IN-DEPTH: Kurien Jacob, SVP Revenue and Distribution, Highgate Hotels says there are many instances where online travel agencies include extras, gift cards or gas cards, on the retail price offered to customers. He says there is clearly a difference in value parity as OTA websites use these extras to convert customers to bookers.

Published: 22 Jun 2011

IN-DEPTH: Kurien Jacob, SVP Revenue and Distribution, Highgate Hotels says there are many instances where online travel agencies include extras, gift cards or gas cards, on the retail price offered to customers. He says there is clearly a difference in value parity as OTA websites use these extras to convert customers to bookers.

By Ritesh Gupta

Rate parity is becoming increasingly important for hotels in light of the Billboard Effect, which is the tendency of travellers to browse for hotels on OTA sites and then go directly to the supplier’s site to book.

Parity ensures that a customer will see the same price for a given room no matter which booking channel they use, and is one important way that any hotel or OTA can increase consumer confidence.

A company of Expedia’s stature says hotels are responsible for setting their own prices, and at the end of the day it is the consumer that ultimately decides whether the price is acceptable or not.

For their part, OTAs immediately refer to the fact that the direct channel comes with higher costs in marketing and customer acquisition. OTAs create trial for brands by reaching brand agnostic consumers who are shopping for a vacation. Online channels enable hotels to reach potential customers they would not otherwise be able to reach, and to quickly make adjustments to rate in accordance with their needs.

So it is clear that strategies for both direct and indirect channels should be aligned to maximise value. Hotels needs to ensure that there are no disparate systems running disparate channel content and pricing.

“I believe that there needs to be price parity and rate integrity on retail pricing in both direct and indirect channels,” said Kurien Jacob, SVP Revenue and Distribution, Highgate Hotels.

Jacob added, “However, do we truly see price parity in existence in today’s world?”

He further explained, “There are many instances where Online Travel Agencies (OTAs) include extras, gift cards or gas cards, on the retail price offered to customers. So while you may see same retail prices on the supplier direct websites and OTA websites, there is clearly a difference in value parity as OTA websites use these extras to convert customers to bookers. It is important for hotel suppliers to offer some value ads to be on a level playing field in such a case.”

Specifically commenting on the balance of distribution power at this stage, Jacob says there is definitely some shift in fortunes towards suppliers in markets that have enjoyed a bounce back and have strong demand trends, as well as certain hotel chains. Hotels should take this opportunity along with the right technology to compete on similar offers to their customers, he told EyeforTravel’s Ritesh Gupta in an interview.

Market mix

Different hotel distribution platforms cater to the need of different sets or groups of customers. Hotels don’t have to make a decision between growing their direct channel and working with other channels. Rather they need to evaluate the costs and benefits associated with every channel they have the opportunity to distribute through.

Changing a hotel’s market is definitely a strategic and tactical approach, says Jacob.

He says it is ideal for suppliers to maintain a fine balance on going direct to consumers, as well as working with reliable channel partners.

“It is not necessary for hotels to work with every channel out there, but ideally build a partnership to ride the good and bad times together. In the end, the hotel’s market mix is the result of various selling strategies that the hotel had and is in final control of its destiny,” says Jacob.

New intermediaries

Uncertainty of a hotel room is one of the biggest imbalances in travel today, according to Room 77, which is being described as the world’s first hotel room database and search engine. The new venture aims to change this by giving people the information they need to be able to request the room that is best for them.

Jacob says this venture definitely brings travellers’ preferences of rooms and hotels’ various room attributes to a much closer level.

“Though the features available to the customer are fantastic, it may take time for the industry to get its act together to specifically offer or guarantee the room that is the closest match to the traveller’s preferences. I would think this concept will take some time to get full traction, but it is definitely on the right track,” he said.

The industry continues to witness new developments. For instance, the concept of private online travel clubs and its members being offered exclusive hand-picked offers, featuring savings of up to 60-70 percent off hotel rack rates or brochure prices, and the same lasting for few days or as a flash sale is gaining traction in the marketplace.

Jacob acknowledged the same and said: “There are a lot of trends emerging that are challenging or augmenting the OTAs of today, such as; Meta search engines, closed loop sales such as; Jetsetter, Snique Away, Groupon, Living Social, Travelzoo newsletters etc. There seems to be an appetite from consumers to always lap up special deals, discounts and special offers from these providers.”

He added, “It is very important though, for hotels not to fall into a trap of working with everybody and having discounts all over the place. It may prove too costly with all the heavy discounts and margins these players are requesting.”

OTAs

Customer decision making is influenced by a mix of tangible and intangible benefits represented by the brand or the physical asset.

For their part, OTAs say that they offer tools that help consumers discover value as a function of the benefit that matters to them.

Expedia says its customers are quite discerning and tend to make booking decisions based on much more than just the room rate. The online travel agency’s booking data shows the importance of content like property photos, virtual tours, star ratings, and importantly, user reviews in influencing booking decisions. The more information that is available about a property, the more likely that a traveller will book the right property that best meets their needs, which in turn helps to ensure a happy customer, and may eventually lead to a positive online review for that property. Expedia sites today feature well over one million traveller reviews.

“I would say OTAs have played a big part in technological innovation and marketing to guests who may or may not have travelled. The business of OTAs relies purely on generating demand. They invested heavily on technology as well as marketing. In essence, their growth was probably a catalyst in the technological innovation and improved marketing efforts from brands as well as independent hotel suppliers,” said Jacob.

GDS

Hotels are working on ways to increase the relevance of data they offer to agents during the shopping process. The industry has witnessed the emergence of new interfaces that transact with agents via the electronic path for real-time rates, availability, rules and property information.

Assessing the reliance on GDSs to expand reach and sales at this juncture, Jacob said there was a time when everybody in the industry said GDSs were going to be outdated and irrelevant.

“However, many of the GDSs have re-invented themselves to offer better GUI interfaces to their client’s travel agents, corporate implant offices and corporate intranets. Currently, GDSs seem to be the one place for sourcing inventory and rates from various chains and independent hotels. Given these benefits it is important for hotel companies to connect to the GDSs. Moreover, it is one of the highest rates businesses that is out there today,” said Jacob.

“However, if you look at Europe, there has been a migration from many travel agents to systems that are connected to wholesale operators who source rooms and have direct contracts from individual hotel suppliers. While this channel is important, I feel it is most critical for hotel companies to focus on web direct and all the various drivers of demand to the direct web strategy such as search engines, meta search engines, review websites (i.e. Trip Advisor), Facebook, Twitter, local websites etc,” concluded Jacob.