How OTAs react when hotels charge above market rates

The latest World Parity Monitor reveals rising risks for independent hotels as non-major OTAs aggressively undercut inflated direct prices

As hotels sharpen their revenue strategies in an increasingly competitive landscape, the latest World Parity Monitor (WPM) from 123Compare.me reveals how a hotel's price positioning relative to its market average influences OTA behavior - especially in terms of rate undercutting. The April 2025 report warns that pricing above the market average significantly increases the likelihood of OTAs, particularly non-major ones, undercutting direct rates. Independent hotels are especially exposed to this risk, emphasizing the need for vigilant pricing strategies.

Key takeaways

• High prices trigger undercuts: Hotels priced above the local market average face higher "Lose rates" - the rate at which OTAs undercut the hotel’s direct price. This effect is most pronounced for independent hotels.
• Non-major OTAs are more aggressive: While major OTAs like Booking and Expedia maintain stable undercutting behavior, non-major OTAs increase undercutting as hotel prices rise, posing a greater risk to price parity.
• Independent hotels at risk: At more than 40% above market average, independent hotels saw Lose rates jump to 41.8% with non-major OTAs - much higher than the 34.0% observed with major OTAs.
• Overall undercutting still common: 75% of hotels in the sample were undercut by at least one OTA. Expedia’s Lose rate exceeded 20%, reversing a recent trend of moderation.
• Seasonal pricing trend: Direct rates increased 6.3% from January to April 2025 vs. the same period in 2024, reflecting a typical seasonal upswing influenced by events like Easter.
• Competitive advantage in lower segments: The direct booking channel performs best in lower and mid-price segments, showing stronger rate parity and higher Meet rates at those levels.

Get the full story at World Parity Research Group