Wednesday, January 20, 2010

In Search of the mythical 75% off deal

Let us say right off the bat that we like Online Travel Agents (OTAs).

As an accommodation operator, we have no problem with paying them a 10% commission rate for every successful reservation made with us. OTAs do the leg work, they advertise and expose my inventory to a bulk market that I am unable to reach.

We like the fact that OTAs are promoting the desirability of travel and are operating in a space where potential guests like to contemplate and research travel - including the MSM.

An unintended bonus for accommodation operators using OTAs is "The Billboard Effect". Many guests will only use listings on OTA websites for research purposes. The exposure provided by OTAs generates complimentary reservations through other direct channels as the guest "books direct" by using the accommodation provider's own website, 0800 number etc.

There are also may guests that will make an initial booking via an OTA and maintain a regular relationship with the accommodation property by making future reservations direct.

As accommodation operators, we should be skilled in yield management with OTAs as part of our usual business. OTAs allow ease of adding inclusions, adding minimum stays, are able to be switched on and off and rates manipulated according to demand.

If accommodation operators
work in partnership with OTAs they are able to gain additional business and grow average tariff.

We are aware that OTAs receive some flack from operators. While we do not entertain industry whining about paying a 10% commission  for services received, we do have some sympathy for those that claim that OTAs focus too much on tariff based promotions's sub $99 and 50% off promotions that  were supported by Tourism New Zealand caused some rumblings from accommodation operators that accused Wotif of normalising guest expectations of deep discounting. 

We suggested on this blog that operators should be considering quality and adding value before sending tariff through the floor. what about OTAs promoting 70 - 75% discounts?  

One practice that is been used by OTAs that we do not approve of is "bait advertising" by promising savings on accommodation of up to 70 - 75% on search results. 

As an example, if you do a Google search on "Auckland accommodation" you will have the following Adword (paid advertising) links on top of the results: has developed the following landing page that appears in the main body of the search results.

We used Auckland as an example, however similar results are achieved when doing Google accommodation searches for other popular New Zealand locations.

So what's the problem?

The problem we have is that we challenge anyone to easily find savings of up to 75%.

We believe that OTAs over promising unrealistic savings are doing a disservice to potential guests, themselves and the accommodation industry.

Sorta makes you wonder what the Commerce Commission would make of it?

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