Selling Rooms: Hotels vs. Third-Party Websites

Abstract

Hotels have a variety of internet distribution channels to help them sell rooms, including sites that have come to be called online travel agents (OTAs), or third-party websites, but the cost of using these intermediaries is considerable. This article examines how hotels can sell room inventory while maximizing net room revenues—chiefly, by steering customers to their own sites, rather than to the OTAs. Even though hotels want to sell rooms via their own channels, the hotel industry relies heavily on efficient and convenient OTAs to sell rooms. Based on eleven interviews (nine hotels, one third-party website, and one airline), we recommend the following ways to strengthen sales on hotels’ websites: maintain a best-rate guarantee, optimize the website for search engines, mine data from customer profiles to provide custom offers, retain premium rooms for sale on the hotel website, offer discounts or other promotions to customers who book on the hotel website, offer incentives for returning guests who book on the hotel website, avoid giving loyalty points for OTA bookings, and enrich the hotel’s website with information. Because the ability to offer low prices is a chief advantage of OTAs, many hotels have promoted price parity as one strategy for attracting customers. The results of tracking room rates of 13 hotels posted by third-party websites and hotels over a 17-week period demonstrated, however, that room rate parity is rare, even though all selling parties espouse such parity. Parity generally was found only for smaller hotels. The study also found that room rates fall as the date of arrival approaches, and it became clear that individual properties in a hotel chain follow the chain’s overall pricing strategy.

The interactive effects of online reviews on the determinants of Swiss hotel performance: A neural network analysis

“…In February 2014, TripAdvisor (2014b) issued a press release announcing a UGC milestone making it the first travel site to offer consumers 150 millions reviews and opinions. The increase in online reviews echoes a similar pattern to the growth of hotel room bookings through e-distribution (O'Connor, 2008;Schegg & Scaglione, 2013;Toh, Raven, & DeKay, 2011). However, despite the achievement of the eWOM stream of research (Cantallops & Salvi, 2014), research can go further in providing broader insights of eWOM as a determinant of hotel performance.…”

Role of e-WOM in hospitality market pricing

“…The most important factors affecting price volatility in one hotel are number of available rooms [Badinelli 2000;Abrate, Fraquelli & Viglia 2012;Bayoumi et al 2013], time left to the date of booking [Bayoumi et al 2013], competitors' prices [Abrate, Fraquelli & Viglia 2012], length of stay [Bayoumi et al 2013], and other external indicators. Prices are also diversified between distribution channels in order to move the stream of bookings from OTAs to the supplier's website [Toh, Raven & DeKay 2011]. As a result of this practice, the cost of renting a hotel room varies depending on demand (and selling strategy).…”

Hotel Overbooking and Cooperation with Third-Party Websites

“…Under this cooperation, the hotel has two types of customers: t-customer who books a room by phone, in person, or through the hotel's own website and w-customer who books a room through third-party websites. The hotel conducts price parity among all selling parties as a strategy to attract customers [27]. Price parity means that hotels charge the same room rate p per day to all customers from different distribution channels.…”

“…The room inventory of hotels is usually not transparent to third-party websites under the agency model. In practice, the commission is usually given as a percentage of the room rate [27], that is, i i p…”

“…Many studies have been conducted on hotel overbooking strategy [25,26] or cooperation between hotels and third-party intermediaries [27][28][29][30]. The present paper develops a model to explore hotel pricing and overbooking strategies in the context of the cooperation between a hotel and multiple third-party websites.…”