In the first part of this series, we have learned how it is easy to sell Hotel rooms online: it just requires the connection to a travel switch that sources from different providers, and voilà … everybody can redistribute inventory and prices of your Hotel online.
This is the reason why the world wide web is constellated of OTAs of any kind, reselling rooms of Hotels that they don’t hold any contract with.
Besides the traditional OTAs, there are new business models arising that are making the distribution landscape even more complex and could possibly pave the way to a more fragmented (but yet interesting!) future.
In this new part of the series, with me and Alessandro Crotti another two amazing guests contributed with their point of view:
Darko Bosancic expert in travel, fintech and integrations that will be shedding some light on the NFT world of possibilities ad Simone Puorto, bestselling author, founder of travel Singularity and futurist that will elaborate on the world of the Metaverse.
Price freeze…in Hotels
The greatest innovations come from simple ideas. Airlines have been giving travelers the possibility to lock prices for a flight for years now, and fare holds are quite the norm in the airline industry booking process. Hotels have been following the airlines’ logic since the beginning by applying yield management techniques first, dynamic pricing then and price freeze now.
According to Phocuswire, “Hopper has emerged from the pandemic as the top travel booking app in the United States, surpassing Booking.com, which claimed the leading spot in 2020.” Launched in 2020 and growing in popularity through Tik Tok, the core business model of Hopper is:
- The traveler pays a small deposit to freeze the hotel rate
- Traveler can complete the booking at a more convenient time (24-48 or more hours after)
- If the price increases, Hopper will cover the price difference up to the maximum limit listed on your Price Freeze policy.
- If you don’t book, the option expires along with the deposit.
Easy-peasy. How does Hopper sell my Hotel when I don’t have any direct contract with it?
Going back to the first part of this series: sourcing rates and playing the margins game.
Hopper gets inventory and rates from different sources, we run a test on a Hotel that sells the specific room type called “Premium” only through the following 3 channels: Expedia, Booking, Direct.
After downloading the App, we looked for a room for 1 Night on December 1st, the Premium double room pops up as the cheapest room type/rate:
The official sell rate for Premium room type is: 104 euro including VAT and tax
Rate #1: 88 euro (-15%)
Hopper lowest returned rate for the same room type: euro 78 per night + taxes = 88 euro (-15% compared to the official sell rate).
To price freeze today at the 88 euro rate, the guest has to pay 26 euro, representing roughly a 30% of the rate itself.
From the tentative bookings we made, Hopper rates seem to be from 15% to 20% below the official sell rates on major OTAs, that is a bold saving supported by the fact that the company states that price predictions are 95% accurate.
After this first-rate return, I closed the Expedia availability on the Premium Room type.
After a few minutes, I searched again for the same Hotel and the same date and here is what I got:
Rate #2: 104 euro (same rate)
Standard double or twin room is the Booking.com name for my same Premium Room.
The rate is now a bit higher, and adding taxes it arrives at 104 euro. Exactly the sell rate I am sending to Booking.com on that date. The 95% accuracy probably knows that I am going to raise the price for this room by December 🙂
But why is Expedia sourced price lower than Booking.com? Expedia is a merchant model, so same as other wholesalers or tour operators, they work on net rates and Hopper can probably play better on margins.
Should I make a booking now, the guest would receive the confirmation from Hopper but the Hotel would receive the booking from Booking.com.
After this second try, I then closed Booking.com availability on the Premium Room type.
After a few minutes, I searched again for the same Hotel and the same date and here is what I got:
Rate #3: not available
The next available room type, Double Classic, is returned.
There are no other OTAs that are distributing the Premium room type, so Hopper cannot source anywhere else for that specific room. (at least for now, Brand.com looks safe :))
Hopper is designated an OTA — not a metasearch provider or aggregator — so the booking takes place right in the app, rather than passing you on to another site. There is this interesting article in the datumize blog that explains how price forecasts and models like Hopper work: Hopper says that 60% of its searches advise customers to wait for lower prices, despite the trend towards fares rising closer to departure. The majority of Hopper’s forecasting tool users are holiday-makers who begin to research a vacation approximately three months prior. As most users have a longer research period, there is more scope for fluctuation. However, Hopper claims that customers who follow their flight price forecast advice save 10–15% on their fares.
On its website Hopper states that At the heart of the Hopper app is a prediction algorithm that processes trillions of data points, allowing us to make precise and personalized travel recommendations.
Are we still sure that our old-fashioned way of revenue managing our Hotels through excel spreadsheets and gut feeling can really cope with an AI-written future for our travel industry?
We love the way these new distribution models are changing
Snaptravel: lead-leading-to-booking model
Those who follow us know that both of us are great supporters of chatbots, despite the general skepticism of our industry.
Snaptravel perfectly and better than anyone else understood the power of this new channel to the point that, in a matter of a few months, it turned from an on-the-verge-of-bankruptcy company to being the first, by all means, chatbot OTA.
