Hotels and OTAs are being undercut on the overwhelming
majority of OTA searches by non-authorised players looking to capitalise on
price competitiveness finds a new white paper.
Fornova
and EyeforTravel’s new white paper has uncovered that the greatest factor
impacting rate integrity is contracted wholesalers, which are selling inventory
to Online Travel Agencies (OTAs) that do not have direct agreements with
hotels. This is resulting in lost market share and revenues for both hotels and
partner OTAs. The depth of this is revealed by Fornova monitoring of nearly 10
million shops made through metasearch engines in 2018.
Contracted
OTAs on average undercut hotels in 14% of the shops with leads times less than
14 days and in 26% of shops with leads times above 14 days. However, when it
comes to non-contracted sellers, the share of shops that were undercut doubled
or trebled, depending on the time frame. 39% of hotels’ direct rates advertised
on meta were undercut by these actors for stays less than 14 days rising to 74%
for those with lead times above 14 days
Furthermore,
non-contracted OTAs are undercutting more aggressively than contracted
counterparts. On average, OTAs working under agreements with the hotel posted
rates that were 5% to 6% lower than the direct rate. This jumps up to 10% for
non-contracted sellers advertising for lead times under 14 days and 11% for
lead times above 14 days
The majority of this is coming from wholesalers moving on
inventory, which is then posted by other sellers. Fornova CEO Dori Stein
estimates that 40% to 50% of hotel inventory contracted to wholesalers is
leaked online, despite the fact that they negotiate for static rates, based on
the fact that those rates will be opaque to consumers who are purchasing the
room as part of a package with other services included.
The growth of APIs has allowed more players to access and
market inventory to more partners but this is not necessarily in the hotel’s
best interest. Hotels need to have a view on who is selling their inventory and
at what price to protect their brand’s integrity and also to prevent their
prices being consistently undercut by wholesalers who should not be placing
inventory in this manner. Failing to do so means hotels cannot understand the
true effectiveness or cost of their marketing and sales efforts and for
consumers to shift away from seeing value in making a direct booking.
The issue is ongoing for Thailand-based Dusit International,
which operates primarily in Southeast Asia and which maintains static contracts
with a multitude of traditional wholesalers. “There is crossover between all of
the different players on various channels and that makes it very hard to
maintain rate integrity,” said Chatchai Pongprapat, assistant vice president,
revenue management. The company’s solution has been to partner with Fornova,
which polices the rates and in turn, Dusit tackles rate disparities one-by-one
as they arise, while also reconsidering the terms and conditions of individual
static contracts in order to keep the hotels from being undercut.
However, resolving each rate discrepancy doesn’t necessarily
remedy the issue in the long-term. The third-party vendor will rectify the
issue at the time it occurs says Stein, but without contractual obligations,
the partner isn’t necessarily obligated to maintain parity in the long-term.
Plus, they will often change the rate in the local market where the hotel’s
revenue or distribution team is located, while leaving incongruent rates in
international markets as it’s more difficult for the hotel to verify that the
changes have been made. According to Fornova CEO Dori Stein, “when hotels have
a bad parity situation and they’re on meta, they’re effectively paying to tell
the world that their brand.com rates aren’t the cheapest.”
This white paper, made in conjunction with Fornova, gives real-world data on hotel, wholesaler and OTA bidding strategies, alongside consumer behaviours, and meta success metrics. Use these to understand the channel, the competitive landscape and build a winning strategy!
Learn the following from this white paper:
- The state of the metasearch market.
- Market penetration rates among consumers and hotels.
- Consumer behaviours on metasearch.
- OTA bidding strategies.
- Techniques to succeed on metasearch.
- The outlook for meta.
