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The French economy minister launched a legal action a few weeks back against the hotel booking site Booking.com. Arnaud Montebourg has called into question the alleged rate parity clause imposed by the Priceline-owned website. NB: This is an opinion by Arthur Waller, a partner at France-based PriceMatch. A double-or-nothing bet for the hotel business Up to now, this rate parity clause, even if it was circumvented by many hoteliers, constituted a clear and standard contractual framework for consumers and simplified the life of hoteliers. The demise of the rate parity clause is a great opportunity for hoteliers to regain control over their distribution. By practicing the lowest price on their website, hoteliers provide consumers an obvious reason to book directly. However, if the end of rate parity is poorly managed by hoteliers, it could get worse:
- OTAs have a lot of information about their customers and are already starting to hire data scientists.
- As hoteliers adjust their prices to changes in demand, there’s no reason why OTAs don’t adjust their commission rates to that demand and other parameters.
- We already have seen some OTAs showing lower prices for the same hotel on the mobile app or for consumers automatically redirected from a metasearch engine.
- Hoteliers will have to react quickly to make sure that they offer the best price on their website.
- With the growing importance of metasearch engines (in 2013, for example, more than a third of consumers used Trivago, Kayak or Google Hotel Finder) price comparison by consumers happen extremely quickly.
- Online auctions through such metasearch engines, social networks and websites such as Tripadvisor will become more and more dynamic and competitive.
- OTAs have an advantage over hotels: diversity of their supply. That diversity, combined with a client loyalty program, could be very powerful.
Negotiating a change in the model? It will be about being able to implement a complex, dynamic and reactive pricing strategy. Optimizing the gap between two room types, two rate policies or two lengths of stay will become crucial. Furthermore, customer-centric revenue management will develop very quickly, pushing hoteliers to make better use of the data stored in their PMS/CRM and to take advantage of the fact they have a direct physical contact with the end-customer, unlike OTAs, when they stay at a property. It will be important to know exactly when to open, close or limit sales on each channel. Or how to adjust prices between channels depending on their commission fees and their production level. This will be carried out dynamically, depending of the night type, demand level and many other variables, in order to maximize the net RevPar of commissions. The game has began. He who can yield last, will yield longest.