Hoteliers have mixed response to Agoda’s new hacker rates

While Agoda is hailing its new feature “Mix and Save” as a breakthrough for extra budget-conscious travelers, hoteliers are still coming to grips with what it really means for them down the line.

The Thailand-based travel platform says the feature would allow customers to save up to 50% in some instances by booking the cheapest combination of available rooms within the same hotel. “Mix and Save” gives customers the option to split their reservation into multiple bookings and helps them to maximize savings when they search between a two- and 14-night stay at any of its two million properties worldwide.

Agoda says that, in turn, accommodation providers will benefit from being able to optimize use of rooms sold.

Omri Morgenshtern, chief operating officer at Agoda, says, “Our customers inspire us to innovate. We’ve seen them ‘mix and save’ through trial and error, where they would split their stay and stack different room deals to get the best overall price, which can be cumbersome and time-consuming. Traditionally OTAs have made the assumption that guests wouldn’t change rooms, but our tests have shown that, for the right savings and low price, there are travelers who will be flexible and change rooms during their stay to get a better deal.

“We are excited to be the first major global online travel agent to make these ‘hacker rates’ available. Mix and Save helps partners to optimize inventory and reflects our commitment to offering Agoda customers the best possible price.”

Currently available on desktop, Agoda is looking to enhance the offering in coming months, allowing users to enjoy Mix and Save deals on mobile and to combine the split bookings in a single reservation.

Pros and cons

The response from hotels and distribution providers was mixed, with one expressing outrage at what it could do to revenue management in a hotel and another saying this could be a risky strategy for Agoda, while one hotelier called it clever.

Comments Christine Tan, managing director at D-EDGE Hospitality Solutions APAC, “Interesting. It is a question of mixing the room rates for different dates, where usually the price for a length of stay is defined per room. It might become very difficult for hotels operationally – changing rooms during the stay. It also forces hotels to manage better their pricing strategy.

“I am not sure how it will impact the hotels. If they are not happy by that, they may remove their availability from Agoda and put it elsewhere. It’s risky for Agoda.”

Fabian Bartnick, CEO of Infinito, says, “Reservations for four nights will now come in four different reservations across room types, rate plans, pricing policies. Now imagine apartments who have to pay a cleaning fee for every check in, check out? Not the four nights’ stay that had one check-in and one check-out fee, it now has now 4x check-in and 4x check-out fee. This is going to go crazy especially in Australia.”

Marta Laguardia, cluster revenue manager at Veriu Hotels & Suites and Punthill Apartment Hotels in Australia, speaking at No Vacancy this week, was less fazed by it. She commented on a panel that she is focusing on increasing length of stay of customers (to avoid additional operational costs of having more short-term guests).

She says, “It will affect us operationally (if guests are changing rooms within one stay), but to me, I may not even be aware it is the same customer anyway. If I do know of it, if it is a direct booking, I might try and put them in the same room. We train our staff to ensure we have availability for a guest in the same room type throughout the length of stay.

“It is a clever initiative by OTAs. Why not?”

Philip Niemann, group vice president, Asia Pacific, at Duetto, says, “Hoteliers must pay close attention and ensure such heavy discounting is the right strategy for them. While it may drive occupancy, it may actually harm profitability. Ensure you’re making informed decisions based on your own guest and transaction data and understand how low-rated business will affect your performance.”

The idea of mixing rates is not new, according to industry insiders WiT spoke to. One hotelier says “it looks like some other programs available on other OTAs,” just that on these sites, the feature is not active, they say.

Another hotelier pointed out that an Israeli-based OTA, Splitty Travel, founded in 2015, claims its unique selling proposition as “splitting and combining multiple bookings under one reservation.” 

In April this year, Splitty raised $6.75 million in a Series A round of funding led by Fosun RZ Capital, the VC investment arm of Fosun International. 2bAngels, Techstars Ventures, Cockpit Innovation and 11-11 ventures also participated.

The question in hoteliers’ minds is how the Agoda move will affect operations – “this could be an operational nightmare with room move, request to stay in room, additional turn around cost for hotels, passport check and registration to authorities, confusion for arrivals, bookings not being linked – therefore customer dissatisfaction.”

What is also new of course is that it is a company of Agoda’s scale that is doing it and what this could mean long-term for hoteliers.

Meanwhile, Splitty has said that the new funding will enable it to expand its team and accelerate its global market growth in the coming years, with China as one of the markets. Splitty claims to analyze and split over 1.5 million transactions to create exclusive deals in one second.

“Splitty differentiates itself from traditional OTA through this transaction model,” says CEO Eran Shust.

“It’s a win-win situation – we could improve the occupancy rate of hotels by over 15%, while users enjoy lower prices up to 50%. Fosun RZ Capital is the perfect partner for us to bolster our business globally."

Comments Duetto’s Niemann, “Overall, while commission costs are coming down thanks to some hard bargaining by the biggest global hotel brands, the share of travelers booking through an OTA continues to grow. Acquisition costs continue to cut into hoteliers’ profitability, along with rising franchise fees, marketing and digital marketing costs.

"With all of the data available to them today, hoteliers should be able to build a more seamless and personalized booking experience that drives more profitable bookings to their lowest-cost channels.”

* This article originally published on WebInTravel.