Last year I shot a dedicated video about Snaptravel and how it worked back then. You can find the link here.
Ever since Snaptravel hasn’t stopped its evolutionary path; in fact and in addition to SMS, initially, it was Facebook Messenger the primary booking channel, whilst now they focus more on Whatsapp.
Either way, the concept is simple, yet revolutionary: deals happen over messages.
Now, let’s see how a typical reservation happens over Snaptravel, so that the concepts like “chatbot OTA” and “deals over messaging” will become a little clearer to many.
Step 1: Normal Search
It is a normal Google Hotel Ads screen, with Snaptravel popping up just like any other OTA. The only difference is the label “SMS only rate”.
Step 2: SMS or Whatsapp
Whilst on a normal OTA you’d be offered the chance to make the booking right away from the app (or website) you made the original search, Snaptravel points you to either an SMS or a Whatsapp message to continue your funnel.
Step 3: Get the deal.
Step 4: the deal you selected and… something more.
Just like any other OTAs, Snaptravel doesn’t give a thing whether the user will end up booking your hotel or any other, as long as he will get the deal via Snaptravel.
Step 5: an even sweeter deal.
Most times the deal will be even (a lot) cheaper than the one initially seen on Google Hotel Ads.
Step 7: want some more discounts? Why not…
Share with a friend and you’ll both get something.
From a Revenue Management perspective, the way Snaptravel works is no different from any other Amoma, CancelOn and Co.
What’s really notable though it’s Snaptravel’s model that gives the LEAD as much credit as the BOOKING: lead-leading-to-booking.
In last year’s video one of the greatest aspects we particularly highlighted as being very smart, was the 24hours free retargeting window allowed within Messenger.
You heard that right: FREE retargeting. How cool?
Snaptravel made the most out of this Messenger-specific feature, understanding that a typical booking funnel rarely reaches its end at the end of the first session.
Not only did Snaptravel manage to get rid of the web infrastructure necessary to host a booking system, but they found a way to turn free-to-use and commonly known apps like Messenger and Whatsapp into their booking system, by leveraging chatbot APIs that can cost as little as $15 /month.
Shockingly smart!
ABS: Attribute-based Selling
Find the difference:
On one hand, the OTAs are an incredible source of traffic and visibility on a global scale.
On the other hand, they are the masters at flattening any hotel value proposition.
Hotels are being considered the most commoditized items across all business sectors. Why? Check the difference in the image above.
A 5-star luxury hotel and a 2-star property being presented in the exact same way: same graphic design and look&feel, same copy style, same everything.
Ultimately, that’s the role of the OTAs: quantity vs quality. Commodity vs. uniqueness. Meaningless average vs valuable brands.
No wonder at times hotel rooms end up costing like a slice of pizza.
Every single hotel of the world claims more direct bookings. Yet, think about it: what do most hotels do to compete with the OTAs? They adopt systems that sell their products (hotel rooms) in the exact same way:
- standard room on Booking.com, standard room on the booking engine;
- deluxe room on Expedia, deluxe room on the booking engine;
- suite on Agoda, suite on the booking engine;
“Tomato tomato”.
What’s the difference? Price, eventually.
So, is it possible to sell our hotel rooms through our direct channels in a way that the very same room gets perceived differently?
Differently put, is there a way to raise the value of our rooms by offering our potential guests something different from a “better price”?
We think there is and it’s something we’ve been talking about for more than 2 years already: Attribute-based Selling (ABS).
What is ABS?
In its basic meaning, visually and ABS could be presented like this:
Put simply: instead of selling rooms as a whole, you sell the in-room specific features as a valuable benefit, at a price.
Want an example? We give you 2.
#1: West-facing room: why would someone want to have a west-facing room? Because “Sunsets with you are better than sunrises without you.”
How romantic! Yet, if presented in a nice way, highlighting the emotional benefit that lies hidden behind an apparently-meaningless feature like a “west facing” room, you’d be surprised seeing how much people are more willing to pay for that extra thing they probably didn’t even think about.
#2 Wooden floor vs. Carpet: would people be willing to pay extra money when offered to choose their flooring preference? Well, I’d be one of them, because I really don’t like carpets.
We’re 8 billion people in this world, with 8 billion different personalities: how can a “standard” room meet everyone’s needs and desires?
The one-size-fits-all way of selling hotel rooms is (should be) over, forever.
To many, all this may sound too futuristic, too challenging, too much.
If so, let’s take a quick look at what others do, meaning how the ABS principle applies to other business sectors:
The online battlefield is fierce and ABS could be the great breakthrough in the personalization process.
Customer experience is at the core, together with the right time, the right segment, the right price. The elements at the base of revenue and marketing and intertwined: understanding the customers’ brand new needs is vital to thrive. Therefore, the one-size-fits-all approach of selling is not effective in a world where the customer wants to be reassured and requires a tailored-made offer to be engaged. This principle was true pre-covid and it is true now more than ever: two of the most ineffective ways to sell, are to present the customer with too many options and to standardize.
