B&B management basics: What is rate parity?
August 13, 2019
Rate parity plays an important role in managing your brand, especially in the online marketplace. Here’s everything you need to know when managing your room rates and distribution:
What is rate parity?
It is a policy that is highly beneficial to OTAs, that have access to a vast number of travellers and require commission rates from B&B operators.
The idea behind rate parity is that it will level the playing field for all distribution agents, but the perception is that it ultimately punishes B&Bs that earn less revenue when the majority of their bookings come from larger distribution agents charging hefty commission rates.
The dangers of rate parity
Rate parity can sometimes put B&Bs at a disadvantage because:
- It prevents B&B operators from offering discounts and promotions to guests for booking direct.
- It minimises the number of direct bookings a B&B receives. The majority of travellers will simply book through an OTA or another distribution agent, because the room rate is the same and the process is often simpler.
- It can cause tension between B&B operators and distribution agents. Rather than feeling like a distribution agent is an extension of their brand, the agents begin to feel like a competitor.
Is rate parity legal?
The majority of countries around the world consider rate parity to be a completely legal business practice, despite the fact that it is detrimental to small business owners like B&B operators.
However, there is a movement in Europe in which several countries have begun to make rate parity illegal in hopes of levelling the playing field between large distribution agents like OTAs and independent accommodation operators. The countries where rate parity is currently illegal include Austria, France and Italy. Other countries are in the process of banning rate parity policies, including Switzerland and Belgium. Germany has also enforced stricter regulations on rate parity.
How to manage rate parity
Unless you operate a B&B in one of the countries that has banned rate parity, the fact of the matter is you will still have to deal with these stringent policies. Luckily, there are things you can do to help improve your success despite being forced to keep consistent rates across all of your booking channels.
Here are a couple of tips:
- Create a closed group of specific guests, such as rewards members. You can offer special rates and discounts to these members without having to apply those rates across every distribution channel.
- Design packages that will entice travellers to book directly with you. Packages can include extras like tours, experiences, upgrades and more.
Rate parity is going to continue to be a hot topic in the B&B industry for the months and years to come. You can read more on it here.