Dynamic commissioning and nano pricing will maximise revenue for hotels and OTAs
Alternative accommodation such as Airbnb should not be viewed as a threat or disruptor to the market

Hotels and Online Travel Agents (OTAs) need to work together to find a collaborative
approach that maximises revenues, builds brand confidence and rewards consumer
loyalty, according to a panel of experts speaking at Arabian Travel Market (ATM).
According to a report published on Monday 23 rd April, by Colliers International on ATM’s
Global Stage, rate parity agreements have led to a turbulent relationship between hotels
and OTAs in recent years.
The findings of the report entitled ‘Alternative Accommodation – Driving Growth for
Destinations or Disruption’ were discussed by a panel of experts from Wego,
AccorHotels, Expedia Group and Colliers International.
The essence of rate parity is to have the same rate for the same product across all
distribution channels. However, rate undercutting has created issues between hotels
and OTAs and as a result, significantly reduced consumer confidence in brands.
Filippo Sona, Director, Head of Hotels MENA, Colliers International, said: “Consumers
are comparative shoppers, so when they see that the rate on a hotel website is higher
than an OTA for the same product, this creates a negative sentiment about the brand in
their minds. As the undercut rate percentage by OTAs increases, there is a drop in the
booking conversion on the hotel’s website.

“Today’s consumers have a more sophisticated mindset and level of needs, and as a
result, rate parity is hindering the ability of OTAs to make more money and hotel
companies to offer higher average room rates. If we removed the rate parity
mechanism, we would be able to more effectively fulfil the needs of OTAs and hotels,
while providing a more personalised product to consumers.”
With continuous technological advancements in the online travel market such as
metasearch engines, blockchain and augmented analytics, new strategies need to be
devised to win back consumer confidence and increase their brand loyalty.

Paula De Keijer, Senior Director of Market Management Middle East, Africa, Greece &
Turkey, Expedia Group, said: “With the consumer in mind, blockchain technology
provides services such as secured payment, identification and security, simplified
loyalty programmes and baggage tracking.

“As we look to the future, augmented analytics will provide consumers with the power to
make more informed choices. Considering the vast amount of data that hotels and
OTAs accumulate, this technology is the perfect tool to understand consumer
behaviour, preferences and booking patterns. Combining algorithms, artificial
intelligence and machine learning will lead to providing better recommendations to
customers and matching them to the properties best suited to their needs.”
Hotels and OTAs have their own competitive advantages and limitations. While hotels
have the micro information, OTAs have the purchasing and booking habits of
consumers.

In the evolving landscape, it is crucial that hotels understand direct bookings do not
matter like they did in the past. Instead, establishing a collaborative approach, with the
help of technological advances, that maximises revenues should be the focus.
Sona, said: “The first emerging tool will be dynamic commissioning. This will enable
hotels to set a hurdle rate for OTAs, in turn incentivising OTAs to sell above that rate to
earn a higher commission. Based on our research, we suggest for every $10 above the
hurdle rate OTAs earn an extra 5%, with the maximum amount of possible commission
capped at 35%.

“The second approach is nano pricing which provides consumers with the power of
choice and added confidence in brands. Today, hotel room prices are based on three
factors: room view, room type and number of occupants. However, nano pricing is
calculated by combining base price (room inclusive of limited amenities) with the cost of
any requested extras (for example upgraded toiletries).”In recent years, competition in the market has further increased with the rise of
alternative accommodation such as Airbnb. The success of this type of accommodation
stems from their ability to create a more local and personal experience for consumers.
Flavio Leoni, Vice President of Sales, Distribution, Loyalty & Marketing, AccorHotels
Middle East & Egypt, said: “Alternative accommodation should not be viewed by hotels and OTAs as a threat or disruptor.

“It is just another tool that provides additional choice to the consumer and also presents
hotels and OTAs with the option to explore new ideas and expand their brands.
“If we break down the needs of both business and leisure travellers, as well as
individual and family travel, it is possible for alternative accommodation to exist
peacefully in the market alongside more traditional forms of accommodation.”

For more information on Arabian Travel Market 2018, please visit the website at
www.arabiantravelmarket.wtm.com