commissions have increased, reaching between 15-30% for larger hotel chains, and even higher for smaller players.

To make matters worse, direct online bookings have taken a hit. This is because OTA market share continues to rise, with OTAs gaining the majority of market share for online reservations, with four big players – Expedia Group, Booking Holdings, Airbnb and Trip.com Group – alone spending $16.8 billion on sales and marketing in 2023, up 20% on the previous year. This all leads to decreased profitability for hotels.

What’s more, OTA customers are young adults – according to one survey, 36% are a combination of Generation X and millennials aged 25 to 39 – and they’re drawn to OTAs for their ability to book a memorable guest experience at a great value.

The cohort of travelers adopting these habits will only grow, with global respondents to another survey saying that they “prefer OTAs to book their holidays”.

Hotels continue to make every effort to retain customers via direct booking campaigns or the priority pricing they offer their guests, with the upside being the creation of a loyal customer base that will continue to seek out direct bookings.

This push and pull between OTAs and hotels has moved into the legal arena with parity clause bans announced across the European continent, most recently by Booking.com. So when setting up or revising your plan, consider reviewing parity at your hotel to set your own benchmark.

Establishing what causes rate disparity, and having knowledge on the developments from both a global and local perspective is a great foundation for not just working hard to fix parity issues, but working smart.

Harness the power of software to identify parity issues

Using the right technology can empower you to manage your distribution channels, surface parity issues, and identify which actions you need to take to restore parity.

It’s all about accessing robust data to improve your decision-making.

To review your hotel’s parity, you need to use data analysis tools that provide a full picture and not only identify issues, but give you the detail required to make more informed distribution decisions in future.

Effective tools have functionality that allows the following:

• Uncovering the root cause of parity issues

• Easy tracking of where you are losing valuable revenue across channels to monitor hotel parity performance

• The ability to drill down on parity issues with segmentation including: market, brand, source channel and price difference

• Checking of the room rates (for different room types) appearing on OTAs and metasearch websites in real time

• Solving portfolio-wide parity issues

• Managing distribution channels and partnerships

These features will allow you to keep control of your distribution cost and fully understand your parity performance.

For smaller hotels, some rate shopping tools may come with a built-in parity feature that also enables you to make the necessary assessments.

Monitoring parity and identifying where instances of disparity occur is indispensable in today’s landscape.

With access to the right rate shopping tool, you can take a broad view and see where you are losing revenue by checking rates and identifying parity issues on all key OTAs and metasearch channels, in real time. By eradicating manual checks and having parity insights displayed in a simple dashboard efficiency.

As a sense-check and for a more holistic picture, consider viewing your parity dashboard alongside native OTAs’ data and other revenue management tools, such as your PMS. In doing so, you can look at revenue and profit projections with and without the worst offenders, and adapt your strategy.

Rely on data analysis to inform your response to parity issues

Having the right tools is crucial, but establishing a successful strategy to tackle disparity requires a data-centric approach.

But are you looking at the data in the right way? Interpretation is all important when determining how to respond to parity issues.

These are becoming the industry-recognised terms for top-line parity analysis:

Win – Percentage of arrival dates where the lowest priced channel is more expensive than Brand.com, i.e. your hotel’s own website

Meet – Percentage of arrival dates where the lowest priced channel is equal to Brand.com

Loss – Percentage of arrival dates where the lowest priced channel is cheaper than Brand.com

Delving into your analysis, it’s easy to get overwhelmed with the amount of data available. Consider the 80/20 rule, meaning 80% of the impact can be found in 20% of the properties. By focusing on these issues, determining the root cause and taking action, you can directly improve your parity.

Clearly, ‘loss’ figures are those that should sound the loudest alarm bells, but beware too many ‘wins’ at too high a differential relating to the same OTA, as this could indicate problems to come.

Create an action and escalation plan

After isolating your most pressing parity issues, it’s best to have a system in place that differentiates between them. Some losses may be smaller than others, some offenders may have multiple violations, while others only have one; it’s important to acknowledge this and act accordingly.

Start with giving warnings to let the offending party know there is an issue and an opportunity to correct it. If a warning proves ineffective then consider a step up to finding them, and decide at what level you choose to take that action.

You may need higher fines if parties continue to undercut with lower rates, and to increase your shops to spot more quickly if there is continued disparity.

