Alex Dietz, Principal Industry Consultant, SAS Institute believes that from a revenue management standpoint, rate parity does not serve the best interests of a hotel property. “This is because rate parity, by its very definition, is restricting the property from managing price – reducing prices to attract price-sensitive segments, while leaving pricing higher for price-insensitive segments,” he says. And, while some hotels prefer to maintain rate parity as their own strategy, many hotels run into rate parity as a consequence of dealing with the larger online travel agencies (OTA), who require it as part of their distribution agreements. Overall, OTAs produce a small portion of overall hotel rooms demand[1], so for this channel to be effectively dictating pricing actions in channels that impact a much larger portion of bookings and revenue is, Dietz believes, a bit like the “tail wagging the dog”. Furthermore, since OTAs don’t always have system capabilities that match those of the hotel, hotel revenue managers often complain they spend too much time “chasing their tail” to make rates match in disparate systems with unequal capabilities. “While I have heard arguments that rate parity serves the consumer by reducing shopping complexity and confusion, I also do not believe that rate parity serves their best interests, either,” stresses Dietz, adding that in the long run, the consumer is best served by efficiency. By this he means, lowering the costs of services over time, and rewarding the most effective provider of services. According to Dietz, rate parity distorts both of these effects in the distribution market, distorting competition (by eliminating the ability to differentiate on price) and thereby reducing the effectiveness of the market to drive efficiency. Get the full story at EyeForTravel Read also "IHG says a best rate guarantee drives revenues and loyalty" at EyeForTravel