The Importance of Rate Parity for Travel Brands

Importance of Price Parity for Travel Brands

When it comes to pricing, travel brands are currently facing two sets of online competition. The first is fellow travel brands within their competitive set, with whom they’re vying for visibility and popularity among the same group of customers. The second is their own rates, as represented across the rest of the web from other advertisers.

The travel industry is notorious for the proliferation of systems and services that its members have to navigate on a daily basis. It’s never as simple as one room, one rate; there are a multitude of distribution technologies pulling data from each other at any one time, and it is easy for pieces to fall through the cracks.

But maintaining rate parity is crucial for both maximizing the value of advertising spend and for achieving a healthy conversion rate.

Competitive pricing for metasearch

Metasearch publishers are becoming an increasingly larger piece of the online travel pie. The number of customers interacting with a metasearch site during their online hotel booking journey is growing year over year. Appearing competitively in the search results of these sites will become more crucial as time goes on.

The rate displayed by a hotel advertiser can have a much bigger impact than simply attracting a customer. Being price-competitive can also lead to:

  • Higher click-through and conversion rates
  • Lower cost per click, and improved positioning
  • More profitable campaigns

How? Let’s find out.

With competitive pricing, users click through and convert at higher rates

According to a recent study, 61% of consumers still consider price to be the most important factor when booking a hotel. It’s no surprise that when users see a lower price, they’re more likely to click through to a hotel’s listing. The uplift on click-through, however, can reach as high as 20-30%.

This effect can be magnified, depending on the treatment of the lower rate by the publisher. For example, Google automatically applies a ‘deal’ badge to significantly lower prices, while TripAdvisor and Trivago both display ‘Top Deal’ badges to entice customers to click through.

Trivago Top Deal

Additionally, once users click through to the advertiser’s site, they are 10-20% more likely to convert on a competitive price. From the consumer’s perspective, once the lower price is confirmed, there’s often no need to do further comparison.

On the flip side, non-competitive pricing can really harm conversion rates. From Koddi’s own research, about 1 conversion point on average is lost for every $10 in price non-competitiveness.

Price Parity

Publishers reward accurate, competitive pricing

Many publishers consider pricing in their algorithms to determine both positioning and cost per click (CPC). In a best-price-wins auction, the lowest-priced advertiser not only obtains ideal positioning, but they obtain it at a lower cost than competitors. On average, competitive pricing can actually lead to a 10-15% decrease in CPCs.

Even in auctions where the best price doesn’t always win, competitive pricing is likely to improve an advertiser’s quality scores. When users are clicking through and converting more frequently (because the price is competitive), the advertiser is likely to receive a boost to their quality score. This can lead to increased impression share and visibility.

What’s really important to note is that, while displaying a lower price can be hugely beneficial, the pricing has to be accurate. Displaying a lower price on a metasearch site that’s not actually bookable once users click through will have an overall negative impact, as it can decrease an advertiser’s quality score and harm the entire campaign.

Winning on price leads to higher conversions

Having the best price available across the web is crucial to conversion, not only on metasearch publishers but across the digital landscape.

In one study, Triptease found that UK users, converting at an average rate of 1.9%, increased to a 3.1% conversion rate when the site advertised the most competitive price. For users in the US, the conversion rate increased from 2.6% to 3.1%, while Chinese users increased from 3.8% to 4.2%. The competitiveness of prices had a clear impact on conversion rate across users in different countries.

Rate disparity can be monitored

So, when can travel brands expect to be competitive and when will they be losing to a competitor?

Although pricing trends can vary from brand to brand, the best rates tend to be displayed closer to the check-in date. The graph from Triptease below shows the increasing price disparity that occurs when a consumer is booking further out from the check-in date (up to 100 days).

Triptease Graph on Rate Parity

Since nearly one-third of searches by North American travelers are made more than 60 days in advance, this means that it is important for brands to ensure that they have the best rate for future dates. Doing so will not only increase their bookings but also back up their ‘best rate guarantee’ and build trust with their customers.

Price matters and experience does too

While having the right price will get consumers to an advertiser’s site, it is also crucial that the landing page is welcoming, useful, and personable to secure the booking. Price may be the biggest factor in a customer’s decision-making process, but experience is increasingly running a close second.

With the rise of metasearch publishers as a significant step in the booking journey, marketing activity and parity management are increasingly dovetailing in importance. A consumer’s interaction with a brand will be bound up with both how it’s represented by pricing, and also how the brand is presented online. The guest experience goes hand in hand with competitive pricing.

This post was written in collaboration with our friends at Triptease. Triptease provides a Direct Booking Platform for hotels looking to drive conversion on their site. See more of their research on their blog.