Escapio, a Berlin-based online travel agency (OTA), has switched to metasearch model for a curated list of luxury and design hotels.
The revamped Escapio showcases at launch 6,000 "unique" hotels, rather than trawling the internet for hundreds of thousands of properties.
Economics driving the switch
The switch in business models is driven by market economics. Hotels are eager for direct bookings, which let them more savvily upsell to guests and avoid middleman commissions.
The original booking website model was becoming harder to sustain because of the growth of Booking.com, which has approximately 50% market share in Germany, not to mention other large players like HRS and Expedia.
Competing on price with a giant OTA had become almost impossible, says Escapio.
If Escapio got a rate for a hotel that was lower than what was available on Booking.com, within about six hours, Booking.com would call the hotel demanding the same rate.
Given that Booking.com is such a large demand generator, hotels usually feel obliged to cooperate with it, regardless of any formal rate parity provision.
The new model works with the OTA giants rather than against them: Travelers shop rates from up to 40 booking portals, such as Booking.com, Expedia, and HRS. If the users click to a OTA like Booking.com or HRS, Escapio receives a commission share or a click out fee (cost per click) from the OTA.
Hotels have the option of generating reservations with the “Escapio Direct Link”. This lets hotels capture a direct booking from consumers in the advanced stage of decision-making.
If the user clicks on this link, the hotel has no click or transaction costs within the first year. After that, Escapio charges a fee per year for the link which depends on the size of the hotel, between Euro 120 (up to 11 rooms) and Euro 720 (more than 200 rooms).
CEO Uwe Frers says:
“The majority of owner-run hotels currently have neither the know-how nor the relevant resources to measure the success of click-based models in real time. These are the essentials to play along in this league, without quickly burning thousands of euros.
Escapio’s flat-rate model gives hotels the opportunity to gather experience over the year.”
Escapio is limiting its inventory to upscale brands, which can afford to invest in a little marketing, and whose typical customers are less price-sensitive than average.
Listed properties in 50 countries include luxury hotels, romantic country houses, stylish design hotels, historic castles, rustic vineyard estates, Spain’s Paradors and Moroccan riads.
Challenge for niche OTA like Escapio and others -- like Stayful, MyRoomIn, Journeyful -- is that without a big customer base, the value to hotels may be negligible.
HotelTonight worked around this problem by focusing, at first, on only a handful of upscale hotels in selected major cities. The hotel managers consistently noticed HotelTonight generated revenue for them because the app's users were only given a few options. That made the managers more inclined to share inventory.
Maybe Escapio's niche offer can succeed in a sea of larger ones, DoHop, Hipmunk, Kayak, Momondo, and Skyscanner.
But even HotelTonight faces a struggle when it comes to the cost of customer acquisition relative to the giants like Priceline Group, which have economies of scale.
On the mobile front, Escapio has also caught up with the times by adopting a responsive design for better usability on mobile devices. Europe's been a bit later to the mobile game for on demand hotel booking, so this may turn out to be just in time.
If Escapio can generate recurring demand to make the channel worth the time of upscale hoteliers, and if Escapio can compete on cost with players like TripAdvisor and Google -- whose rates seem to hover at 10 to 15%, underneath the commissions charged by Expedia Inc and Priceline Group brands -- then it might grow nicely, especially given its established brand reputation in several markets, such as Germany.
10 top priorities for hotels
Frers has told Tnooz that his advice to hotels is to make the following things your top priorities:
- Monitor the profit margins generated by each distribution channel (length of stay, revenue per order, food & beverage, retention, and cost), rather than just commission percentage
- Position your hotel on a range of different distribution channels, avoiding dependence on any one
- Market your hotel on additional niche websites that focus on specialist themes or particular target markets
- Enhance the hotel’s individual charm. A strictly implemented concept and clear branding allow for higher prices than interchangeable competitor hotels nearby
- Generate higher revenue onsite through appropriate extra services and qualified personnel. Learn from airlines
- Stay in contact with your guests. Use newsletters, social media, postal mailings, giving them a reason to stay again. Use emotions, innovative content, qualitative offers (upgrade, extras) or quantitative discounts
- Use incentives to motivate guests in recommending your hotel to friends. Guests attract guests when they’re satisfied and rewarded for it
- Don’t let yourself be convinced about needing each and every new innovation. Twitter? Augmented reality? Pinterest? Quatsch. Ask yourself if these can really earn extra revenue or can contribute to another clearly defined goal
- Work on your own hotel website as just ONE marketing measure in your distribution strategy. But recognize and retain as partners at least the trustworthy and quality-oriented booking portals like Escapio
- Fair play for all comparable distribution channels – keep your prices the same for all comparable booking channels