February 09, 2012

Rate Parity and Rate Integrity vs. New Online T/A



Founded by brothers Nicolas and Yann Arthur, this low cost online travel agency is bringing some more challenges for General Manager and Revenue Manager, to ensure Hotel Best Rate Guaranteed and Rate Parity are protected for hotels clients. Olotels.com had partnerships with the principal wholesalers and tour operators, based on the fact that their clients already wished to obtain more competitive rates while taking advantage of the web's immediacy for booking hotels.

In 2010, Olotels had 10 participating suppliers, representing 95% of the world's offer, who are integrated in our reservation system, thus guaranteeing the best rates.

Olotels.com has price guaranteed and also feature their hotel price listing including all taxes and service charges. They also have a dedicated 24/7 service with reservation advisors based out of France and Romania, to make reservation.



With an unequalled consolidated hotel offer of 200,000 hotels, at 19,000 destinations in 170 countries, this online travel agent is a troubleshooter for any companies engaged in Best Rate Guaranteed protection.

We compared over 20 major hotels in United Arab Emirates, named it, Jumeriah Group, The Address Hotels, Radisson, Best Western, Ramada, Hyatt, Sheraton, and independent hotels, Olotels.com is undercutting everyone.

In a strategy of rate parity, how could this be possible that a Deluxe Room on my OTAs (Hotelier manage their rate through extranet management) and branded website are aligned for the same price, and then out of nowhere Olotels.com has cheaper rates. Could this be the fact that Tour Operators or DMC are distributing their contracted rates to Olotels.com without the hotel getting to know about it? well there are dozen of reasons, because the world is not perfect.

Let’s face it, today we are trying to control hotel channels, but there will still be new business models coming up. We have been staying in and consulting for 3 and 4 star hotels going around with rate parity and rate integrity concept. The world is changing…

From our experience we have found that hotels who have applied a more dynamic and flexible strategy are the ones achieving the best results. The hotels who applied our solutions for re-defining their BAR pricing, are on top of their market. But realistically we are competing in a world that goes in all directions, so we have to be smart about it, not just simply discount across the board.

Ok great… But what is a smart strategy? How could it work? Because in the end you still have to fill rooms. Every hotel is paying a property rent (index on all room inventory). It is too easy to stand on the side and say, discounting is not the solution. A theory is not enough. It won’t get you there. You need to get creative, and be flexible.

Here an idea of a strategy that has worked very well for some of the hotels we consult:
* Rate Parity: same rates published on all channels, it s up to you to choose when to please your market manager for special promotions,
* Rate Integrity: make sure the rates that you published reflect your hotel property, it does not mean that someone is selling 30% lower to you, that you have to follow,
* Pricing with room restrictions: If you retrieve your length of stay statistics and analyze your historical data, you may offer a slight discount on 2 night stay on a specific days of the week,
* Early birds, advance limited time offers: Retrieve your booking window statistics and publish a special offer before your competitors,
* Opaque Pricing: Hidden discounts through non-branded offers. Use opaque channels like Priceline to unload distressed inventory. They provide reports showing you exactly what demand volume exists at each price point.
* Consortia Pricing: Retrieve from your PMS, statistics from Consortia companies (Hogg Robbinson, American Express, BCD Travel, Carlson Wagon Lit...) and study which implants are giving regular business to your hotel. See how much they are booking your Best Available Rate.

To avoid to discount to deep to achieve occupancy, the name of the game is driving demand. The role of the revenue manager therefore has changed. Collaboration and working along with the marketing manager has become the key factor. Working a CRM strategy is also necessary to ensure we target the right offer to the right client for the right day.

If you really want to be on top of the games, you should really invest. Lets take a scenario to define your budget. A hotel of 120 rooms, running at 90& occupancy at an ADR (Average Daily Rate) of AED 350 which gets 40% of its business through 3rd party travel agencies and 30% through FIT Wholesaler production. Calculating the commission and net rate discount, we are talking of AED 1,134,000. Converting 10% of this business into direct sales would be acceptable at a price of AED 113,400 no?

We applied this approach to some hotels we consult, and their revpar is outperforming last years.

To win, you need to be different, take risks. Don't just follow the market, analyze and do it rights.

Maxime @ RSVP Hospitality

4 comments:

  1. Wonderful blog & good post.Its really helpful for me, awaiting for more new post. Keep Blogging!








    Yield Management

    ReplyDelete
  2. Right. But how can I prevent Olotels from selling rooms B2C? Rooms they buy from wholesalers are not supposed to be online. Fact. I should also be entitled to choose who is selling my rooms.
    Thanks
    EC

    ReplyDelete
  3. Do you know how to identify who is the wholesaler behind those rates?
    i.e i'm selling for 100 eur, and olotels.com offers 3 different rates each < 100 eur ...

    ReplyDelete
    Replies
    1. Sure contact us at info@rsvp-hospitality.com with your details and we will assist you.

      Delete

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