What Is Making The Hotels Direct Booking Process Different From OTAs, Is The Opportunity To Work On Personalization Vs Standardization. To Offer A Tailored Service Vs A Commodity Service.
Unfortunately, in our industry, we are still tied up with a rigid mentality and the path to change is a long road if we do not start to think outside the box. Even when considering the most advanced technology in the market and the Revenue Management Systems out there, it would require a full change of the pricing logic and algorithms to shift from the current room type/room class pricing to the attribute-based pricing. But if we think at the possibilities behind such fragmentation of price points that the ABS would allow to, it is easy to understand that that’s exactly where AI would make a huge difference.
The rise of ABS would also further push on the neverending debate about open APIs and the importance to open connections for innovation in the travel tech sector.
OTAs are moving fast when it comes to innovation and new distribution models and trends are on the rise: we should not leave anything to chance.
If we change our perception of the hospitality business as being less about just selling rooms and more like a retail business, we will look at our Hotels with brand new eyes and discover incremental revenue opportunities we did not realize existed before.
The NFT bandwagon in Hospitality
by Darko Bosancic
With all of the excitement around NFTs and the arrival of the metaverse, even the hospitality industry is now preparing to get on the NFT bandwagon. Many hotel chains are releasing their version of NFTs with real use cases to benefit their customers worldwide. They are now getting well-positioned to capitalize on this boom since they are already providing unique experiences to their customers.
NFTs are showing the potential to drive mass innovation in this industry, and a part of this is the swing to NFTs as part of the restaurant’s and hotel’s promotional campaigns. With Pizza Hut Canada covering NFT’s for pizza collection, Marriott Bonvoy NFT reveals how travelling helps us reach emotional fulfilment to the five-star Venetian hotel is the first to accept reservations using NFTs. NFT’s and crypto are marching fast to hospitality world adoption.
NFT’s are not just art; they are just more of that, and with world usage NFT’s, we are getting a whole new dimension of possibilities in the hospitality industry. We all have been in the situation where we booked a reservation in the restaurant, but we could not come due to some circumstances. So we all were on the losing side as a guest, we were undercut for our experience and restaurant income. But imagine the following scenario where we will tokenize tables and issue unique NFTs for those tables. Each tokenized booking would be distinct in terms of date, time, number of people, and so on, and certain tokens may be more valuable than others depending on location, business, and other considerations. The tokens would work as a deposit, ensuring revenue even if the party did not turn up. For example, make a reservation but are unable to attend due to unforeseen circumstances. You might sell the token to the highest bidder online, retaining the income as well.
The possibilities are enormous, and this was just one of the examples of how NFT and crypto technology can be used in the hospitality world. NFTs have demonstrated their ability to disrupt the arts, music, and other industries, but their entry into the hospitality industry will undoubtedly be a game-changer.
Follow Darko’s insights on Linkedin here
A Metaverse revolution in the travel industry
by Simone Puorto
The metaverse may be defined as a new digital reality combining elements of AR, VR, MR, social interaction, online gaming, shopping, and work. Some may label it as extended reality (XR), but it’s hard to put a commonly accepted label to the concept, because -let’s make it clear as soon as possible- the metaverse does not exist. Yet.
Some of the foundations of the metaverse are already here, such as AR glasses, VR headsets, blockchain, NFTs, crypto, while others are still embryonal or do not exist yet.
The metaverse will need some infrastructures that do not exist today, and the whole Internet landscape has not been originally created to support such a revolutionary platform. Moreover, we will need standards and protocols (possibly from day one), not to mention the privacy and regulation concerns that building the metaverse can trigger.
With all that in mind, we can start engaging with the idea and envision some of the possible applications of the metaverse in our industry. It does not seem too far-fetched to me that, in five years’ time, the Marriotts and Hiltons of the world will start building meta versions of their hotels into Horizon, allowing avatar/guests to meet with their friends in the lobby, or brainstorm on their virtual meeting rooms, of course for a fee.
That being said, it may be way too early for the (probably unjustified, at this stage) hype that the metaverse is getting, at least in hospitality. If the metaverse can be (and will surely be) a goldmine for online microtransactions-centric industries (think of gaming: the console microtransaction market alone generated $2.94 Billion in 2017), on the other hand, VR traveling never really got mainstream, and this is something we all learned during 2020’s lockdowns.
So, how the metaverse will affect travel is still largely unknown. Even though I can foresee some applications in hotel distribution and advertising, the “hows and whys” are still nebulous.
Follow Simone’s insights on Linkedin here and don’t miss his latest bestselling book Hotel Distribution 2050. (Pre)visioni sul futuro di hotel marketing e distribuzione alberghiera if you want to deep dive in the future of distribution.
