Each month, the Hotel Heroes - our panel of trusted hospitality industry experts - answer questions from hoteliers around the world about anything, from hotel marketing to revenue management and distribution.
In this first edition of our Ask the Heroes article series, the audience asked our panel of specialists to share insights into parity management, the effect of pricing on conversion rates, revenue strategy and more.
Submit your questions for the Hotel Heroes panel here.
My hotel has been reliant on OTAs for bookings, but we're launching a new hotel website soon to drive more direct business. What should be my parity concerns?
In terms of parity, the laws around what OTAs are allowed to put in their contracts have changed in the past year. You need to check your OTA contract and ensure you don't have a parity clause. There are different types you should be aware of: a wide rate parity, in which a hotel agrees not to undercut the room prices that an OTA charges for their hotel, and a narrow rate parity allowing a lower rate on your hotel website as long as it isn't showcased publicly.
Depending on which country your hotel is located, you will need to understand which law is applicable. In general, across Europe, the narrow rate parity applies.
Major global chains like Accor, Hilton, Marriott and others have introduced a lower rate on their own website. However, this price is only applicable if the customer belongs to the hotel's loyalty program.
Keep in mind that OTAs may be looking at your website. If you give out an exclusive price direct, they can penalize you by ranking you down on their websites. Expedia now allows hotels to do PPC and redirect traffic to your hotel website through their Travel Ads program - but only if you provide parity!
OTAs are great for bringing your hotel more visibility, so you should aim to use them to drive business from markets that are hard for you to penetrate on your own. But at the same time, you need to ensure that third parties are not cannibalizing your direct business.
Is conversion rate higher when the price is shown with or without final taxes included?
Answered by Hotel Hero Ludovic Cacciapaglia, Assistant Vice President Distribution at Shangri-La Hotels and Resorts:
The user's expectations regarding tax display change by region. For example, in the US it is normal to show tax on the checkout page as consumers are used to net prices. However, in Germany, all fees should be clearly displayed on the room search results page.
I recommend looking at the feeder markets of the property and running user experience testing for these consumers to get some qualitative feedback. It'd also be wise to watch what your competitors are doing in this regard.
Hotels should also pay attention to how to display extra fees (e.g. rollaway beds and service charges) very clearly in the booking funnel. This can be one of the major reasons for abandoning bookings!
It can depend on price sensitivity and brand perception.
Price sensitivity: if you’re competing on a price basis, being transparent and displaying the net amount makes more sense - it's more convenient for your customers to make a booking decision based on how much they're willing to spend.
Brand perception: some luxury brands display room prices without including taxes and service charges. In their case, the customer decides if there’s value for money based on how they perceive the brand's value.
It’s worth noting that the conversion rate is not fully dependent on whether you choose to display the gross or net rate. For example, on social media, the intent, micro-moment, copy and imagery can also play important roles in assisting conversion.
I'm a Revenue Manager for a mountain resort in a pre-opening stage. What would be the best strategy for the start of business?
Answered by Hotel Hero Joe Pettigrew, Director of Revenue Maximisation, Europe Hotels at Starwood Capital Group:
Since the context is so important, it's always difficult to answer this question properly. However, not knowing any specifics for this hotel, I would generally say that it's more important to set the hotel up for long term success rather than short term gain.
For the first year of the hotel's opening, I always prefer the strategy of turning every guest into a brand ambassador. Deploy some creative tactics to generate the awareness of your resort. Try putting together a newsworthy grand opening offer and setting aside a few rooms for local influencers to try your resort.
You might want to leverage all third-party distribution partners to maximize your visibility with a generous rate. This way, your guests see immediate value and feel compelled to tell their friends and family about their stay - preferably online via social or review sites.
These tactics may contradict our natural instinct to maximize revenue, but they will set you up for greater success in the second or third year after your hotel's opening. To be clear, I’m not advocating leaving money on the table! Build up your rate strategy with a clear purpose - to get the right people to stay at your hotel who will then become an extension of your sales team after the checkout.
One more thing to add is that the first year of the hotel's opening is the best time to experiment. Try one new idea every week! For example, you can see how your guests respond to different rates, how they respond to your competitors, or whether one type of package sells better than another. Testing different ideas isn't only enjoyable - it can also help you solidify your overall commercial strategy in the following year.
Good luck with the opening!
Why don't hotels publicly undercut OTAs on brand.com?
The main reason not to publicly undercut OTAs on your hotel's website is the partnership agreement you have with them. In our contracts, we allow OTAs to access our rates and availability in return for preferred commission arrangements. Without allowing access to our best rates, we don't get the best commission levels.
Not displaying better rates than on OTAs' websites doesn't mean you can't have a cheaper rate direct: at Best Western, we have programs that allow us to offer lower rates to our loyal guests.
I'm exploring an option of building our own live XML feeds and a BigQuery database ecosystem, but I can't find examples of such practices in the industry. Do you have any advice for me?
At Deutsche Hospitality, we haven't had experience working with BigQuery - Google's cloud data warehouse. We're currently still using a local data warehouse.
XML feeds can be used for a variety of purposes, such as getting the information on room rates to online marketing publishers or distribution partners.
If you're considering the pros and cons of creating your own feeds versus using a third-party engine, first determine what the feed will be used for and how customizable you want it to be. For example, in the case when the feed is used to create complex personalization or targeting on the website, a custom solution is the right choice for you. However, for delivering rates to standardized marketing channels, feed engines might be a better fit - they are already adapted to publishers' needs.
If you have a question for the Hotel Heroes panel, submit it here. Our hospitality experts will answer your questions in the next monthly edition of Ask the Heroes.