Price parity a major issue for European hoteliers

Hoteliers across Europe trying to drive direct bookings on their websites are being undercut by online travel agencies that are offering lower rates for their properties.

OTA Insight analyzed data across 146 countries and more than 28,000 hotels on brand, OTA and metasearch sites. For its report on the European market, it included a cross-section of major chains, independent and local chain hotels.

The analysis found that for independent and local chains, 52% of the time OTA rates were more competitive than the hotel’s website rate. For major chain hotels, the OTA rate was lower 44% of the time.

“There is still a massive gap between what the chains are saying … that they want to drive direct bookings, and the reality where there is still almost half of the time a better price on an OTA,” says Gino Engels, co-founder and chief commercial officer of OTA Insight.

Engels says the root of the problem is wholesalers who are now unbundling their heavily discounted rates and selling them to smaller, non-contracted OTAs. Those OTAs then push those rates online via metasearch sites, where they surface at the top of price comparison searches, undercutting rates offered by hotel brand sites and larger OTAs that have contracted parity clauses.

Non-contracted OTAs are out of parity 38% of the time for major chains and 46% for independents and local chains. The most frequently tracked channel for parity loss issues across all European hotels analyzed is eSky.com.

“This onward distribution shouldn’t happen,” Engels says.

“Hotels need to have better contracts in place. It should clearly state this rate can only be sold when it’s bundled.”

The shift in bookings from offline to online has caused wholesalers to lose market share, and Engels says by selling unbundled rates they are able to reclaim some of that, incentivizing them to continue the practice.

“That’s why it’s a cat-and-mouse game,” he says.

“The big global chains are going to the wholesalers and saying you can’t do this … and the wholesalers say they are working on it, but at the same time, it’s a big revenue driver for them.”