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Newton's cradle with Earth globe

If you use online travel agencies (OTAs) to generate business for your hotel, you’ve inevitably come up against the term Rate Parity. In fact, you likely have a rate parity clause in your contracts with some or all of your OTAs. What does Rate Parity mean? It means that wherever your guests book a room in your hotel, the rate must be the same. It doesn’t matter if they book on HRS, Expedia, Lastminute.com, your own website or they phone up your call center. In all cases, they should get the same offer at the same rate.

At first glance, this sounds like a good policy to follow. Guests may feel comfortable booking your brand anywhere at any time, knowing that they are always getting the best offer.

On the other hand, this strategy doesn’t work well if you want to convince guests to book over certain channels such as your own website. After all, the guest has no incentive to shop around.

But in fact there are some ways to motivate guests to book directly and still maintain rate parity. Let’s look at a few.

  1. Rate parity only applies to “published rates” that do not have special qualifications, like, affinity rates or limited audience rates. Examples might be negotiated corporate rates, special email offers to a non-public list or your in-house special offers list. Also, opaque channel rates, like Priceline, are not subject to rate parity rules. So you can increase direct bookings by explaining to your corporate customers, for example, that they only get their special rate by booking directly.
  2. On high-demand nights, close off the OTAs completely and take only direct bookings. If the city is full, people will still find you via your website. With proper demand forecasting or sometimes just common sense, you can predict which nights will have high demand long in advance and close off the OTAs early on.
  3. Since the OTAs have to fit your rates into their booking engine, they may not have the wide variety of product offerings that you have on your own site. For example, they may not offer some of your value-added packages. Obviously, there is no possibility for rate parity on these packages. Train guests to book at your site by offering special packages that are not available at the OTAs. For example, you may have a standard room on your site and on the OTA at the rate of €100. But you could offer that same room on your website as part of a package with free internet and free breakfast for €109 and still maintain “rate parity.”
  4. Standard is not always standard. You may have a lot of standard rooms in your property, but some of those standard rooms are slightly better than others, e.g. higher floor, better view, more recently renovated. When your direct bookers arrive at your hotel, assign them one of the better standard rooms as thanks for the direct booking.

With these techniques, you can shift some of your indirect business to direct business. Considering the savings in third party commissions, this can add up to a lot of additional revenue in a short time.

shape of things to comeTechnology – love it or hate it, you have to embrace it says independent hotel IT consultant Mac Smith, as he looks at the trends in technology for both consumer and hotelier and the impact that these have on how hotels should operate

What are the major trends that hoteliers need to take on board?

  • Increasing penetration and use of Smart phones across all customer groups.
  • Intermediaries pose an increasing threat to profitability, the rise (and rise) of the OTAs (On line Travel Agents) is leading to hotel commoditisation and competition based mainly on price.
  • Increasing use of Social media and growth of Online communities providing more dynamic interaction and impact on subsequent purchasing decisions.
  • Significant market demographic changes including growth of the Senior market as the Baby boomers retire and travel.
  • Consumers are increasingly time poor and demanding (and expecting) convenience and ease of use.
  • The increasing role and commercialisation of Google and Apple as consumer portals and their increasing presence and influence in the travel and hospitality space.
  • The maturing of Software as a Service (SAS) ) (i.e. the increasing opportunity to avoid hardware purchasing and the costs and complexity of supporting it)

So what are the implications for the hotelier and hotel owner? 

Unfortunately there is no simple magic bullet that addresses all of these ‘mega (structural) trends’. There are a few common themes, but much will depend on the market that the hotel is aiming at and management’s willingness to embrace change and invest both time and money in Technology and related areas.  There are, of course, some fundamentals that need to be in place if the new challenges we face are to be met successfully.

  • Do you have a robust and relevant Marketing and Distribution strategy?
  • Are you clear who your target customers are and which channels they have a propensity to book through?
  • How good, clean and useful are the records that you keep from previous guests? Do you have records of source, product, and contact information?
  • Are your products easy to understand, compelling, convenient and simple to book?
  • Do you have appropriate content and offers in all the channels that you market through?
  • Are you selling real time inventory at the best price through the hotel direct and through your hotel web site?
  • Is the content rich, deep and attractive? Does it support upsell and additional add-ons. Is your hotel web site significantly more attractive that your hotel as seen on the OTAs?
  • Are you ensuring that the feedback on social media sites is being reviewed and where appropriate responded to? (Both good and not so good!!)

The consumer is (going) Mobile.

Smart phone growth continues in the UK both in real numbers and as a percentage of all phones sold and shows no signs of slowing. This proliferation of devices and mobile technology drives the expectation of instant and easy multi-channel access.

Geo awareness of these devices brings new capabilities for search and potential sales and service delivery in hotels. (You will soon be able to know when the guest gets near the hotel and where they are in the hotel)

Increasing numbers of your potential customers are researching your location, product, prices and services using these devices and then moving onto bookings and payment.

Ease of use and richness of content play a vital role in these consumer decisions. Being average is not good enough. When there is a wealth of quality product on offer being average actually means being poor!

Know your Customer and how they search, find you and book.

  • Have you recently looked at the Customer type, reason for stay, how they searched for you and what products they looked at?
  • Do you regularly review your web site analytics to see the source and journey through your site?
  • Can you analyse where they drop off?
  • Do you collect useful information from this process and when they arrive at the hotel?
  • Do you have an email address and mobile number to be able to communicate with them post stay and for future marketing?
  • Is there any reason why a returning guest should book through an OTA?
  • Once they have become your customer do you value and keep them?
  • Do you recognise a returning guest on your web site?

There’s a wealth of information that means you can ‘own’ your customers and reduce your reliance on third parties and all their associated costs. Saved costs go straight to the bottom line.

Cash flow and guaranteed revenue

Much of the travel industry is now using a prepay model with either costs for changes or no changes allowed. It’s the model that budget airlines use with remarkable success.

Are you able to take payment at time of booking as part of a product offer? What are the issues with this approach for your property?

What is your strategy for OTA and other intermediaries?

Increasing volumes of commissionable business is not inevitable but you may well need to take some actions if it is not to be. What is your plan to make more business come direct to the hotel (or CRO) and the hotel web site.

  • How are you planning to compete?
  • Are you able to make ‘hotel direct’ a richer experience?
  • Does your web site have more depth and richness of content, allow personalisation of products and offers?
  • Is it easier to use?
  • Can guests choose their own room, personalise the service and check in from their mobile?
  • Can you support extended stay or late departure at time of booking?
  • If not today are you planning for this in the future?

The OTA world leads to commoditisation and competing much more on price, than service and product quality – not an attractive proposition for most hotel owners who value quality and service as important product attributes.

Social media

Purchasing decisions are increasingly influenced by peer opinions and are widely checked and contributed to. The consumer has a much louder voice than at any previous time.

Is this an area that you proactively manage? There are tools that can help. Best practice would indicate that this is a role that needs to be assigned within the organisation. It is risky to leave it unmanaged and just hope it will not be a problem.

Technology alone is not a differentiating factor

Yes it certainly needs to be robust, reliable and fully featured. Support needs to be excellent and costs need to be affordable. Information needs to be usable to support the way you manage and it needs to be timely. Does it need to be Multi property and comparative? Real success comes from how you, the hotel management and staff use the technology and to a certain extent how you may match and exploit capabilities such as a PMS and Revenue Management.

  • What Gaps exist today that are holding back the Operational service and Profitability?
  • Are these shortcomings with the technology you have or that you are not fully exploiting it?
  • Are you receiving the support you need from your suppliers?
  • Are you locked in to a Capex model and can always find pressing reasons to delay technology upgrades?

Maybe it is time to look at buying a service (Opex) and getting some of those problems solved now. Cloud based Software as a Service (SaaS) is now a reality as an alternative to on property solutions.

About the author

Mac Smith is an independent hotel IT consultant with many years’ practical experience with the full range of hotel types and technology solutions suppliers on a global basis. He has worked with many different hotels and hotel groups as part of his consulting assignments. He was a founder member of HTNG and is also senior technology advisor to Delta Squared Performance Improvement Ltd, a hospitality consulting group based in Maidenhead. He was also a small independent hotel owner/operator for 10 years so has practical first-hand experiences of the challenges. Mac Smith is also a member of the advisory board at hetras GmbH. All comments and questions on the article welcome at mac@projects-plus.co.uk or mac.smith@delta2rd.com

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