Price disparities are one of the main problems for hotels in terms of Internet distribution and they have a much deeper impact than one would initially think. They are artificial alterations of your price which you must correct, since they are highly damaging.
Regaining control of your price is not, in principle, a complex issue, although when it comes to implementing it, it can get slightly more complicated. If you get down to work properly, in less than three months you should have your price under control and free of risk.
The keys are the following:
- Better safe than sorry. In each new contract you sign or renew, make sure that it has binding price clauses and the corresponding penalties in the event that they are not met (penalties which you must execute). Contracts are not worth much but at least you mark your territory from the start.
- Watch out constantly. Periodically revise your key issuing markets, also from your mobile device. Stop being a hotelier and become a client. You will realise many things which were unknown to you before. You can start by creating your own team (set it up for this purpose or, if you cannot afford the extra resources, the night-time receptionist) who can find them, identify them and write up a report for you which has to be on your desk every morning.
- Act with determination. When you find an unauthorised price:
o Make a booking for your hotel to see where the confirmation comes from. As a client, you will receive a quoted confirmation email (with the price) and a separate voucher without the price (this way, hotels can’t find out the booking price when the client hands it over). In this voucher you will usually see the channel from where the booking is coming from. Don’t be afraid to use a hotel credit card and give it to your staff to make the bookings because, in order to find out where the price disparity is coming from, you will have to make and pay for the booking. After, when you cancel it, you will get your money back and if you don’t, you will have to pressure the issuing channel to recoup your money.
o When you find out the channel where the booking came from, prepare to act.
o Words count for nothing. OTAs and bed banks are used to receiving these kinds of calls and if you don’t adopt a firm stance, they probably won’t listen to you.
o Zero tolerance. Don’t believe any of the excuses they give you. Anyone can make one mistake. Two mistakes may be a coincidence. Three mistakes is something intentional and also a lack of respect.
o Price increases, temporary blackouts during dates of high demand or contract closures are the weapons you can use. Use them wisely. When you act in this manner, they will definitely listen to you. They will be alerted and understand that you mean business.
o Repeat this process every week and all the channels who don’t respect your price will surface one after the other.
- Simplify your distribution
o Hotels tend to be over-commercialised and, therefore, have a surplus of channels.
o Controlling your Internet price with so many open channels is impossible. There will always be a market and a time where they will try and sneak one by you. You can’t look out for all cases.
o With one or two channels which distribute your rooms to agencies and OTAs, your life in general will be much easier and you won’t lose out on clients.
o As you start controlling the price, you will see that many of the channels you have don’t sell. That’s when it’s time to cut them off.
o Create a relationship based on honesty and trust with the channels you stick with (a much smaller number). They will respect you and also make more profit since they will capture a higher market share from now on. You can negotiate contractual conditions with those you stay with.
- Overcome the additional challenge of controlling your price. One of the most difficult and uncomfortable parts of limiting or closing channels is notifying the people involved, with whom you’ve maybe worked for years and know well and who, in some cases, may even be friends. Saying “no” is always hard but you have to separate personal feelings and business. Look at it as if you are opening a new hotel where everything needs to be simpler because there are no relationships to question or bad news to give.
If I control my hotel’s price disparities, what will happen?
If you put your distribution in order and regain control of your price, the following will happen:
- You will lose out on sales, albeit a minimal amount which in many cases will be the sales you are least interested in. The reason behind this is that your hotel will no longer be priced at 85 euros on the Internet but rather at 100 euros. Clients who used to pay 85 euros but not 100 will probably go to another hotel. Nothing to worry about. Remember that they weren’t your real clients.
- Sales on your website will automatically increase as long as you have a website and an adequate booking technology (something which is not always the case). Despite it being rarely mentioned, price control on your channels is undoubtedly the variable which has the highest effect on your website conversion.
- The happiest of them all will definitely be Booking.com (and Expedia), since you have now made them competitive when they didn’t use to be. Transferring wholesales and bed-bank sales to Booking.com isn’t what you were looking for. To avoid this, you have to design a real and aggressive direct-sales strategy where you can manage your stock with an iron grip, are committed to having a better price and better conditions than OTAs, invest in visibility intelligently and move forward in building customer loyalty through your direct channel.
Regaining control of your price should be a priority. Once you’ve achieved it, you’ll see things differently and more positively. You will have less problems and complaints and, above all, will make more money. It’s a win-win situation. What are you waiting for to get going?
The other articles of the price disparities series: