Understanding channel mix is key to pricing MINNEAPOLIS, Minnesota—As travelers spend more time and visit more resources when researching hotel rooms, hoteliers continue to stress the importance of evaluating each channel for the opportunities they present. Using different pricing strategies for different channels—all while staying within rate parity constraints—hoteliers can optimize their demand to produce the best profits. Today, many hotel suppliers—ultimately owners and third-party management companies—are lumping brand in with third-party intermediaries when evaluating the costs and benefits of demand. Starting with the “rack rate,” suppliers can then use packages, fences and selective discounting to capture different types of travelers. According to a panel of experts at the Hospitality Sales and Marketing International’s 10th Revenue Optimization Conference, brands, online travel agencies and metasearch sites are all fighting for today’s potential customer. “There’s the customer who loves the gnome and will always book on Travelocity; there’s the customers who are brand loyal and will always book on brand,” said David King, regional director for the Eastern U.S. for Travelocity. “Then there’s the traveler who’s going to shop around, and that’s who we’re all fighting for. And we’re all fighting nicely.” Clearly, the most profitable piece of traffic is direct, said Kurien Jacob, senior VP of revenue and distribution for Highgate Hotels. As suppliers begin distributing inventory through metasearch sites or flash-sale sites, average daily rate begins to erode, he said. The challenge becomes “how to balance between taking a price down in a certain area and opportunities to keep your retail price and develop price points around it,” Jacob said. Last-minute business One discounting strategy rising in popularity is the practice of offering last-minute inventory at discounted rates. However, last-minute discounting must be done through opaque and other creative channels to keep from training the consumer to wait until the last minute to book, panelists said. “We’re selling a product that’s really different,” said Dan Allon, senior market manager for HotelTonight, a mobile-only booking app that serves up three discounted hotel choices at noon each day available only for that night. “Our customers are shopping for totally different products.” Allon suggested that HotelTonight offers hoteliers incremental demand—guests they wouldn’t obtain otherwise—because of the spontaneous nature of the business model. Often HotelTonight users weren’t planning to stay at a hotel but needed to for one reason or another at the last minute, Allon said. “Hoteliers should be doing the best they can to drive traffic direct and be wary of those partners that are looking to drive large amounts of demand across the region,” he said. “Use specific niche partners. Identify partners that are going to be additive to your business.” Jacobs of Highgate said it’s difficult to verify whether any distribution partners are in fact bringing incremental demand. There is data that will help, but it’s important to carefully evaluate whether hoteliers are shifting share away from their direct channels, he said. “It’s a combination of thinking through how strong these fences are and then cross comparing samples of guests coming through the new channel and guests from your existing base,” he said. Channel strategies To identify areas of lacking demand, Allon suggested hoteliers start by analyzing their current mix of demand and distribution partners. “Maybe a new channel would be a perfect partner to fill in where you might not be doing such a good job,” he said. “We focused on smartphone users looking to find a hotel while on the go. Hoteliers should gauge if they can fill what they set out to fill while not cannibalizing their business.” Jacobs said it’s imperative for suppliers to offer same type of “HotelTonight discount” on their own channel. By understanding their customer at various stages of the travel research funnel, there are ways hoteliers can work around rate parity and offer different types of pricing structures. “That doesn’t mean lower all your prices,” he said. As an example, Highgate uses retargeting—serving up advertisements to users who visited the hotel’s website but did not book—in the New York market. Through retargeting programs, Highgate is able to offer slightly discounted rates to entice those potential guests with a second offer.
Posted on: Thu, 27 Jun 2013 05:03:50 +0000
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