New Mobile Entrants and Issues in Hotel Distribution
By Matt Carrier Manager of Revenue Strategy, Kalibri Labs | January 25, 2015
The mobile eCommerce space in the hotel industry is growing and changing rapidly. With the massive influx of new distribution apps and mobile sites, it is vitally important that hoteliers stay educated and able to make informed decisions about their hotel participating (or not) in these new channels. Hoteliers must be able to take a pragmatic view of both their hotel(s) and these channels, with their specific customer profiles and compensation structures, to determine if they will be able to benefit from their participation.
Last Minute Booking Apps
One of the hottest topics in mobile hotel distribution at the moment is the rise and prevalence of last minute booking apps. Examples of this type of distribution channel include HotelTonight, Groupon Getaway Tonight and JustBook, among others.
From a consumer perspective, these apps provide the opportunity to book a room at a significant discount from what they might expect to pay on traditional distribution channels or through the hotel's website. The tradeoff is that the guest can only book these discounted rooms on the day of arrival; they are essentially trading uncertainty about specific hotel availability and rates for the chance at booking a room at a significant discount. In some ways this is not dissimilar to the tradeoff offered by more traditional opaque Online Travel Agency programs, such as Priceline and Hotwire. However, what we're seeing now is the same day booking restriction loosening on some channels.
From a hotel's perspective, the benefit of these apps is decidedly more mixed. While they provide a unique opportunity to potentially fill distressed inventory, these bookings tend to come at a very heavy cost by way of the discount (in many cases there is a required minimum discount) and commission rate. Typically the commission rates for these last minute distribution channels exceed those of traditional OTAs and can range from 20-50%.
Another consideration when a hotel is contemplating participating in a last minute booking app is the customer profile of these channels. These customers are actively seeking out deep discounts and tend to be brand agnostic. If these channels are used to convert last-minute customers into repeat customers coming through direct channels, they can be a wonderful acquisition tool. On the other hand, if these simply provide a steady stream of one-time, short-window bookers, the economics of the discounts and commissions make it difficult to rely upon them.