·
Dynamic
commissioning and nano pricing will maximise revenue for hotels and OTAs
·
Alternative
accommodation such as Airbnb should not be viewed as a threat or disruptor to
the market
Hotels
and Online Travel Agents (OTAs) need to work together to find a collaborative
approach that maximises revenues, builds brand confidence and rewards consumer
loyalty, according to a panel of experts speaking at Arabian Travel Market
(ATM).
According
to a report published on Monday 23rd April, by Colliers
International on ATM’s Global Stage, rate parity agreements have led to a
turbulent relationship between hotels and OTAs in recent years.
The
findings of the report entitled ‘Alternative Accommodation – Driving Growth for
Destinations or Disruption’ were discussed by a panel of experts from Wego,
AccorHotels, Expedia Group and Colliers International.
The
essence of rate parity is to have the same rate for the same product across all
distribution channels. However, rate undercutting has created issues between
hotels and OTAs and as a result, significantly reduced consumer confidence in
brands.
Filippo
Sona, Director, Head of Hotels MENA, Colliers International, said: “Consumers
are comparative shoppers, so when they see that the rate on a hotel website is
higher than an OTA for the same product, this creates a negative sentiment
about the brand in their minds. As the undercut rate percentage by OTAs
increases, there is a drop in the booking conversion on the hotel’s website.
“Today’s
consumers have a more sophisticated mindset and level of needs, and as a
result, rate parity is hindering the ability of OTAs to make more money and
hotel companies to offer higher average room rates. If we removed the rate
parity mechanism, we would be able to more effectively fulfil the needs of OTAs
and hotels, while providing a more personalised product to consumers.”
With
continuous technological advancements in the online travel market such as
metasearch engines, blockchain and augmented analytics, new strategies need to
be devised to win back consumer confidence and increase their brand loyalty.
Paula
De Keijer, Senior Director of Market Management Middle East, Africa, Greece
& Turkey, Expedia Group, said: “With the consumer in mind, blockchain
technology provides services such as secured payment, identification and
security, simplified loyalty programmes and baggage tracking.
“As
we look to the future, augmented analytics will provide consumers with the
power to make more informed choices. Considering the vast amount of data that
hotels and OTAs accumulate, this technology is the perfect tool to understand
consumer behaviour, preferences and booking patterns. Combining algorithms,
artificial intelligence and machine learning will lead to providing better
recommendations to customers and matching them to the properties best suited to
their needs.”
Hotels
and OTAs have their own competitive advantages and limitations. While hotels
have the micro information, OTAs have the purchasing and booking habits of
consumers.
In
the evolving landscape, it is crucial that hotels understand direct bookings do
not matter like they did in the past. Instead, establishing a collaborative
approach, with the help of technological advances, that maximises revenues
should be the focus.
Sona,
said: “The first emerging tool will be dynamic commissioning. This will enable
hotels to set a hurdle rate for OTAs, in turn incentivising OTAs to sell above
that rate to earn a higher commission. Based on our research, we suggest for
every $10 above the hurdle rate OTAs earn an extra 5%, with the maximum amount
of possible commission capped at 35%.
“The
second approach is nano pricing which provides consumers with the power of
choice and added confidence in brands. Today, hotel room prices are based on
three factors: room view, room type and number of occupants. However, nano
pricing is calculated by combining base price (room inclusive of limited
amenities) with the cost of any requested extras (for example upgraded
toiletries).”
In
recent years, competition in the market has further increased with the rise of
alternative accommodation such as Airbnb. The success of this type of
accommodation stems from their ability to create a more local and personal
experience for consumers.
Flavio
Leoni, Vice President of Sales, Distribution, Loyalty & Marketing,
AccorHotels Middle East & Egypt, said: “Alternative accommodation should
not be viewed by hotels and OTAs as a threat or disruptor.
“It
is just another tool that provides additional choice to the consumer and also
presents hotels and OTAs with the option to explore new ideas and expand their
brands.
“If
we break down the needs of both business and leisure travellers, as well as
individual and family travel, it is possible for alternative accommodation to
exist peacefully in the market alongside more traditional forms of
accommodation.”
For
more information on Arabian Travel Market 2018, please visit the website at www.arabiantravelmarket.wtm.com
