A short video showing the features and benefits of RezTrip 2.0

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RezTrip 2.0

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[The video has been produced by Michael Clarke, owner and creative director at Suburb Studio. Michael's work can be seen on his website and his LinkedIn profile is available here. Michael is responsible for most of Travel Tripper's creative work. We think he's awesome!]

Be Direct. Be Yourself. Be Independent!

There has never been a better time to be an independent hotel.  People expect a personalized experience from the products and services they use, and they want no less from their chosen hotel.  Branded hotels tend to be somewhat cookie cutter, as hotel chains drive “brand standards” that range from room decor, to guest services, to bathroom amenities.  Independent hotels, on the other hand, can paint their rooms any color and put any brand of soap in the bath.  And the Internet is fostering a myriad of marketing channels – many of which even the playing field between chain and independent hotels.

Hotels have used chains and marketing/representation companies as a security blanket – afraid to fight for customers without this protection.  I believe that the time is right to take down that chain flag, rip up your representation agreement, and Be Independent!

Big boxes are BORING

Many years ago, each hotel was different from the rest.  Over time, hotel chains emerged and started to swallow up and replace independent hotels in cities and roadsides.  Chains were successful for several reasons:

1. Consistency:  Chains conveyed the benefit of brand consistency at a time when consumers craved the security of knowing in advance what the product would entail.  Hotel guests were happy that a Holiday Inn hotel in one city was exactly the same as one in another city
2. Sales Aggregation:  Chains brought hotels business by aggregating business from travel agencies, business groups, and call centers.  Independent hotels quickly signed on with chains because the brand would deliver guests the hotel could not otherwise reach
3. Purchasing Power:  Chains could set lower prices than individually run independent hotels, because the chain used cost economies in construction as well as supply sourcing.   In other words, if the hotel saved $1 per room in lower bedding cost it would pass $.50 of the savings on to guests in the form of lower room rates

The Tables have turned

1. Uniqueness is good: At the beginning of the 21^st century, consumer desires began to change.  People got bored with sameness and wanted their choice of lodging to better fit their individual needs.  Chains realized this and reacted by building “boutique chains” within themselves.  They did this with limited success, however, as the mini-chains turned out to be just as boring as their older brothers – on a smaller scale.
2. Sales channels have fragmented: Hotels can now reach customers through a huge number of sales channels both online and off.  Furthermore, independent hotels can hire a reservation center and sell via the GDS themselves without cowering under a brand umbrella.  And of course the Internet offers a huge direct sales channel that did not exist at all 15 years ago.  On average, hotels now receive 62% of their business directly.
3. Purchasing agents have emerged: Hotels can join group buying organizations to gain purchasing power that rivals that of the chains.  Independent hotels can keep all of the money they save on pillows and tissues

Be Unique

As an independent hotel, you can choose whatever identity you like for your property.  Want to try catering to swinging urban singles?  Go for it.  Want to become a family oriented property?  You can try that too.  Brands have difficulty changing their marketing approach for an individual property.  Once the brand or rep company has pegged you as a “city center business hotel” they will market you like all other hotels in that category.

Brand fees are high

Like many franchisors, hotel chains make a healthy profit on the back of their franchisees.  Don’t believe it?  Many hotel chains remained profitable during the recent economic downturn while independent hotels and other businesses struggled to survive.  That’s because hotel owners (franchisees) assume financing risk while franchisors collect royalties and incur very little capital risk.

Brand fees vary, but a typical fee structure includes:

1. Franchise application fee:  $45,000 for a property of 150 rooms or less
2. Franchise royalty:  5% of all hotel revenue
3. Reservation fee:  Can average 4% of revenue delivered from chain’s reservation system
4. Marketing contribution:  2.5% of all hotel revenue
5. Loyalty program fees:  Another 1% of hotel revenue
6. Miscellaneous fees: Varies

The average brand fee for a mid scale hotel totals 10% of room revenue.  At least once a year you should carefully calculate whether your brand brings you enough value to justify this expense.

Representation Companies do what exactly?

