Expedia executive Brian Ferguson lifted the veil surrounding his company’s hotel sorting process during the most interesting panel of the Cornell Hospitality Research Summit last week.
If you were wondering why sort, or order of appearance, is so important, Ferguson, VP of supply strategy and analysis at Expedia, said 95% of all transactions on the site occur with Page 1 hotels. And further, 47% of transactions occur with hotels in the top five positions on the page.
So that brings us to the question of how Expedia decides who goes where. Ferguson said factors the OTA takes into account include:
- Long-term rate competitiveness;
- participation in Expedia packages;
- peak season inventory levels;
- distance from a user’s desired location; and
- negative user reviews.
Of course, rate is important, though Ferguson made a point of saying that OTAs do not set rate, but instead use the rate provided by hotels. “It’s not this notion of OTAs running down rates,” he said. “What the Internet has done is created a lot more transparency in rate. It’s easier to see who is the cheapest hotel.”
Surprisingly, no audience members threw anything at Ferguson.
He then added: “The Internet is not going to be uninvented. That genie is out of the bottle.”
Reviews are a particularly important factor in what hotels will be able to charge through a third-party site, Ferguson said. A 1-point increase in a review score equates to a 9% increase in average daily rate.
“By definition, the people on online travel sites are not looking for a specific brand,” he said. “They’re here to shop around, and they do shop.”
Another reason why this session was the most intriguing to me? Sitting in the audience was STR co-founder and CEO Randy Smith, who just minutes earlier during his keynote listed OTAs as being one factor behind the pricing crisis in the industry during the downturn.
I’m happy to report no one left the session with any black eyes.
