Hotels Striving to Control Prices and Profits
This week’s news has involved much discussion of pricing. Hotels are seeing some signs that price control is returning to them as they fight to reduce OTA commissions and change consumer ways of thinking. They’re also seeking ways to increase profitability overall – see the panel discussion below.
However, these efforts are complicated by turbulent international waters. The US is staring down the barrel of Donald Trump’s immigration policies and they way they’re affecting tourist decisions. On a brighter side, a study reveals that German, UK and French business travelers are more comfortable booking both directly and on mobile. See the full stories below.
There are already signs that computer and smartphone users are wizening up. Sarah Hughes, a cofounder of travel industry consulting firm Fiz, has reported that research shows that “the majority of users now prefer to book directly via airlines and hotels rather than rely on online travel agencies….What does this tell us? That consumers are more interested in travel brands than they are in having information pre-filtered according to a narrow set of perceived needs.”
But it also tells us something far more important. It reveals that consumers are no longer taking for granted that aggregators offer the best deals. The price control pendulum is swinging back toward the hoteliers.
“It was really easy for the aggregators to gobble up all this business in the past because the hotels weren’t really paying any attention,” that West Coast CEO told me. But eventually, the aggregators cornered so much of the market that they jacked up their commissions high enough that everyone had to take notice. The CEO revealed that his hotels typically paid aggregators 20 percent commission—and in many cases even 30 percent.
According to Expedia, hotels and airlines in the US are cutting prices as tourists avoid the country in response to Donald Trump’s immigration policies.
Dara Khosrowshahi, chief executive of Expedia, the largest online travel agent by gross bookings, warned the US travel industry is preparing for a turbulent year amid falling international interest in visiting the country.
How has the hotel industry been faring in terms of revenue and profit management in recent years and what should hoteliers be doing to tackle the challenges they’re facing, either from online travel agencies (OTAs) or rising wage and insurance costs?
Those are some of the questions posed at a hotel ROI breakout session at the International Hotel Investment Forum (IHIF) in Berlin earlier this month, with the aim of drawing out solutions from the panelists taking part.
A new GBTA Foundation survey of business travellers who are based in Europe’s three largest business travel markets – Germany, the United Kingdom and France – revealed business travellers are increasingly booking direct with suppliers and embracing mobile and sharing economy services.
If business travellers had no restrictions, 37% would choose to book directly with the supplier. 26% would choose an online travel agency.
The balancing act between third party channels and your own hotel website is often a difficult one. Once you make the decision to take charge of your online distribution, it can cause some friction with your OTA partners and other third party channels. However, you should not be afraid to prioritize direct bookings over OTA bookings.