"The message here is that hotels need to get on top of their parity."
Our recent report on third-party rates on OTAs sparked an explosion of interest and comment from hoteliers, so much so that we hosted a webinar to answer as many questions as we could from those that had been sent in by our audience.
Why is it that hotels find it so hard to deal with wholesale rates? [5:45]
Explaining the Booking.basic rate [9:00]
Is this actually going to help hotels to improve? [17:00]
How to identify high-risk moments [23:50]
Using lead time analysis to spot potential issues [28:48]
It's not just Booking.basic
"What is most interesting is actually the early purchase rate, where Booking.com is going to undercut hotels on a big scale." That's what one member of our audience contributed during the webinar as Grace and Charlie discussed the measures OTAs have been taking in order to combat the issue of undercutting by wholesale rates. You can hear what they've got to say at [13:10] in the video above, but in case you need a recap, here's what we had to say about the Early Payment Discount in our January white paper:
In an email received by a hotelier and shared with Triptease, a Booking.com agent explains that "by showing an 'Early Payment Benefit,' Booking Sponsored Discount creates a more compelling rate for our customer if we see we might not receive the most competitive rate. This indicate is measured by a PQS below 70 [...] When partners do not have a PQS at or above 70, we will display this benefit during the booking process."
The reasoning is a wise move on Booking.com's part. It means that the onus rests on hotels to ensure they are giving their partner the best available rate. The behavior is rational. The OTA knows that its conversion suffers when it is out of parity with other distributors. For both OTAs and hotels, parity matters if you are serious about conversion.
This was a message reiterated by Charlie during the webinar itself: "Booking.com are not doing this because it's going to be fun to have a war with hotels. They're doing this as a last-ditch attempt because they just know that they have to have better parity, and they can't afford to be undercut."
The Price Quality Score
One thing that has repeatedly come up in our conversations with hoteliers is the PQS and how it is used to determine how a hotel's listing appears on Booking.com. You can see Charlie and Grace discuss this at [14:20] in the video above. "It seems that there could be more transparency around how this score is calculated," suggests Grace.
Unclear rate sources are one issue - another is the fact that hotels can struggle to recreate the disparities they can see on their OTA dashboard. "I currently have a bad score because [Booking.com] seem unable to use geo rates, and Expedia can," suggested one hotelier on the webinar, referring to geo-localised rates that vary according to where the user is in the world.
"What we'd recommend is you use a rate-checking tool to make sure you've got evidence to show that you're in parity," suggests Charlie. "That way, if you do get 'punished,' you can be clear on whether or not it was your fault."
Is dynamic pricing really the answer?
The received wisdom on dealing with the problem of rogue wholesale rates is that dynamic pricing allows hoteliers far greater control over how much their rooms are sold for. However, one member of the audience on our webinar questioned its use as a cure-all in this situation.
"I've been thinking about static vs dynamic and whether it [dynamic rates] will resolve the problem, but actually the issue has got worse since wholesalers went dynamic," they said.
"Wholesalers now have access to more inventory and more product. Therefore the issue has got worse. Perhaps it's better to stay on static with limited access to inventory/allocation! In this way, they [wholesalers] would be unable to sell to the 3rd party OTA's that don't work with hotels directly!"
What do you think - should hotels stick with static or make the move to dynamic? Let us know your thoughts by emailing firstname.lastname@example.org - we'd love to feature them in an upcoming article.