Bruno Kim, director of revenue management, CRME, Four Seasons Hotel Sydney, doesn’t believe that OTAs have any true influence on the market conditions.

Published: 13 Nov 2009

Bruno Kim, director of revenue management, CRME, Four Seasons Hotel Sydney, doesn’t believe that OTAs have any true influence on the market conditions.

“OTAs just happen to be the channels used to distribute the rates, because of their ability to reach out to a large audience instantly. The same OTA that is used to discount rates in a need period, is also used to push out higher rates in a demand period. What happens in the market is influenced by decisions at the hotel level, and not by the OTAs,” says Kim, who is scheduled to speak at the forthcoming Sales and Marketing in Travel Asia Pacific conference, to be held in Sydney (November 18-19).

Kim, in an interview with EyeforTravel’s Ritesh Gupta, spoke about price integrity and other issues. Excerpts:

If it is not acceptable to compromise on price integrity at any level of unqualified business, could you provide an insight into other ways to discount and to attract additional customers that do not compromise your core pricing?

Bruno Kim: I’m a firm believer that your original price point has to be correct, and that you are already getting your share of the business before you can consider looking for ways to attract additional customers. There is a big difference between discounting, and re-pricing to be appropriately positioned within the market. Once you have achieved the correct price point, you can then start targeting additional customers. How you choose to target the additional customers will all depend on the demographic of the customer you are targeting. The most common way to attract additional customers is by providing a package that is attractive to that specific market.

How do you assess the utility of opaque pricing channels in today’s environment as far as pricing strategy is concerned?

Bruno Kim: Whether you choose to utilise an opaque pricing channel or not is up to the individual business and their own business strategies. We currently do not utilise this option.

Recently, a hotelier told me: pricing integrity is not just about BAR parity which is a common mistake. It is pricing to support the most optimal customer mix that best suits the brand and at the same time logically differentiates the different price points that are available to the potential and targeted customer base. What’s your take on this?

Bruno Kim: Pricing integrity can be dissected in so many different ways. I am in agreement that it is indeed a combination of several different factors, with the most important being BAR parity. What it ultimately comes down to is the word "integrity" which can be simply defined as "adherence to a strict ethical code". As long as you don't neglect the meaning of integrity in your pricing strategies, the end result should be one that is a mutual win for both the consumer and the business, and this in turn will build trust and loyalty.

When it comes to bundling, do you think today it is necessary to clearly demonstrate objective value by combining several elements of the customer’s stay and thereby making the rate opaque? What should one be wary of?

Bruno Kim: I personally think bundling is a great way to provide value, but I would not say it is a necessity. Once again, whether one chooses to bundle or not will purely depend on the target market of the business. If there is a need to bundle your offers to attract more business, then by all means go for it. But if you can get way without bundling and get full retail revenues instead, then why bundle? However, if you do choose to bundle, I think it is important that you bundle and price the package appropriately so that it's not reflecting an exaggerated discount on retail equivalent prices. Once you give too much of a deal, the recovery will be a very long road once you try to take it away.

Some senior RM executives say the entire equilibrium of pricing is based on several factors including elasticity of demand being one. Sure, this is influenced by several considerations right from product, value, relevance that makes price elasticity determination a bit more complex. In addition there are also compelling cases that also are an exception to general function of price elasticity and one needs to consider the same. How do you assess the situation?

Bruno Kim: Price elasticity is an area that is very difficult to measure. You can come up with the most complex formulas and equations to determine price elasticity, but at the end of the day, true demand will never be constant and will change by the day. But this is the beauty of Revenue Management in the sense that you are working in a constantly changing environment, and you have to keep adjusting your strategies accordingly.

From distribution perspective, with online channels more responsive to discounting, how do you think online channels impact ROI and CPA?

Bruno Kim: This can be looked at from several different viewpoints. Some businesses may choose to discount through online channels, and others may have rate parity. This is a question that can be answered in so many different ways depending on how you choose to dissect it. But as a simple response, it would only make sense that online channels have a positive impact on ROI and CPA. If not, these online channels would not be growing and becoming more popular every day.

Hotels that play more aggressively with OTAs and drop rates in an effort to steal market share damage the market conditions for their entire destination and it will take them years to build the rate back up to normal levels. The role of OTAs (and wholesalers) should not change according to economic conditions. How have OTAs generally played their part?

Bruno Kim: If a hotel chooses to drop rates to steal market share, that decision is made by the hotel and not the OTAs. Many of today's OTAs actually require rate parity amongst all the channels. So I do not believe that OTAs have any true influence on the market conditions. OTAs just happen to be the channels used to distribute the rates, because of their ability to reach out to a large audience instantly. The same OTA that is used to discount rates in a need period, is also used to push out higher rates in a demand period. What happens in the market is influenced by decisions at the hotel level, and not by the OTAs.

Sales and Marketing in Travel Asia Pacific

Bruno Kim is scheduled to speak at the forthcoming Sales and Marketing in Travel Asia Pacific conference, to be held in Sydney (November 18-19).

For more information, click here: http://events.eyefortravel.com/smapac/agenda.asp

Or Contact:

Reece Gladstone
Regional Director, Asia-Pacific & Middle East
Email: reece@eyefortravel.com