Hotel woes and four ways to win

In a one-off guest post Dori Stein, chief executive of ForNova, a provider of online market intelligence and EyeforTravel sponsor, considers ways to overcome the threats and opportunities facing hotels

In the rapidly changing world of online travel, consistent OTA consolidation continues to create technological and financial giants that leverage their inventory to fiercely compete for travellers’ business. In order to win, these OTAs continuously drive down prices, undercutting hotel rates and violating rate-parity agreements.

Special offers, secret deals, hidden fees and price manipulation in remote geo-locations (point-of-sale) are just few of the methods used to win over travellers, making it difficult for hotel revenue and distribution managers to track and react. Consequently, conversion rates and margins are dropping and customers loyalty and brand reputation is affected.

Indeed, metasearch battles have shifted the traditional roles between hotel brands and OTAs from distribution channels to direct competitors. Hotels must fight back in order to win direct bookings as well protect margins and brand equity. Here are some thoughts.

#1. Don’t ignore metasearch

EyeforTravel’s latest report The Future of Metasearch points to the channel becoming a popular form of research in several geographies. As millennials are increasingly likely to visit metasearch sites when planning travel, these numbers are expected to continue growing, and will transform metasearch sites into an advertising battleground.

Increasingly hotels are targeting this distribution model to compete with their other channels and increase direct bookings. The number of hotels bidding on metasearch sites (Tripadvisor, Trivago and Google) doubled during the first quarter of 2015, according to Sparks, ForNova’s online market intelligence solution. Compared to the end of the fourth quarter 2014, there has been an increase of more than 600%!

Additional moves to strengthen direct booking conversion rates are demonstrated on sites like roomkey.com and in initiatives that include showing rates from other channels on brand.com (more on this on EyeforTravel.com Why hotels cannot afford not to show competitors pricing, March 17, 2015)

#2. Keep inventory up to date

In spite of the opportunities for metasearch, there are challenges. A major one is their ability to communicate up-to-date inventory, including hotel rates (best available rates and lead-in rates) as well as descriptive information. While large brands use API connections, smaller brands may struggle with IT hurdles.

A quick and easy resolution is an automated feed generation and distribution technology that delivers daily updated inventory files to metasearch sites in addition to display networks and affiliate marketing channels. Hotel information and rates are shopped directly from the hotel website without the need for IT resources.

#3. Maintain competitive rates anywhere in the world

As mentioned already, intense competition on metasearch sites is largely nurtured by the OTAs’ aggressive pricing strategy.  OTAs take advantage of global distribution to reduce pricing, using a geo-located pricing algorithm. Rates may be severely undercut, depending on the point of sale (POS) or from which country the consumer is shopping.  ForNova’s Sparks encountered price gaps that exceed 20% in some geographies and in extreme cases more than 50%!  

Exposing those violations and achieving rate parity across your global distribution channels was practically impossible until now. But recent technologies, that utilise automated online data extraction and simulate human shoppers from multiple POS worldwide, are revolutionising the way hotels track offenders and stay competitive on a global level.

#4. Bid smart and win with data

Sending inventory to metasearch sites is just not enough. Hotels need to bid their way into the best position, but bidding is where giant OTAs, with financial muscle, have an advantage. That’s why hotels must play smart, ensuring that they do not waste money (cost-per-click budget) on non-competitively priced properties that will not convert.

Market position and competitive intelligence can help hotels fight back. Continuous monitoring of hotel rates and position rank across metasearch sites offers an advanced layer of external competitive information that is injected into the bidding platform, optimising each bid with hotel-level data to reliably increase return on investment.

What hotels today must never lose sight of is that in today’s information era, successful decisions are founded in relevant data. Market and competitive intelligence can help hotel revenue and distribution managers cope with the aggressive online travel market and find better ways to win.  

This guest post by ForNova chief executive Dori Stein is published as part of EyeforTravel’s sponsored content programme

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