Who is in control of your rate?

The recent turn-around by Tripadvisor on its PLUS subscription model has once again put the spotlight on the issue of rate control.

Tripadvisor PLUS, introduced in the USA in June, allowed subscribers (who paid $99) to get access to discounted hotel stays and perks. The attraction for hotels was that there was no commission charged. All Tripadvisor asked for was a discount and perks for their subscribers.

However, rate parity was an issue, since Tripadvisor Plus was enticing people to sign up by openly displaying discounted room rates that were lower than the publicly available ones on the hotels’ websites. Now, following a kickback from hotel chains, the model has been changed to a cash-back benefit for subscribers, redeemable upon check-in.

But Tripadvisor Plus is just one of many threats to the control that hotels should have over their own rates. Hotels have long struggled and battled with OTAs to protect their rates from being publicly discounted and distributed to other partners.

New Distribution Models

New players in the game are a cause for yet more concern. Revolut, the popular banking app with 10M+ subscribers, offers instant cash back of 7.5%-10% for hotel stays via Hotels.com, diluting any best rate offer when you book direct. N26, another global banking app, partners with Booking.com to offer additional cash back options, and Booking Genius members get to top up their current discount with the additional 10% offered by N26.

Regaining Control

Hotels may not be able to control who OTAs partner with to sell their rooms, but they can certainly control the rate and importantly the availability that they give to OTAs. They need to think smarter when distributing to 3rd party OTAs and be more aware than ever of how their inventory may be sold on or discounted, quite publicly. Setting a 2 night minimum, refraining from handing over their best selling room types and avoiding uploading availability too far in advance should all be considered.

The bottom line is that rate parity is NOT enough anymore! Hotels need to beef up their book-direct benefits and shout them from the hilltops. Hotels need to be fully aware of the total value that third party bookers are now getting when setting their own direct booking benefits. Unless the total book-direct value is better than the combined value the booker gets from booking via Tesco or Revolut or N26 for example, then the booking will be lost to the OTA with higher commission paid for the stay.

In a market where pent-up domestic demand can be tapped into direct, there’s no excuse for filling your hotel via high-cost third-party channels.