Years ago, hotel representation companies offered a great value to their member properties.  Groups such as Leading Hotels of the World, and Preferred Hotel Group gave independent hotels marketing and sales support for both direct and intermediated business.  Every year the rep companies delivered thick, printed hotel guides to thousands of travel agencies all over the world.  This book was the bible of independent hotels, and properties would pay exorbitant fees to ensure they were in it.  Believe it or not, in the year 2010 rep companies are still distributing those printed books!  When was the last time you reserved a hotel room out of a book?

Rep companies occupy the nether region between consistency (the hotel chain’s primary proposition) and uniqueness (independent, non-flagged hotels).  Rep companies claim to offer travel agents and consumers a qualified offering while permitting hotels to maintain their distinctive nature.  Unfortunately this qualification is very inconsistent, and guests would have a very difficult time explaining what a rep company brand offers exactly.

While not as expensive as chains, rep company fees are not insignificant for a hotel:  8% of revenue is quite common.

Even Chains are going independent

Big chains are recognizing that consumers want what independent hotels can offer.  Marriott is launching Edition – a boutique hotel collection – with Ian Schrager (certainly no hotel traditionalist).  Starwood has the Luxury Collection of individual boutique hotels, and lifestyle brands like Kimpton and Design hotels are portfolios of loosely similar properties.

Stand on your own

So how can you fill your rooms if you don’t use a brand or representation company?

1. Build and maintain a great web site.  For less than $25,000 you can get a unique, search engine friendly site.  Don’t forget to budget for maintenance and updates since you’ll want to keep your site fresh.
2. Promote yourself extensively via Online Marketing.  Either hire an online marketing specialist for your staff or hire a company (such as Travel Tripper) to manage online marketing for you.  Online marketing includes pay-per-click advertising on search engines, social networking on sites like Facebook, using promotional tools such as TravelZoo, and
3. License a powerful booking engine – like Travel Tripper’s RezTrip 2.0.  Convert as many visitors to customers as possible by integrating a great booking engine on your web site.  RezTrip 2.0 with its dynamic pricing capabilities and merchandising features is an excellent choice.
4. Control your intermediaries – don’t let them control you. Use online travel agencies (OTA) as a limited source of business only.  Like a dangerous drug, if you become too addicted to the OTAs you will find it nearly impossible to break away. Encourage travel agents to book on your web site so you can save some GDS costs as well
5. Don’t forget about offline marketing. Word of mouth is still a very powerful way to expose your hotel.  Partner with local businesses and commercial organizations to create promotions and drive business.  Walk into nearby offices and offer them a special rate for their visitors to stay in your property.  If you are in a residential area, put up flyers in apartment buildings to advertise your hotel.  The options are limitless.

So, before you automatically renew your chain or representation agreement – remember you have another, great option.  Be Independent!

Accor’s Reservation System has Decent Pricing Capability

In a previous  post I demonstrated the shortcomings in the pricing capabilities of hotel reservation systems. But after posting I thought that someone must be doing something correctly. But who? Could I find any res system that enabled more sensible pricing?

After poking around, I found that the Accor Reservation System (TARS) is better able than most systems to:

• Simplify hotel pricing
• Provide the ability for revenue managers to implement a coherent pricing strategy.

Like my previous entry, the purpose of this post is not to evaluate revenue strategies as much as it is to evaluate the ability of a reservation system to support a coherent revenue strategy. Note also that all conclusions in this post are based on analysis and inference. I have no direct insight into how things work in TARS and neither have I spoken with anyone at Accor.

So, I take responsibility for any and all factual errors in this post.

My Findings

I tested using two availability searches:

1. Sofitel in New York, 11^th Aug for 2 nights, 1 room, 2 adults
2. Sofitel in New York, 11^th Aug for 7 nights, 1 room, 2 adults

As you can see the the only difference in the two searches is the length of stay.

I found the following:

For the 2 night stay: 5 rooms and 4 rate plans were returned, summarized in the following table I created myself.

And for the 7 night stay, 5 rooms, 6 rate plans for the 7 night stay were returned as follows.

(Note: I’ve trimmed the prices to remove the decimals as they are not relevant to the analysis.)

Side Note:  The Early Rate (a full non-refundable pre-paid rate for advance purchases) is not offered for a 2 night stay. The absence of the advance purchase doesn’t make sense to me. Why put a length of stay restriction on an advance purchase offer. But fair enough – that was Accor’s revenue management strategy and we’re not here to question a strategy but to analyze TARS’ ability to allow its revenue manager to implement a chosen strategy.

So what do I think TARS is doing well?

Length of Stay price changes enabled without adding rate plans

Typically when a hotel wants to offer a lower average price for a longer length of stay, the reservation system requires the revenue manager to create a new rate plan, which is returned in addition to the base rate plan (often called Best Available Rate or BAR).

In Accor’s case however, for the room only offer there was no need to create new rate plans to handle different price points for the longer length of stay. The average rates or the base rate plans decrease based on the length of stay. A 7-night stay costs 29 dollars less per night than a 2-night stay regardless of room type.

Sensible package pricing

In my previous post I pointed out how package pricing is often out of whack when presented alongside room only promotional rate plans. This is because the room component of the package does not discount in synch with the room only promotional rate, and the result is that the package rate is too high given the value of the extras included in the package offer.

With TARS, however we can see that not only does average daily rate decrease in the room only rate plans as the length of stay increases, but the average rate also decreases in the package rate plans. And to ensure consistency, only the room component is discounted in the package rates. The Business and Haute Cuisine rate plans for a 7-night stay cost $29 and $38 less, respectively, than same rate plan for a 2-night stay regardless of the room type.

Differential pricing between room types

The price difference between room only and package rate plans is consistent across room types – this makes sense because the extras that are part of the package (non-room items) should not cost more based on which room type is reserved.

Pricing package components by length of stay

The price difference between room only and package rates is also consistent across length of stay. This makes sense because the hotel is only discounting the room component for longer lengths of stay.

However it would also make sense if the extras were also discounted for longer lengths of stay, if the reservations system had the capability to price extras based on lengths of stay. And it turns out that it can! The per day combined price of daily breakfast, daily three course dinner and a Zagat restaurant guide book falls from $50 for a two night stay to $41 for a 7 night stay.

Number of price points

Lastly, the 19 and 26 price points returned for the two different lengths of stay are far fewer and more manageable than most other systems would return in order to handle a similar strategy.

But yet, there is room for improvement

Up-selling reservation policies

Accor has three clearly distinguished rate plans which differ by their cancellation policies:

Early Rate (Non-refundable), Smart Rate (must cancel within 72 hours), and Premium Rate (must cancel within 24 hours).  Accor has done a job of creating clear and consistent guarantee policies.

Accor’s mistake, however, is in returning each combination of these guarantee policies with each rate plan.  This complexity adds 5 and 10 of the price points respectively in the 2 night and 7 night stay searches above. A better approach would be to offer a standard guarantee policy on each rate plan and offer alternative policies once the guest has selected a room-rate.  This would result in a reduction to 5 price points (one for each different room type) for both the 7 and 2 night stays

By simplifying per above Accor could reduce the price points to 14 and 16 for the 2 and 7 night stays respectively.

Handling multiple bed types within a room type

Accor creates multiple room types to account for each bed type at the hotel.  This is a needless complexity for its revenue managers and guests.  Accor should prompt guests to select a bed type at a later stage – after the rate plan and room type has been chosen.  Accor could therefore merge the Superior room with two twin beds with the Superior room with 1 queen bed, leaving us with just a Superior Room.

This would further reduce the price points to 12 and 14 respectively.

Clarifying the Extended Stay Rate

Lastly, let’s look at the Extended Stay Rate. This is pitched as an upgrade offer available for the 7-night stay. “Extended Stay Rate” is not a good name for the offer since it does not change price based on extending the stay. Secondly it is not available on the Luxury Room, whereas it easily could be since reserving the offer would not impact the inventory of the Luxury Room as the guest is given the Junior Suite. Lastly, the Junior Suite should be priced at $386 per night for the 7-night stay (the price it can be reserved at by availing of the Extended Stay Rate available for the Classic and Superior Rooms.

This would bring the number of price points to 12 for both the 2 and the 7 night stay and would look something like this:

11^th Aug for 2 nights, 1 room, 2 adults

11^th Aug for 7 nights, 1 room, 2 adults

Note that the policy options available for any rate plan and bed type options available for any room type can be offered after the initial room-rate has been chosen. This would be much easier for consumers to understand leading to higher conversions.

So while Accor is doing things better than most, I have still not found a booking product that comes close to RezTrip 2.0!

Spread the word – RezTrip 2.0 is coming

[Post re-released on May 29th, 2010]

Chances are that, if you found this page, you may have heard about our next generation booking engine, RezTrip 2.0. We promised you it would be the hotel industry’s leading direct online e-commerce platform. Our ambition was to provide our customers with the best tools available in the market to generate as much revenue as possible, through the lowest cost of sale channel, your own website. Well, we’ve been hard at work building it for the past year or so and are nearing the end of the tunnel – RezTrip 2.0 will soon see the light of day on your hotel websites.

This means we expect to put a first set of clients in a fully functional beta version of RezTrip 2.0 this summer. As we get closer to the launch, we will update you with more accurate dates. After the beta cycle is complete, we will roll out the new engine to all clients, current and new, in a progressive manner.

During the planning stages for this ambitious new version, we compiled a long list of features – a superset of everything you’d asked us for and everything we dreamed up ourselves. Our challenge was to figure out which features would be the most effective in helping generate more revenues and balance that out with keeping the scope of RezTrip 2.0 manageable and deliverable in a reasonable timeframe. The initial list was very long and while some of our own ideas were fanciful and died a quick death, several of them took root as new, innovative paradigms that made sense because of their simplicity and obviousness. Below are just some of the features that we think are exciting.

Graphical User Interface and Design Aesthetic

We heard you loud and clear when you said to make the booking side user interface look nicer! So we did, and we think you’re going to love what we came up with. Below is an example of the availability result page.

We went through a very detailed process in order to design the most user-friendly, intuitive and up-to-date user interface for RezTrip 2.0. Though the process was very time-consuming, it was also one of the most fun parts of the project for us. Everyone at Travel Tripper wanted to get involved – and they did! We started with rough sketches, which became wire-frames, which then went through a few versions of mock-ups by different usability engineers and graphic artist. Most importantly, we solicited feedback from as many people outside our industry as we could — even some co-commuters on my daily train ride! After all, we know that the booking flow needed to be intuitive to the people who will actually be making reservations, not just for those of us who live and breathe hotels every day.

Below you will see some just snapshots of different elements of the new UI.

Internationalization/Localization– We know that you source your business from around the globe, just like us. We know that guests at your hotels come from all over the world, and so it only makes sense that your booking engine speaks to users in their own language… and currency. RezTrip 2.0 will be available in virtually any language and can handle pricing in and conversion to virtually every major currency, allowing you to attract more business from more parts of the world.

Multi-property search – Quite a few of our current customers – and many prospective ones – have more than one hotel as part of their portfolio. Many of you have more than one hotel in the same city. We know you’d like to offer your guests the capability to shop across and cross sell all your hotels in the same geographic location at once: a matter of convenience to your guests and a matter of revenue to you. RezTrip 2.0 will offer multi-property shopping capability, presenting bookable room/package availability results from several hotels on a single screen.

Dynamic packaging – There are many facets to your hotels beyond the rooms you sell. Most of you now offer your guests products and services (airport transfers, dining, spas, golf, Wi-Fi, etc.) which are sometimes bundled into packages and sometimes available to guests to pick and choose “a la carte” once they arrive at the hotel. Why not offer your guests the capability to pick, choose and reserve these services at the time they book their room directly from your website? RezTrip 2.0 offers the industry’s most flexible dynamic packaging capability and allows you to sell virtually anything in addition to the room – again offering your guests a better booking and stay experience while simultaneously earning you more revenue.

