The role of price transparency in converting hotel guests online
By Fig Cakar, Managing Director – the Americas, SiteMinder
Hotel brands, online travel intermediaries and technology solution providers are all too aware that online conversion is a huge issue. Depending on who you talk to, online conversion rates for most travel websites sit in the low single digits and all stakeholders are challenged with what to do about it.
So, which way is the industry moving and how does price transparency fit in?
While more hotels are today educated about the ‘billboard effect’ and its role in increasing direct sales, research released by SalesCycle earlier this year will have been welcomed by anyone involved in selling travel online for the insight it provided into the reasons travellers abandon a booking.
As a refresher, most travellers (39 percent) say they are just looking and want to do further research, while high prices/desire to compare and the need to involve others in the process were cited as the next two biggest reasons.
Finally, stumbling blocks – such as an over-complex booking process, technical issues and payment problems – were also reasons cited for abandoning a booking.
Empowering travellers to make the choice
A deeper dive into the SalesCycle research also reveals where in the booking path travellers drop off and more than half admit to abandoning a booking when they are shown the total price.
It’s no wonder, then, that brands and intermediaries employ various techniques to keep people on their sites and ensure they have everything they need to complete the booking.
One good example, recently reported by Tnooz, was a move by UK-based chain Shire Inns which recently introduced a price comparison feature on its website.
It seems like a risky move because the hotel group could lose the booking altogether by enabling potential guests to compare its rates against those of four large online travel agencies (OTAs). It could also risk the ire of those same OTAs but Shire argues that it recognises travellers want to shop around.
Getting the distribution mix right
Early results are positive for Shire, with the chain experiencing significantly-improved, double-digit conversion rates. Not a bad result when considering the industry average is around four percent.
What the story highlights is the need for hoteliers to track where their guests are coming from and ensure they are getting their distribution mix right, both direct and indirect.
On the one hand, hoteliers should not be paying twice for guests they believe they would have attracted anyway. However, most hoteliers recognise the value they get from the OTAs, in terms of the extended reach they offer via the sales marketing clout that sits behind the online giants and helps smooth out the peaks and troughs in the hotel business.
So, moves from hoteliers to push the direct channel are only a part of the equation.
SiteMinder recently produced its own findings on the power of direct bookings, showing that while Booking.com continues to hold the top spot when it comes to revenue generation, TheBookingButton Internet booking engine came third in terms of business to hotels.
So where does hotel distribution go from here?
2014 was certainly a year of upheaval with further consolidation in the online travel market and new entrants to consider in the mix. 2015 has not been that different so far with Expedia’s planned acquisition of Orbitz and rumours around Priceline acquiring RocketMiles.
No one can say where it will all end up.
Hoteliers will continue to consider initiatives like Shire Inns’ price comparison tool because, ultimately, it’s about attracting, reaching and converting all travellers, and giving them the choice to book what they want in the way they want.
But as part of the increasingly-complex distribution strategy that today’s Internet economy demands, hoteliers will – and should – also continue to sell rooms via a mix of channels, direct and indirect, to ensure their businesses reap the benefit of reaching both global and local travel markets to generate the most value and in the most effective way.