Last week we learned more about important concepts in the area of Distribution and about the...

Last week we learned more about important concepts in the area of Distribution and about the job of Revenue Manager. Two of the most heavily negotiated points in the distribution channel agreements are Last Room Availability and Rate Parity. Which of these do you feel is the most beneficial to the hotel, and why?

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Expert Solution

In case of the Last Room Availability (LRA), there is a mutual contract entered by the Hotels and the Agent, to be granted the room at a certain rate. Therefore, even if last room is available with the Hotel, the Hotel has an obligation to sell it only to that Agent as per the contracted terms and to that extent, there is a limited control of such a Hotel towards the decisions pertaining to the booking and price fluctuations. On the other side, in case of Rate Parity, the room rates shall remain same across all the Distributors or Agents who contract with the Hotel. The condition becomes concerning because whether it be on Hotel’s official website or through Online Travel Agencies (OTA), the room rates shall remain constant. The clients may choose to directly deal with the Hotels or to get it through the OTAs, as there shall be parity in rate. This may be burdensome for the Hotel because the Hotel shall need to pay a certain rate of commission to the OTAs from part of their revenues if the clients book it through OTA. Therefore higher the commission, lesser shall be the scope to earn high revenue on the part of the Hoteliers. The Hoteliers can only profit more when the clients directly deal with them.

Hence, I feel for the Hotel, Rate Parity may not be much beneficial owing to the uniformity in rates across all distribution channels but the burden of paying commission to the OTA thereupon from their revenues. In case of the LRA, it shall be hence beneficial for the rate as entered in the contract, shall remain unchanged and binding.

keosha answered 1 year ago

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