More valuable bookings – It is a general practice to train voice reservations agents to up-sell higher room categories to guests making reservations over the phone. Chances are many of you have even trained your front desk staff to up-sell at the time of check-in. There is no reason the online sales process shouldn’t do the same. With RezTrip 2.0, we have improved and expanded on how to deliver more valuable reservations to your hotels with three distinct up-sells:

Room Category Up-sell - Already successful in our current version, we expect this feature to be far more effective in RezTrip 2.0. The new engine will show not only the up-sell room’s name and price, but also its room images and descriptions. With a fuller, more visual product differentiation, users will have a more concrete understanding of the value proposition, and will be more inclined to consider the offer.

Length-of-stay Up-sell – One new up-sell feature in RezTrip 2.0 is the suggestion of a longer-length of stay to the guest by automatically displaying price difference for “shoulder” dates. Leisure bookers are often flexible enough to add a day – or two – to their stay, and group delegates frequently take advantage of company sponsored travel to stay a few extra days beyond their conferences or seminars. Instead of requiring these users to redo multiple searches to price these options, they are now available with a single click.

Guarantee Policy Up-sell – This unique up-sell allows you to offer your guests a choice of guarantee policies at a price supplement or discount. Users can choose between more relaxed policies such as a “6 pm day of arrival” policy for a price supplement or more strict policies such as an “advance purchase, non-refundable” for a price discount. This is a form of insurance of course, which is inherently a win-win proposition for you and your guests.

We think these up-sell widgets will be critical tools for driving revenues in your hotel, but we also understand that, based on your product, you may want flexibility using them. And so each of these features is customizable and optional, allowing RezTrip 2.0 to match your brand identity and sensibilities.

Shopping Cart and Shopping-Cart-Save – In order serve your customers better we have made it easier and more flexible to book multiple rooms in a single reservation process. RezTrip 2.0 will allow your guests to book up to five rooms for different rooms at different rates and even different dates. Guests will even be able to add (or delete) a room to an existing reservation flow. The total price is always visible to the guest and each room has its own separate reservation and confirmation number.

Have you ever been uncertain about an online purchase? It happens to all of us and probably the most when booking travel. Aside from the fair amount of planning it takes, consumers have learned to shop around on the internet for travel related deals. For many different reasons, a guest might start the booking process at your hotel and need to return to it later. RezTrip 2.0 allows the guest to save their shopping cart by generating a permanent link and sending it in an email message. The guest can use the link to return to a booking in progress, or they can share the link, and effectively their shopping cart, with friends or family for a more collaborative shopping experience.

Dynamic pricing – One of the main drivers of RezTrip’s success is our “Rate Rules” functionality. We have renamed it “Dynamic Pricing” in order to make it more resonant of all it can do for you as a hotelier . RezTrip 2.0 has the industry’s most powerful pricing and promotions engine. You will be able to create multiple promotions for the same room or rate combination and stay dates, and the engine will serve up the most attractive offer to guests that meet the qualifying criteria for the promotion. In addition, we have greatly expanded the set of conditions for which promotions can be served up. This allows you to better create and target specific revenue-managed market segments, to target offers in a more granular way, and to add rounding capabilities to the final price. With RezTrip 2.0, you also have the option of presenting rates with “strike-through” pricing or only showing the final price. Again, so RezTrip can accommodate your brand… and its sensibilities.

Defined Sort Order – It is a known fact that during an online shopping process (particularly when booking hotels), the choices that show up towards the top of the list end up being the most clicked and purchased. It is the reason why every hotel wants to be at the top of Expedia’s search result screens. It is also the reason Google sells enough ads in its search engine to earn billions of dollars in revenues each year. In RezTrip 2.0 you can define the default sort order of rooms as well as rate plans in order to maximize and optimize how much of which rooms and rates you sell.

