In the first part of this series we have learned how it is easy to sell Hotel rooms online: it just requires the connection to a travel switch that sources from different providers, to redistribute inventory and prices though a website.
NB: This is an article from Direct Your Bookings
This is the reason why the world wide web is constellated of OTAs of any kind, reselling rooms of Hotels that they don’t hold any contract with. Besides the traditional OTAs, there are new business models arising that are making the distribution landscape even more complex and could possibly pave the way to a more fragmented future.
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Price freeze…in Hotels
The greatest innovations come from simple ideas.
Airlines have been giving travellers the possibility to lock prices for a flight for years now , and fare holds are quite the norm in the airline industry booking process.
Hotels have been following the airlines logic since the beginning with yield management first, dynamic pricing then and price freeze now.
According to Phocuswire, “Hopper has emerged from the pandemic as the top travel booking app in the United States, surpassing Booking.com, which claimed the leading spot in 2020.” Launched in 2020 and growing in popularity though Tik Tok, the core business model of Hopper is:
- Traveler pays a small deposit to freeze the hotel rate
- Traveler can complete the booking at a more convenient time (24-48 or more hours after)
- If the price increases, Hopper will cover the price difference up to the maximum limit listed on your Price Freeze policy.
- If you don’t book, the option expires along with the deposit.
Easy-peasy. How does Hopper sell my Hotel when I don’t have any direct contract with it?
Going back to the first part of this series: sourcing rates and playing the margins game.
Hopper gets inventory and rates from different sources, we run a test on a Hotel that sells the specific room type called “Premium” only through the following 3 channels:
- Expedia
- Booking
- Direct
After downloading the App, we looked for a room for 1 Night on December 1st, the Premium double room pops up as the cheapest room type/rate:
The sell rate that the Hotel is sending to OTAs for the Premium room type is 104 euro including VAT and tax.
Hopper lowest returned rate for the same room type: euro 78 per night + taxes = 88 euro (-15% compared to the official sell rate). To price freeze today the 88 euro rate, the guest has to pay 26 euro, representing roughly a 30% of the rate itself.
From the tentative bookings we made, Hopper rates seem to be from 15% to 20% below the official sell rates on major OTAs, that is a bold saving supported by the fact that the company states that price predictions are 95% accurate.
After this first rate return, I closed the Expedia availability on the Premium Room type.
After a few minutes I searched again for the same Hotel and the same date and here is what I got:
Standard double or twin room is the Booking.com name for my same Premium Room.
The rate is now a bit higher, and adding taxes it arrives at 104 euro. Exactly the sell rate I am sending to Booking on that date. The 95% accuracy probably knows that I am going to raise the price for this room by December 🙂
But why is the Expedia sourced price lower than Booking.com? Expedia is a merchant model, so same as per other wholesalers or tour operators, they work on net rates and Hopper can play on margins.
Should I make a booking now, the guest would receive the confirmation from Hopper but the Hotel would receive the booking from Booking.com.
After this second try, I then closed Booking.com availability on the Premium Room type.
After a few minutes I searched again for the same Hotel and the same date and here is what I got:
The next available room type (in this case, Classic) is returned.
There are no other OTAs that are distributing the Premium room type, so Hopper cannot source anywhere else for that specific room. (at least for now, Brand.com looks safe :))
As any respected OTA, Hopper allures the customer with value adds and discounts like the one below:
Hopper is designated an OTA — not a metasearch provider or aggregator — so the booking takes place right in the app, rather than passing you on to another site.
There is this interesting article in the datumize blog that explains how price forecasts and models like Hopper work: Hopper says that 60% of its searches advise customers to wait for lower prices, despite the trend towards fares rising closer to departure. The majority of Hopper’s forecasting tool users are holiday-makers who begin to research a vacation approximately three months prior. As most users have a longer research period, there is more scope for fluctuation. However, Hopper claims that customers who follow their flight price forecast advice save 10–15% on their fare.
On its website Hopper states that At the heart of the Hopper app is a prediction algorithm that processes trillions of data points, allowing us to make precise and personalized travel recommendations.
Are we still sure that our old fashioned way of revenue manage our Hotels through excel spreadsheets and gut feeling can really cope with an AI written future for our travel industry?
Snaptravel: lead-leading-to-booking model
Those who follow us know that both of us are great supporters of chatbots, despite the general skepticism of our industry.
