Rate consistency across distribution channels is crucial but might be compromised if you apply promotions and discounts directly on individual OTA extranets.
Typically, what happens is:
A. Your team sets up ambitious prices in your PMS.
B. However, when your team gets scared of an empty grid, they notice powerful OTAs such as Booking.com offer multiple price reduction possibilities such as mobile discounts, app discounts, basic deals, early bird, last minute, boosting visibilities. They decide to go for it. These discounts vary per OTA, even LOS discounts do not match (see more in this article about price consistency across channels -technicalities.).
C. In the confusion, your direct website ends up much more expensive than the distribution channel. Usually, this is the opposite of what you want to achieve, if you prefer direct bookings.
And the whole complexity created and rates “all over the place” favor errors.
Illustrative example:
Let’s take illustrative weekly stay rates in for several units. Then apply offered discounts in the prevailing OTA extranets. The summary of the final guest-facing rates after applied discounts are seen in the table below.
Units | Airbnb | Booking.com | Direct Website |
Unit 1 | € 370 | € 393 | € 462 |
Unit 2 | € 341 | € 340 | € 341 |
Unit 3 | € 437 | € 445 | € 397 |
After applied discounts on the channels’ extranets, we might end up with direct bookings price above channels – our direct bookings are in danger because many guests do compare.
Or we can have the rate parity – rates on OTAs and on the direct website are (nearly) identical. In some countries, it is mandatory in theory- not in Europe.
But what most aim for is to have the rates on OTAs higher than on the direct website, to benefit from the billboard effect and make sure their returning guests who do compare do not find the stay cheaper on channels (often promised in a “Best rate guarantee”).
Do not put your direct bookings in danger, test your STR rates across channels now:
Pick several units of different categories.
Check the rates for selected dates, on your direct website, on main OTAs.
Compare the Rates on OTAs to your direct booking website.
Is booking direct with you more beneficial for a guest than on OTAs? Are you satisfied with the booking value difference of your website vs OTA?
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Once there, you can consider the following process:
1. Double-check that your management and team are aligned on the strategy– meaning in this case what should be the price difference between direct and each channel?
This could look something like this:
Objective | Favor direct | Rate parity | Favor channels |
Direct Website | 100% | 100% | (usually, this happens by mistake 😉) – but it does happen more often than you would like… |
Airbnb | 110% | 100% |
|
Booking.com | 110% | 100% |
|
VRBO | 110% | 100% |
|
It can vary by season depending on how sure you are to fill in etc. 😉
2. If the test above diagnosed inconsistencies on sample units, revisit all your units on OTAs and check whether you have set promotions of any kind.
a. Compare resulting prices to your strategy.
b. Consider if the promotions are really necessary.
Watch it – often your team put promotions in place for a good reason
– in practice, the original target price in your PMS was too high and they were not selling fast enough. So, erase the unnecessary promotions, but think twice about your target price and rather decrease the nightly rate or replace the promotion with a similar rate rule directly in your PMS (if the rule is transferred to an OTA).
In the process, you will find:
Some discounts do not make sense. For example, yes mobile is trendy, and it is the future. But why give a discount to someone who books on mobile vs. someone who books on desktop? Your target margin remains the same.
Some channel discounts make sense, and you usually cannot replicate them on your direct website. Booking.com enables discounts per guest country of origin, and you may have noticed that guests from some countries create much more trouble than others.
For example, vacation rental companies in Hawaii get more scams from local bookings than from Japanese bookings. And in Europe, we notice that all guests are equal, but some demand more or party more or are more confused than others (no valid cell phone, no command of English etc. make them hard to deal with without a front desk on-site).
Similarly, you might be OK with some extra discount in Booking.com for genius travelers because they are more travel-savvy and create fewer complications.
3. Double-check price differences across channels for all units.
4. Set up constant monitoring to make sure you keep up the good work in time.
5. Reap the benefits – extra bookings and margins.
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This article is the second of a series of 7 tests and a webinar.
If you manage more than 100 properties: we can calculate the 7 tests for you!