Confirmation emails – Post-reservation communication with your guests is an important marketing opportunity. Your communication, beginning with the emailed confirmation reflects your brand identity and is also a tool that can help you sell and advertise additional products and services. In RezTrip 2.0, we will be able to send template HTML confirmation emails incorporating your logo and branding. In subsequent releases we will add pre-stay and post-stay emails to better serve your customers and also to sell more of your products and services.

Technology – RezTrip 2.0 uses cutting-edge technology.

For the more technically minded amongst you, the major technical pieces of the new application are MySQL, Java 6, and Google Web Toolkit (GWT). These are all open source frameworks which we chose because they are more progressive, cheaper, and improve faster due to open source collaborative work.

Of specific interest is the choice of GWT for the front end of the application. In a nutshell, GWT is the absolute cutting edge of web browser programming available today. With nine major releases in just under four years, GWT is an extremely fast-moving platform thanks to the driving support of world class Google engineers (ours, by the way, are equally smart and creative, just not as many in number!) as well as contributors from around the world (open source!). GWT brings a multitude of browser optimizations and the elegance of being based in Java to RezTrip 2.0.

GWT also sets us apart from the competition by being a pure Web 2.0 technology: unlike some of our competitors, RezTrip 2.0 does not rely on Flash technology. Some years ago, Flash was the technology of choice for rich web interfaces, but today less and less applications are choosing it as a toolkit due to the severe limitations it presents with Search Engine Optimization (SEO), RESTful linking, and the much discussed incompatibility with the Apple iPod, iPhone, and iPad devices. We want to ensure your hotel can be booked from any mobile device or web browser, and so we went with a standards-compliant toolkit.

And so – if you have any feedback, I’d love to hear from you – here on the blog itself or by email at gautam@traveltripper.com. In the mean time, many thanks for your patience and participation in the release of the new booking engine. We look forward to delivering a product that we’re sure you’re going to love it and use it to generate even more revenues through your websites. So stay tuned!

Sweet Revenge! but yet quite a bit to live up to.

Apple today, and at least for now, overtook Microsoft as the most valuable technology company. Even though Steve Jobs might have seen this coming for some time now, I can just imagine the smile on his face when he sees news like the New York Times posted just earlier this afternoon.

I love Apple products. Mr. Jobs has me right where he needs and wants me: I get excited at each new product they release and have bought a series of Apple products since 2005. I’m guessing I’m in right in the middle of Apple’s sweet spot. I don’t over-buy, yet I buy consistently. People like me probably make up the largest volume of their customers and have the longest lasting loyalty – and have contributed substantially to generating the headline shown above. Since buying the iPad recently (and getting quizzed about its utility, user-experience etc. by all and sundry), I’ve also consumed a reasonable amount of media through iTunes, iBooks and the App Store.

Conversely, I haven’t bought anything from Microsoft for personal use since 1999 and am never enthused about installing MS Office or any version of Windows on my work computer.

But there is one thing about Bill Gates that has impressed me far more than the products Apple, and certainly of late, Microsoft have available – it is the Bill and Melinda Gates Foundation. I hope Steve Jobs follows in the footsteps of mega-philanthropists like Gates, and several before him as well. Or maybe he has, and we just don’t know about it.

Can your booking engine shift business from the OTAs?

I recently started a discussion in LinkedIn group forum I happen to be a member of. The discussion topic is titled “Do you know of a booking engine that can help me shift business from OTAs?”. It turned out to be quite a hot topic, but what I found particularly surprising was the number of people that said the booking engine could do nothing to help shift the business and that the main thing that made a difference was driving traffic to the hotel website.

It’s no wonder that so many hotels are still at the mercy of the OTAs.

Now, admittedly, traffic generation is critical… as one of the proponents of the role the booking engine succinctly put it – if there is no gas in the car, you can’t drive it. Traffic to your site is absolutely important, else there’s no one to make the reservations. And there are also other very obvious factors, a good website, a hotel that meets the needs of the consumer, etc. But what about the booking engine itself? Obviously as a company that offers both, online traffic generation services and a great booking engine (about to get better with the release of RezTrip 2.0), we think the booking engine plays a hugely important role.

