Distribution through third parties doesn t make things any easier. Intermediaries can sell hotels un

Hotel rate parity is an incredibly best western stovalls inn divisive issue, with investigations, litigation best western stovalls inn and confusion running rampant around the globe. best western stovalls inn Government officials, class action attorneys, hoteliers and online travel agencies (OTAs) are all engaged in a fight with considerable implications.
Hotel brands best western stovalls inn and OTAs rely on rate parity as the basis for consumer best price guarantees. Lawyers call it Resale Price Maintenance (RPM.) The uninformed call it price fixing. best western stovalls inn Only one thing is for certain passions run high and everyone feels they are somehow being wronged by the accusations of the other side.
The UK Office best western stovalls inn of Fair Trading (OFT), the French Competition Authority, the Swiss Competition Commission best western stovalls inn and Germany s Federal Cartel Office are all investigating the practice. Some opportunistic US lawyers are busy filing class action suits.
The allegations range from hotels artificially inflating consumer prices, to OTAs using their market power to prohibit hotels from giving competitors lower prices, to hotels colluding with the OTAs to limit the number of competing OTAs.
Oddly, as oppositional and contradictory as these charges may be, they pertain to exactly the same pricing mechanism. It would seem to be highly unlikely that all suppliers and distributors, both severally and collectively, are simultaneously leveraging their market power to constrain trade with each other.
What follows is an attempt to remove the emotion, evaluate the facts, and come to some reasonable best western stovalls inn conclusions about the nature of hotel rate parity it is easiest to think of it as a Manufacturers Suggested Retail Price. From here forward, I ll call it RPM, not only because that s the correct legal term, but just like automotive engines, when RPM s get high, there s often lots of loud whining, uncontrollable shaking, billowing smoke, best western stovalls inn and the emission best western stovalls inn of noxious gasses
A hotel product is not simply a room. It is actually the combination of 1) a room category (inventory) and 2) a rate plan (price.) This is very similar to an airline, where a comparable product is created by pricing an Economy class seat (inventory) with, for example, a Y (unrestricted,coach) fare.
A hotel room category best western stovalls inn is normally a variety of rooms or room types that may or may not relate to a grouping of physical room numbers. A room category may be based on the room size, view, building/floor, bedding, room features, amenity package, special services, accessibility, elevator proximity, renovation status, or frankly, anything else the hotel might come up with to efficiently manage best western stovalls inn its inventory.
Perennial favorite room categories for consumers are Partial Ocean View King and Run of House. Oceans best western stovalls inn are big. Partial views sound quite small. One always wonders if such a view requires standing on the patio chair to catch a glimpse of the ocean around the side of the hotel. Run of House simply means there is no specific type of room associated with the rate. However, any particular hotel s translation for ROH could fall anywhere between whatever we have left to tipping the desk clerk might improve your options
Hotel rate plans, best western stovalls inn on the other hand, define the actual monetary value assigned to each of these types of room. They are more virtual in nature. They might be associated with a specific distribution channel, transaction model, agency relationship, market segment, corporation, group, best western stovalls inn travel management company, advance purchase timeframe, yield tier, payment method, or again, any other pricing method that might work for the hotel.
But the complexity does not stop there. The length of stay may also influence product availability or pricing (for example, a three night stay may be priced less or offer greater availability than any single night stay during the same timespan. A good example is how LAs Vegas casinos control inventory and pricing over high demand weekend periods, or Dallas hotels best western stovalls inn manage inventory over Texas-OU weekend. These are called Full Pattern Length of Stay controls. Adding closed to arrival, minimum stay or no departure constraints to seasons or date ranges can add further dimensions to a hotel product line.
Additionally, there may be inventory allocations or rate fences established that close out availability of specific room categories or rate plans at defined occupancy levels, or after a certain number of reservations are booked for a specific category, plan and/or combination. The lead time prior to arrival is also considered when applying such rules.
Ultimately, this all winds up getting worked out at the property level, where there may be varying degrees of expertise or revenue management system sophistication to coalesce all these options into a logical, consumer friendly strategy. As a result, two similar properties could offer consumers best western stovalls inn dramatically different pricing structures and discounting strategies best western stovalls inn for a remarkably similar product offering.
