Supply, demand, and 72 hour flash sales: welcome to the deal economy. Some say the deal economy is ruining the guest experience, but who exactly is to blame? Maybe it starts with third party travel sites like Expedia, Booking.com, Kayak, and Hotels.com who’ve driven down rates making it possible to travel for less. Maybe it starts with the consumer who has a small budget but big wanderlust, enduring longer flights and basic rooms in favor of a good deal. Or maybe both parties are equally at fault. Navigating the deal economy as a consumer and even as a hotelier can be tricky but it can also be mutually beneficial. In this travel trends blog post, I’ll break down both sides.
A NECESSARY EVIL
Hotels who manage their occupancy and rates on a daily basis tend to struggle with OTAs. It’s a necessary evil for most. These sites advertise steep discounts, take steep commissions, and aren't known for delivering loyal customers. But they do fill in gaps in occupancy over need periods when it’s often better to have a room booked than leave it vacant (particularly when it comes to resorts when guests are likely to spend money while staying on property). But OTAs also hold onto the guest data, making it difficult for hotels to communicate with the guest prior to arrival. For these reasons an OTA guest is not a guest for life. An OTA guest tends to be a deal-seeking individual who cares less about where they'll stay, and more about savings. Hotels tend to limit their inventory on OTAs, saving their best rooms for direct bookings, and only selling their less desirable rooms on the OTAs.
From a hotel’s perspective then, deal-seeking customers lack loyalty. Can you blame them? From a traveler’s perspective, stretching that dollar is the name of the game. As a traveler, I have found myself in situations in which I thought I was getting a bargain only to realize I was getting what I paid for, be it a class below Coach on an airline that I didn’t know existed, charged for carry on bags, or a hotel room at the furthest possible end of an otherwise luxurious resort. Should guest experience go out the window when the customer finds a bargain?
TOO GOOD TO BE TRUE? PROBABLY.
As a prospective guest, you’re not comparing apples to apples if you notice deeply discounted rates on rooms at high end hotels through an OTA site. Chances are, what’s being dangled in front of you is a smaller room in a less than desirable location within the hotel. It might even be a room type that the hotel reserves exclusively for OTA customers. Be sure to compare what you’re seeing advertised to the room types listed on the hotel website before booking through an OTA.
I’ve noticed lately that booking through my Chase Sapphire Reserve card which is powered by Expedia ironically (it carries a $495 annual fee and touts its travel booking portal as a major benefit), I can upgrade to a larger room within the booking portal. This can help, but bear in mind, it’s still probably still the worst room in the class you’re booking.
THE DEAL ECONOMY EXPERIENCE
When an OTA guest checks in, they’re often given the worst room in the hotel regardless of occupancy. As the front desk agent hands over the room keys, the guest is gently reminded to book direct next time.
Take for example our first night in Kauai. I'd confused the date of our arrival and was left scrambling to find a place to stay. $375 later via Hotel Tonight, I booked a room at Hanalei Bay Resort. I don't doubt that those who book direct have a remarkable experience. If I looked past the sight and smell of the dumpsters, the loading docks and the two flights of sticky stairs we had to go down to get to our room, the room itself…well, it had a bed. For $375, it hurt.
Then there was that time in Portland, Oregon when I rented an Airbnb for two full weeks and was given a 15% discount. Here I thought the host was being generous, kind even. I realized upon arrival that I'd be sharing my stoop with Portland's homeless community, who would howl obscenities loud enough to keep me up at night (I even called the police on one such occasion). I’d also share the hallway with a thick cloud of pot smoke and dust, and my Airbnb would have a smoke alarm that was permanantly faintly beeping, even dislodged from the ceiling and even with the battery removed (if you’re wondering, I eventually put the smoke alarm in the hallway where you can imagine it continued to beep). But it was 15% off, could I really complain?
There are endless anecdotes of the deal economy ruining the guest experience when it comes to airline travel, too. On a Ryan Air flight from Lanzarote to Barcelona, we thought we'd booked a great deal, only to find out that we needed to pay 45 euro per bag if we wanted to bring our luggage on board. What was the alternative we wondered? We paid the fee and boarded the plane and encountered another bizarre situation: our flight attendants were selling raffle tickets instead of comfort and safety.
How Buyer Behavior Is Ruining THE Guest Experience
OTAs may be the culprit, but buyer behavior doesn't help. In the planning stages, prospective guests are looking at hotel websites - but in the buying stages, they're heading to OTAs like Expedia and Booking.com to book. That's where the disconnect lies. Guests expecting a 5-star experience are then relegated to the lowest room category when booking through an OTA and disappointed upon arrival. Both the customer and the hotel suffers. Hotels pay commissions upwards of 15-20% (some even higher), and customers are treated as one-time guests, those who put rate first and experience second. OTA guests are unlikely to re-book, and hotels reward guests who book direct and are more likely to return.
THE HOTELIER’S GUIDE TO BEATING THE DEAL ECONOMY
Hotels are finding workarounds and incentives to convince their loyal customer base to book direct. Although OTAs require rate parody by law (hotels are not to publicly promote lower rates than those found on the OTAs online), hotels are getting smart about book direct incentives and leveraging their email lists to promote private sales that cannot be found online.
Although the deal economy has made it possible for people who would not normally travel to afford flights and hotels for less and has probably driven down the costs of travel especially in slower seasons, it has also created a lower tier of limited service guest experience.
THE TRAVELER’S GUIDE TO BEATING THE DEAL ECONOMY
Become a loyal customer, or at the very least sign up to receive emails from the hotels you’re interested in, and you'll be rewarded with private offers, room upgrades, welcome notes upon arrival, even deals directly from the hotel. Simply subscribe to their email list. Or, go old school and give the hotel a call to see if they’ll provide an incentive to book direct over the phone since booking on an OTA means they pay out of pocket fees to the booking agent.
As a customer, the best course of action is to book direct, pay a bit extra, and rest assured you're getting the experience marketed to you on the hotel's website. Don't leave your vacation up to chance.
What are your thoughts on the deal economy?
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