In a previous blog post, I illustrated why consumers might get frustrated simply trying to figure out what to book on the hotel website because of irrational pricing resulting from outdated technology. However the best way to reinforce the role a great booking engine can play is through numbers. The chart below shows year-over-year bookings for one of our customer hotels. The bars in blue show booking numbers in year 1 for a single hotel – and yes those are bookings, not room nights! – admittedly for a large hotel. The bars in green show numbers for the next year, year 2. The new website (accompanied by massive traffic generation efforts) was put in place in March of year 2 and resulted in approximately a 24% and 30% increase in subsequent months, compared to the previous year. The hotel swapped out their legacy booking engine with ours in June of year 2, a few months after the new website. The year over year increase shot up to between 78% to 88%, much of that taken back from the OTAs.

The booking engine is obviously plays a huge role generating superior sales and taking business back from the OTAs. In a future post I’ll explain a bit more about the specific features that helped shift that business from the OTAs.

P.S. Another example came to mind as I am writing this, not from our industry. It’s not just Apple’s great products that have helped them become awesomely successful. It is also their retail experience – online and offline.

Irrational pricing in the hotel industry

(Disclaimer: if you happen to recognize the hotel from where I’ve taken the example, it is important to note that the problem is by no means unique to it, nor is it unique to the booking engine used on it’s website. The illustrated problem is pervasive in the hotel industry. I am not singling out the hotel or the booking engine/CRS for any reason other than to illustrate the problem discussed here.)

Our industry suffers from irrational pricing and amazingly, this irrationality is most prevalent in a hotel’s direct channels, where the hotel supposedly should have the most control in how it sells its rooms and products.

For years now, so many hoteliers have complained about the stranglehold the OTAs have on their distribution and business that one would imagine technology providers to the industry would have figured out how to help hotels improve the situation. Unfortunately this hasn’t been the case.

At the heart of the irrational pricing problem lies the concept and misuse of Rate Plans, which have become somewhat of a plague in our industry.

Hotels moved away from the “Rack Rate” to the concept to the Best Available Rate (BAR), which was a good idea to accommodate the reality of supply and demand pricing. Except that it’s turned out to not really be such a good thing mainly because the Best Available Rate is not really, or even nearly, the best available rate. This is because:

• If the hotel wants to offer a length of stay based promotion, they create a rate plan for stays of 7 days or more, lower than BAR.
• If they want to try to fill Sunday nights, they need to create a new rate plan for stays that include Sunday nights, lower than BAR.
• If they’d like to create an advance purchase special, they need to create a new rate plan for bookings with a lead time of 21 days or more, lower than BAR.
• If they’d like to offer a promotion for non-refundable rates, they need to create a new rate plan with that specific policy, lower than BAR.

Now a consumer could very easily be booking her stay 45 days in advance and staying 8 days, which would obviously include a Sunday night… and therefore qualify for all four promotions. And all rate plans are returned in the availability display.

And then there are the package rates. The theory is that since the consumer is committing to buy more (than just the room) she should the get similar discounts on the room component of the package rates as well.

But she doesn’t. And this is because the revenue manager has better things to attend to than make those discounts available on the package rates too. If there are the above four promotions running simultaneously, and three packages, the revenue manager would need to create 12 more rate plans to make the pricing somewhat rational. In total, he’d need the BAR rate with four variations (the promos), plus three packages with four variations to each (the four promos) or 20 rate plans.

But let’s assume this was all somehow done. The pricing options would still be silly since if the hotel has 5 room types, the consumer would have to scan through 5 room types x 20 rate plans or 100 price points!

Fortunately revenue managers cannot be bothered (and probably rightly so) to manage 20 unfenced rate plans. So they stick to BAR, a few promos on the room-only price and a few packages. And yet the search result screen looks something like this (and please pardon the imperfect stitching together of multiple images I needed to capture all price-points):

So as a consumer I’d rather select and book my room from here:

But would the hotel prefer if I did?