Speaking to hoteliers at recent events, a common topic of conversation was surrounding hotels being undercut by unpackaged wholesale rates through third parties. The general consensus was that maintaining rate parity was now more crucial than ever, with some alluding to the fact that they were not sure how to address this issue and that it was an increasing concern.
All hotels around the world are affected, but its hoteliers in Asia who are currently feeling it the most, due to wholesale rates being particularly prominent within Agoda and Ctrip. Rumour also has it that Expedia is set to go this way too, but the major innovation in this space can currently be found within the introduction of Booking.com’s Booking.Basic.
While supposedly under a test period, rooms on Booking.com can now be provided by third parties — meaning a new threshold has potentially been crossed that could cause huge changes within the hotel industry. As Europe’s top OTA, the question posed is what would happen if Booking.com offered third party rates en masse and how would this affect hotels?
While this is set to play out, we talked to some of our Asian hotel clients to see how they have been affected by sites like Agoda. One hotelier we caught up with said that it’s a growing issue and that overall the hotels are unfortunately bearing the loss.
He told us “What we are now seeing is a double standard from OTAs. On the one hand they want to agree rate parity but on the other hand they are building their systems to move revenue away from us to their channels. In the end, the hotels are bearing the loss significantly.”
Another hotelier also commented how “The game of selling to OTAs is now becoming far more complex. It’s now much more difficult for us to control rates. Different packaged rates offered to wholesalers are now being used in channels where they are not meant to appear, and we have no control over this.”
The point he is alluding to is OTAs agreeing to contractual rates but only on the condition that these rates are competitive. If wholesaler rates are cheaper, then in theory they have a license to display them in a loophole that is extremely difficult for hotels to avoid.
The question is what can hoteliers do to address this problem?
Stricter agreements with distribution partners and more focused channel management could be one way but it would still be difficult to stopgap the leakage due to these contractual loopholes.
As we speak to more hoteliers at our upcoming events we’ll bring you more input on this subject at the top of the list for many hotel marketers.