Pricing? Don’t Forget Your Customer
You’ll be aware of the long-running bunfight between hotels and those ‘dastardly’ OTAs charging high commissions for business that might otherwise arrive direct.
NB: This is an article from Revanista
And you’ll also be aware that Google it appears is now beginning to encroach on the OTA and meta-search space – especially the latter – as it positions itself as the ‘go to’ place for aggregated hotel rates.
(There’s a creeping inevitability about this that’s not just limited to hotel search but that’s another discussion.)
In any case, there’s a lot of noise and energy now around the issue of hotel channel management and pricing and driving direct that you would be excused for choosing to zone out: not necessarily because you’ve better things to do (after all, your channels, direct and indirect, are your principal routes to market so ignore them at your peril) but because there’s a lot – and I mean a lot – of well-intentioned views on this.
So figuring out how best to manage your pricing and distribution is becoming really, really, really challenging … What channels to turn on and turn off and when. Which competitors to follow. How to price in order to optimise yield and occupancy. And so on. And whereas there are now lots of tools available to help hoteliers, pricing decisions are often still made on a wing and a prayer. In hope rather than expectation.
Remarkably however the one person in the room that rarely gets a look in within this melee that is pricing/distribution strategy is the customer. How is it that we’ve lost sight of what guests are actually prepared to pay?
Think about it.
A lot of the traffic on this is one way in terms of driving customers to buy, be they special offers or closed user group discounts, or pressure sales techniques such as timer count-downs or ‘one room left at this rate’ messaging. All of this is geared towards getting customers to book. And yes, that they do, suggests that the price is ‘right’ but the fact is that this couldn’t be further from the truth as most of the cues are driven by the seller. Not the buyer.
And it needs to be said that a lot of cues used by less scrupulous operators – direct and indirect – have been exposed to be spurious at best (eg fake reviews) and anti-consumer at worst (eg ‘you got the best rate’).
(Fun fact: your conversion rate is higher when your direct price is in parity. Hotels that undercut OTAs 0-10% of the time convert 42% higher than those undercut 30-40%. Source: Triptease 2019.)
So why is this an issue?
Well simply because if this happens on an industry-wide basis, the customer becomes wary, cynical and frankly untrusting of every player, hotel and agent, and not just one or two. This is not good.
It’s difficult and costly enough maintaining visibility on Google so as to drive direct business without having the third party channels undermining themselves (and their client hotels) to the point that ultimately Google rides into town with big pockets and ends up controlling everything. And I mean everything. Every single aspect of your business generation.
It’s not just OTAs or meta search sites by the way that need to check themselves. It can be hotels too. There’s lots of bad habits and sharp practice floating about that needs to be reigned in if we are to retain consumer confidence. Including some control over our destiny.
So come back to your customers.
I accept it’s difficult to figure out what a guest is prepared to pay. Each one is different as are the reasons for their stay. And yes hotels should price based on optimising yield and remaining competitive.
But a simple way of engaging the customer on your website perhaps differently and with some greater transparency if they are browsing, might be to simply display what the same equivalent room rate was last year and the year previous. Or if you have access to their previous history, what price they paid last time they stayed. Or simply ask them, do you consider this good value. All this at least starts to provide context, even ‘believe-ability’ and gets away from the ‘sweaty salesman’ approach.
Basing your price on what your customers truly are prepared to pay is not just a work towards but something that you would need to constantly review. It would be a departure from standard practice and again admittedly it’s not without its challenges but if we’re all about connecting with clients and forging lasting relationships, why can’t price be part of that conversation?