News for the Hospitality Executive
The Pitfalls of Last-Minute Sales in Hospitality
By Max Starkov
October 12, 2011
The following article is Max Starkov’s latest contribution to the “Successful eMarketing” blog on HOTELS magazine’s website.
Last-minute sales in travel are not a new phenomenon. There have been many attempts to find a way to dispose of these empty airline seats, idle rental cars, and empty hotel rooms at any cost.
Theoretically it makes economic sense: it is 4PM, I have 20 empty rooms, and if I sell them at 50% off rack, I will still be making some money from my otherwise perishable inventory, right? Wrong!
Last-minute sales in hospitality at lower discounted rates are not sustainable in hospitality as this approach jeopardizes all other distribution channels (hotel mobile site, hotel traditional website, GDS, phone reservations, even OTA distribution). This is especially valid today in the viral and mobile environment we live in and with the smart hyper-interactive travel consumers we are dealing with today.
What Is the Situation in Hospitality?
Last-minute sales have been tried and failed repeatedly in the hospitality industry. Remember LastMinuteTravel.com? Where is this site today? At the height of the dot-com bubble this site even had a splashy multi-million Super Bowl commercial.
Currently Hotels.com has a last-minute hotel deals section on their site (http://www.hotels.com/last-minute-hotel-deals/). Our analysis shows that these last-minute deals are more of a marketing gimmick and, due to contracted rate parity provisions with the hotels, these “last-minute” rates are no different from the “regular” hotel rates you can find on the main section of the site, on any other OTA, or on the hotel own website.
Priceline announced recently opaque Last-Minute Hotel Deals as part of a broader last-minute travel section on the site. Travel consumers can now book hotel rooms up to 11pm the same day they travel and still save up to 40 percent over other leading online sites when they use the “Name Your Own Price” model, which is Priceline’s traditional opaque program.
There is a new kid on the block, a mobile-only last-minute discount OTA called HotelTonight.com, which operates in the following manner:
As travel demand improves, hoteliers will become increasingly reluctant to participate and provide the supply side of the equation with fresh, intriguing last-minute discounts. Online travel consumers, disappointed by the lack of fresh/intriguing last-minute discounts, will revert back to the traditional booking channels: hotel direct, voice, GDS and OTAs. As a result both sides of the equation will suffer and shrink.
In this sense HotelTonight.com and some OTAs are trying to re-create in the mobile space what other players in the field have tried repeatedly and failed. My prediction is that HotelTonight.com and similar last-minute discounters will not last long as these sites employ a business model that is against the hospitality industry’s best practices for channel management and rate parity, and will suffer as a result of supply and demand economics.
Why Hoteliers Should Avoid Last Minute Sales?
Here are only some of the reasons why it is not a good idea for hoteliers to utilize the last-minute deal business model and why this business model will not survive the test of time in hospitality, similar to the example from the airline industry:
In the age of social and mobile “word of mouth,” it will not take long for all regular and frequent guests at your hotel to hear about the lower last-minute rates offered via an OTA or a service like HotelTonight.com. What will be the result? The hotel will soon witness that:
There is a very good case study from New York City where a luxury boutique hotel was (mis) using Twitter to offer last-minute discounts for unsold rooms for the night:
What Should Hoteliers Do to Avoid Last Minute Sales?
Now that we have discussed that last-minute room sales are against industry best practices and do not work in hospitality, what should hoteliers do?
To begin with, if hoteliers are doing everything right in the direct online channel, the hotel would not need to use last-minute discounters. Instead of relying on last-minute discounters, hoteliers should invest in the direct online channel, both traditional and mobile Web.
Second, make the mobile web your priority in Q4 2011 and 2012. The mobile channel has already become an important travel planning and transaction channel in the U.S. and worldwide. Hotel guests and travel consumers are already mobile-ready, and hoteliers and travel suppliers have to respond adequately to this growing demand for mobile travel services.
Third, hoteliers should focus not on “naked” rate discounts like last-minute deals, but on hotel special offers, packages and promotions that provide real value, such as: limited time offers, advance purchase promotions, complimentary amenities and upgrades, loyalty point promotions, family, weekend, spa and romantic packages, etc.
In this economic environment, it is essential for hoteliers to embrace all three of the above steps in order to increase market share by taking advantage of this new mobile travel planning and booking consumer behavior, as well as the shortened booking window and last minute nature of mobile bookings.
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