A bevy of third-party distributors sell rooms specifically through mobile apps.
REPORT FROM THE U.S.—With the growing number of hotel bookings coming via the mobile device, hoteliers are evolving their strategy to distribute and price inventory on mobile channels correctly.
Until recently, mobile channels had been pinned as last-minute discount channels where travelers could find deals on hotel rooms. Hoteliers bought into that notion and were giving inventory to distributors at deep discounts.
“The temptation to (discount the mobile channel) is clearly there,” said John Hach, senior VP of global product management at TravelClick. “At a high level, people are looking at mobile as an emerging channel and determining best practices. There’s a temptation to look at emerging channels and use them as a way to sell distressed inventory.
“However, I would caution against that practice.”
A poster child for the last-minute strategy is HotelTonight, which markets “last-minute hotel deals” throughout its app. “Hotels give us last-minute deals on their unsold rooms, with discounts up to 70%,” the company boasts on its website.
And there are many others; Travelocity most recently introduced Lastminute.com, a booking app that promises “instant access to 3-5 star hotels with discounts up to 55%.”
But hoteliers are figuring out that, as more people spend time surfing on tablets and smartphones, they’ll pay the same rate for a hotel room through those devices as they will through a desktop site or over the phone. Therefore, revenue managers more often are being advised to keep the mobile channel in parity with other distribution channels.
HotelTonight executives said the app’s association with discounting is a misnomer, promising the company “is truly on the hoteliers’ side.”
“Nothing frustrates me more than this notion that, because this is a mobile device, hotels should discount on it,” HotelTonight's COO and Co-founder Jared Simon said. “We’ve never believed that. This is sort of a bastardization of our model by big (online travel agencies) who have forced hotels to discount through their mobile app.
“I would love to shout from the rooftop that it would be a silly strategy (to discount the mobile channel),” Simon continued. “We would never endorse that.”
Simon said HotelTonight is designed to reach many audiences, including those looking for a last-minute deal and those looking for a last-minute room and are indifferent to the specific brand of hotel for which they are looking.
“We believe you should discount or not … depending on the customer’s position,” he said.
For the hoteliers, Simon said HotelTonight can be a channel to fill last-minute cancellations at a discounted rate or a channel to fill the last few rooms in the hotel at parity.
“Potentially discounting is a great option, but that has nothing to do with whether it’s a mobile channel or not,” he said. “Our view is that you can use mobile to capture this guest if you can induce them to book and you’re not cannibalizing your other channels. Otherwise, it doesn’t make sense to discount.”
He said even at the last second there are reasons a hotel might put out a full-fare rate.
Robert McDowell, senior VP of global distribution and loyalty at Choice Hotels International, remains a bit skeptical. He said HotelTonight is claiming to franchisees that the app can drive last-minute incremental demand, which franchisees have gravitated toward. However, a lot of the business is not incremental demand—it is just demand that has shifted from another platform, McDowell said.
“Business shifting from the desktop area to the tablet or mobile device is not incremental demand,” he said. “If you just discount it, you’re training consumers to wait until the last minute to book, which flies in the face of any revenue management strategy.”
Evolution of mobile pricing
Stephen Field, president of Synergy Hospitality, a Philadelphia-based management company, said he has never thought of having a mobile strategy as a last-minute discounting opportunity.
“We don’t really have a discount mentality,” he said. “We’re sort of waiting to see where things go with this.”
Choice’s McDowell likens the emergence of the mobile channel to the emergence of OTAs in the early 2000s. Early on, he said, hotels were giving inventory to OTAs at deep discounts as a way to increase demand. Over time, he said, hoteliers became smarter with their pricing strategies.
“Hoteliers need to recognize and have a better understanding of their guests,” he said. “The folks who are setting the pricing and setting the channel mix need to understand that mobile is no different than the desktop and they might not have to discount the channel.”
TravelClick’s Hach pointed to delayed flights as an example of same-day booking opportunity. If a traveler is stuck in a layover city and searches for a hotel room on his or her mobile device, he or she won’t necessarily be looking for a discount, Hach said.
He pointed to LaQuinta’s launch of “Instant Hold” as an example of a hotel brand looking to capitalize on same-day bookings without undercutting rate.
While Choice has earmarked a significant amount of capital to capture demand through its own mobile channels, McDowell said he continues to try to educate franchisees that it’s just a shift in demand, not “something they have to chase down by discounting.”
“Understand the mix and manage that appropriately,” he said. “It’s ultimately the revenue manager who has to have a real good understanding of where the demand is coming from and price appropriately by channel and device.”
On HotelTonight, users will see three hotel options in the market for which they are searching. The hotels are rotated every day to ensure users can’t predict which hotels will be offered. Simon said this is done intentionally “to protect hotels from people just waiting until the same day and hope your hotel is going to appear.”
“That’s very different than how other OTAs do it,” he said.
Simon said the “impulse rates” those last-minute bookers see are special promotional prices that should be used “only when you absolutely need to move rooms at the last second.”