Tariff Parity as a Tool for the Institution’s Profitability

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Managers working in Saudi hotels attach much importance to such an element of revenue management as rate parity since it can affect the profitability or an institution and its relations with clients. Business administrators should bear in mind that customers can make reservations by using various distribution channels. In many cases, hospitality organizations rely on online resources in order to promote their services to potential buyers. These websites are critical for attracting new customers. As a rule, hoteliers attempt to ensure the consistency of prices across different distribution channels. This issue is particularly important when one speak about the use of the third-party websites on which one can find the information about hotels located in a certain region, country or city.

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One can say that this consistency is important for clients who try to seek the fair price. The results of this study suggest that managers can apply different techniques when using direct and indirect distribution channels. In particular, some practitioners emphasize the parity of prices between direct and indirect channels. In this case, one of the main tasks is to make sure that clients have a positive attitude toward the hotel. This goal may not be achieved if buyers know that an organization can charge different fees for the same service. As far as Saudi hotels are concerned, one can point out that customers can book rooms by using such websites as Agoda.com or Booking.com in order to find a hospitality institution that can best meet their needs. These online resources are of great value to the revenues managers of these organizations. Judging from the observation, business administrators attempt to reduce the discrepancy in prices between direct and indirect channels. This policy is vital for maintaining better relations with current and potential clients.

Nevertheless, in many cases, these managers prefer customers to use the websites and call centers of the hotel. They do want to be dependent on intermediaries. It should be noted that this strategy is supported by academic literature. Scholars believe that hospitality institutions should decrease their relieance on third-party websites because this strategy does not enable organizations to increase the customers’ affiliation to a hotel (Boyes & Melvin, 2012, p. 487). This is one of the main points that practitioners should bear in mind while designing the pricing policies of their hotels. As it has been said before, the clients can dissatisfied with the services of a hotel, if they learn that they could have paid a lower price. This is one of the main pitfalls that business administrators should not forget about.

One of the tendencies that can be observed is that almost in every case the price published at a hotel website does not exceed the price published at Agoda.com or Booking.com. This practice is adopted by the majority of practitioners. Again, this strategy is based on the assumption that customers should first look for the services of a hotel without relying on the intermediaries. Again, this policy is supported by researchers who study the application of yield management (Pizam, 2012). However, it should be kept in mind that these results may not be conclusive because the observations were made during a relatively short period. Therefore, the findings should not be generalized and applied to the entire industry.

One can argue that business administrators have to resolve an important problem. On the one hand, they have to attract customers with the help of the websites that belong to the hotel. It is much better when customers directly refer to the information center of a hotel without doing any extra search on the Internet (Boyes & Melvin, 2012, p. 487). However, at the same time, they need to use the services of online companies that help customers find a hotel. This practice is important for attracting new clients who only have to choose a certain hospitality institution. Very often, these intermediaries become almost indispensible. Thus, in some cases, hoteliers agree with the idea that some of the third-part websites can publish higher prices (Pizam, 2012). This policy can be justified if one is speaking about a popular online resource. Therefore, it is possible to say that the practices of business can be driven by different needs. Moreover, other hoteliers should be aware of these challenges.

These cases suggest that rate parity is of great importance to managers in Saudi hotels. These professionals have to reconcile two priorities, namely the needs of customers who want to pay a fair price and the necessity to maximize the revenues. Nevertheless, at the same time, they want to promote the distribution of their services with the help of intermediaries. One of the main trends that can be identified is the effort of revenue managers to reduce the discrepancy in prices that often exists between direct and indirect distribution channels. Furthermore, they understand the importance of promoting the websites that are directly affiliated with a hotel. These are the main tendencies that should be considered.

Reference List

Boyes, W., & Melvin, M. (2002). Microeconomics. New York: Cengage Learning.

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Pizam, A. (2012). International Encyclopedia of Hospitality Management. Boston: Routledge.

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BusinessEssay. (2022, April 29). Tariff Parity as a Tool for the Institution's Profitability. Retrieved from https://business-essay.com/tariff-parity-as-a-tool-for-the-institutions-profitability/

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BusinessEssay. (2022, April 29). Tariff Parity as a Tool for the Institution's Profitability. https://business-essay.com/tariff-parity-as-a-tool-for-the-institutions-profitability/

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BusinessEssay. (2022) 'Tariff Parity as a Tool for the Institution's Profitability'. 29 April.

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BusinessEssay. 2022. "Tariff Parity as a Tool for the Institution's Profitability." April 29, 2022. https://business-essay.com/tariff-parity-as-a-tool-for-the-institutions-profitability/.

1. BusinessEssay. "Tariff Parity as a Tool for the Institution's Profitability." April 29, 2022. https://business-essay.com/tariff-parity-as-a-tool-for-the-institutions-profitability/.


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BusinessEssay. "Tariff Parity as a Tool for the Institution's Profitability." April 29, 2022. https://business-essay.com/tariff-parity-as-a-tool-for-the-institutions-profitability/.