Distribution through third parties doesn t make things any easier. Intermediaries can sell hotels under two methods First, is a retail model, where the hotel serves as merchant of record for the sale and an intermediary serves as its agent, receiving a commission in exchange for referring the sale. OTAs often call this the Commission or Agency Model. Booking.com typically sells hotels under the agency model, as do most traditional travel agencies.
The second is a wholesale model, with the intermediary serving as the merchant of record for the sale, marking up a net rate provided best western stovalls inn by the hotel. The intermediary profit is the difference between the net rate and the retail price charged to the consumer. This is commonly referred to by OTAs as the Merchant Model. It is the predominant method employed by Expedia/Hotels.com and most tour operators for hotel bookings.
But not all merchant model bookings are created equal. A net rate for a wholesaler selling a room-only booking might float at 15% under the hotel s best available rate, where a wholesale package best western stovalls inn rate might receive a 25% discount. An opaque rate, used to move distressed inventory through Priceline could see a 50% price reduction.
best western stovalls inn Unlike consumer package goods, the Manufacturers Suggested Retail best western stovalls inn Price is not simply $299 for a 32GB iPhone 5s until Apple decides to release it next model. Hotel prices can change instantaneously based on perceived fluctuations in market demand, competitive actions or the number and pricing of reservations on the books for various stay patterns best western stovalls inn for various arrival dates streaming into the future.
The merchant model was born decades ago (unquestionably as early as the 1950 s,) when tour operators contracted hotel rooms at net wholesale rates. Those rates were explicitly made available only for sale in combination with flights within inclusively priced travel packages. The wholesalers best western stovalls inn (often referred to as consolidators) were free to offer discounted package pricing that was lower than the combined retail prices of the individual travel components.
In some cases, the discounts could be so deep that one of the travel components might appear to be offered free of charge. This was acceptable to the hotels and airlines as it was impossible for consumers to determine the underlying pricing of the individual components.
Room-only best western stovalls inn hotel sales at these net rates were explicitly forbidden. best western stovalls inn If the tour operator did offer a standalone hotel product, those rooms could be sold on a commissionable basis, or at higher best western stovalls inn (lower percentage discount) net rate plan quoted by the hotel, if the wholesaler desired to sell the room naked and maintain its role as merchant of record.
In some cases, hotels might agree to deeper discounts/higher commissions best western stovalls inn for international guests in consideration of the potential to capture incremental sales and the inability for domestic best western stovalls inn consumers to learn of special pricing made available solely to those living on another best western stovalls inn continent. This was especially true if retail distribution was primarily channeled through retail travel agencies.
Over the years, a strict policy was applied to negotiated best western stovalls inn corporate, preferred travel agency, consortia, group and government rates, as well as for complimentary or bartered room inventory. The policy fundamentally forbid these organizations from the onward-distribution of discounted best western stovalls inn rates to third parties or unaffiliated consumers at rates that undercut the hotel s retail pricing.
To a large extent, these policies still remain in effect today. it is what keeps every travel agency from quoting a unique rate that is different from the rate quoted by the hotel or any other travel seller on the planet. If such a policy was allowed, consumer confusion would be rampant, with the introduction of tremendous market inefficiency surrounding a low price search process.
One change from the distant past was the advancement of technology that allowed pricing to be instantly changed at the discretion best western stovalls inn of the hotel. Earlier, hotels would commonly negotiate best western stovalls inn tour operator and corporate rates on an annual basis, best western stovalls inn often in the summer preceding the year to be contracted. This resulted in static rates extending out 15+ months that could leave the hotel uncompetitive if they overestimated demand, or leave money on the table if demand was underestimated.
Worse yet, if hotels adjusted their retail pricing based on updated demand forecasts at some point throughout the year, previously contracted tour operator margins could get squeezed if prices were reduced, or wildly inflated if retail pricing was raised.
Fortunately, once travel agencies, OTAs, corporations and tour operators were able to electronically interface with hotel reservation systems to interactively transmit rate and availability queries, new relative pricing structures were developed. Discounted and wholesale rate plans could then be priced at a percentage off of the BAR (Best Available Rate,) or the lowest generally available, published rate for a particular stay pattern.
The whole pricing structure may also be pegged to vary based on increases/decreases in the BAR.