Some hoteliers also tackle things from a non-financial perspective. They’ll approach the distributor and look for diplomatic ways to persuade them they’re displaying their hotel’s branding or messaging wrongly, or they’ll try to persuade the wholesaler to sell more inventory that isn’t then sold on publicly.

Your escalation process should ideally be underscored by taking steps to educate offenders. With more knowledge on parity, or even the awareness that they are being monitored, you may find that there is more effort made by offenders to remain in parity without further warnings.

You can choose to send educational material on parity along with your warning emails, or send out material to educate all your properties or distribution partners as a whole.

Ultimately, the right action varies depending on the OTA (or wholesaler), and the issue that needs to be addressed. So act with caution and nuance, and back up your case with data.

Build a case and contact the offending parties

The ease of addressing parity problems depends on your relationship with the supplier. With contracted OTAs, approaching parity should be relatively straightforward if handled sensitively.

But, given the contractual requirements around wholesaler relationships, and that there are no contracts between hotels and non-major OTAs, wholesaler-related parity is more of a challenge.

One way to potentially address this challenge is to carry out a test online booking. This helps to uncover and identify the source of parity issues, allowing you to discover which wholesalers redistribute your rates to which OTAs. A test booking will provide a bulletproof business case against wholesalers and make it easier to enforce fines.

With a lot to address, it’s crucial to take action in an efficient and timely manner. Disparity offenders may be OTA extranet promotions, wholesalers or hotels within your own portfolio, so a centralized platform that allows you to differentiate between them is helpful and saves time.

Some hotels may use an internal system to communicate with their properties, whilst sending emails to offending OTAs. A platform with workflow automation is useful here as it allows communication from one system with clear branding and templates.

Review your relationship management practices

You’ve taken action on your hotel parity, but to make this plan truly effective you need to examine your distribution and pricing strategy with OTAs and wholesalers overall.

Look into the value that additional partners bring and consider moving from static rates to dynamic rates, as well as moving away from ‘guaranteed’ sales. In the case of OTAs, try to negotiate the lowest commission possible – which will in turn boost your cross-channel distribution.

To try and minimize the chances of recurring parity problems moving forward, you should work on your strategy for selecting wholesalers.

Be clear on the type of distribution you’d like to achieve with a wholesaler, explore their different strengths, and make a selection. By being more exclusive in your partnerships, parity may be easier to monitor as there are fewer contracts to manage and different types of booking process.

Whether you’re fixing an existing relationship or forging a new one, transparency should be integral. Stress the benefits openness will have for both parties in meeting your agreed distribution objectives. By having a more productive and collaborative partnership this can only enhance your distribution strategy overall.

This action plan should provide a solid foundation for you to take action on parity in a simple, but robust manner.

For more on parity visit our resource center, where you’ll find debates on parity and distribution.

Lighthouse: The ultimate parity system aid for hotels

Lighthouse is an industry leader in all things related to data and analysis for revenue management, distribution and hotel management, not least in matters of parity.

Parity Insight, our specialized product for groups and chain hotels, offers:

This suite of tools can discover and solve parity issues across your portfolio by:

• Monitoring of over 2 billion rates globally every day

• The discovery and resolution of parity issues across your portfolio

• Tracking parity performance on OTAs and metasearch

• The automating parity issue fixes

By visualizing all your parity discrepancies across the web, both with a single hotel view solution and a consolidated dashboard you can manage and track your parity to better control your distribution and reduce your reliance on OTA business.

Parity Insight is trusted by 8 out of the 10 top hotel chains to manage parity issues. It has been rated the #1 parity solution for three consecutive years by Hotel Tech Report.

About Lighthouse

Lighthouse (formerly OTA Insight) is the leading commercial platform for the travel & hospitality industry. We transform complexity into confidence by providing actionable market insights, business intelligence, and pricing tools that maximize revenue growth. We continually innovate to deliver the best platform for hospitality professionals to price more effectively, measure performance more efficiently, and understand the market in new ways.

Trusted by over 65,000 hotels in 185 countries, Lighthouse is the only solution that provides real-time hotel and short-term rental data in a single platform. We strive to deliver the best possible experience with unmatched customer service. We consider our clients as true partners—their success is our success.