Online travel agencies (OTAs) have built incredibly successful, valuable businesses, and their websites largely define what consumers now expect from the modern booking experience. But even Expedia and Priceline can’t be all things to all hoteliers. Revenue management tools now offered by OTAs—like Rev+ from Expedia and BookingSuite from Priceline—miss a very crucial component of a profitable pricing strategy: the hotel’s data. Hotels should guard this data closely rather than giving it to the companies that have already remade distribution in this industry.
OTAs undoubtedly make good marketing partners for hotels, during need periods and as a means to acquire new customers. Expedia and Priceline are now pitching themselves as data partners, inviting hotels to leverage the millions of data points from listed rates, transactions, and competitor rate shops that occur on their sites every day. Expedia executives have said publicly that the site sees more than 2 billion price and availability changes every day.
However, the big caveat hoteliers must consider is that Expedia and Priceline do not have access to the real-time data hoteliers store in their own systems. Without a connection to the hotel PMS, they don’t get the inventory and CRM information needed to make the best pricing and promotion decisions.
When it comes to data, hoteliers make better decisions with depth, not just breadth. OTA-sourced reservations and rate shops produce very basic rate recommendations. To them, a market is “compressed” simply when the OTA receives less inventory than usual from its hotel partners. They can scrape thousands of competitor rates, yet if that’s a hotel’s sole basis for yielding its own prices, it is still largely just following the market.
Hotels should aim to lead the market and proactively take share. The way to do that is to wield a hotel’s historical performance, customer data from the CRM, and actual on-property spending from folio data in the hotel’s pricing strategy. Most importantly, hotels should set their rates for the maximum profit and gauge how their pricing—not their competitors’—affects the properties’ demand.
Because the OTAs’ revenue management tools can’t access a property’s guest and hotel data, they overly rely on competitor prices as a demand signal. That incentivizes them to pit hotel partners against each other to undercut one another on price. The race to the lowest rate to grab available inventory ends up benefiting OTAs with more bookings, but at the expense of the hotels.
If hotels give OTAs more data to improve their tools, it could be detrimental to much of the industry. Over time, OTAs have shown that they are able to exert control over entire segments of the industry, meaning no hotel gets the competitive advantage from working with them. Moreover, this strategy of chasing short-term spikes in revenue with a distributor-provided system is not going to truly improve a hotel’s personalization efforts and fenced-offer strategy.
OTAs can’t craft a better revenue strategy than a hotel with complete possession of and control over the data that makes the difference, nor would it be in their best interest to do so. Even if OTAs are offering their tools at a low cost, hoteliers should ask themselves what else they’re willing to sell for too low a price—and a hotel’s inventory should never be the answer.
About the Author
Patrick Bosworth is CEO and a co-founder of Duetto, a Revenue Strategy Platform company based in San Francisco.