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Another move by the OTAs that is harmful to hotel profitability

08/25/2018| 2:49:31 PM| 中文

Both OTA initiatives use package or wholesale rates in clear violation of package and wholesale rates contract terms.

Two recent events in hotel distribution created a mild media buzz, but unfortunately were ignored by some hoteliers and quickly forgotten by the industry: Expedia's Add-On Advantage and Booking.basic.

Both OTA initiatives use package or wholesale rates in clear violation of package and wholesale rates contract terms.

What is Expedia's Add-On Advantage?

Simply put, this initiative sells "naked" discounted hotel package rates, which were never meant to be sold unbundled with air, car rental, etc. For the Package Booking Program, typically hotels provide Expedia with discounted rates—20%, 30%, and even 40%—with the caveat that these rates cannot be offered "naked" to customers and must be bundled in a package with air, car rental, etc.

Here is how the Add-On Advantage Program works: After customers book an airline ticket (Step 1), Expedia sends them an email (Step 2) with steeply discounted hotel rates in the destination the customer is flying to, pushing customers to book a hotel in addition to the airline ticket they have purchased. The problem for hoteliers is that the steeply discounted hotel rates Expedia is offering in Step 2 are from Expedia's Package Booking Program and these rates are not meant to be sold unbundled, i.e., "naked."

In Step 2 of the Add-On Advantage program, customers clearly see the discounted hotel rates that were supposed to be offered by Expedia only as bundled package rates, which is in clear violation of the terms of Expedia's Package Booking Program.

Action plan for hoteliers

Expedia's Add-On Advantage Program: If your property participates in Expedia's Package Booking Program, review your contract terms and explicitly disallow Expedia to offer the discounted package rates unbundled in any shape or form. In other words, the package rates cannot be offered "naked" to the customers and must be bundled in a package with air, car rental, etc.; the package should be offered with a single package price to the travel consumer. If you experience any resistance from Expedia, simply stop participating in the Package Booking program.

Focus on the direct channel to improve profitability: Endemic under-investing in direct online booking-generating technology and digital marketing is one of the main reasons why hospitality has allowed the OTAs to continuously gain market share over the years.

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TAGS: OTA | direct bookings
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