With shifting consumer expectations due to the proliferation of last-minute booking apps, hotels must consider the implications of offering rooms via the last-minute mobile channel.
The promise of reducing empty rooms via last-minute bookings is nothing new - last minute travel has always been big in Europe, where the close proximity of dozens of relatively inexpensive destinations encouraged many consumers to care less about advance planning in favor of a lower priced getaway.
While the packaged holiday industry has enough flexibility to offer variable inventory at a reduced rate, individual hotels are capacity-limited with relatively fixed rates. Publicly discounting rates - especially at the last-minute - can lead to some undesirable consequences for hotels: upsetting loyal customers, undercutting full-priced rates, and training the customer to wait for last-minute deals.
In a presentation at the EyeForTravel Travel Distrubtion Summit last week in Las Vegas, Max Starkov of HeBS Digital suggested that hotels should never discount via flash sale sites or last-minute bookings. Max elaborates on his comment in an email:
The most common mistake by hoteliers we are witnessing today is the urge to discount in the mobile channel.
A boutique hotel in NYC was engaged in heavy last-minute discounting in the mobile channel. It did not take long for all regular and frequent guests at the hotel to hear about the lower last-minute rates offered via an OTA and a service like HotelTonight. The hotel soon saw that booked guests were canceling existing reservations, and re-booking, or waiting until the last minute to see what the last-minute rates are for the property and other hotels in the city/location they were traveling to and booking at the last minute.
Anecdotal experiences and observations offer a clear perspective of a rapidly evolving landscape when it comes to hotel bookings.
HotelTonight's last-minute hotel bookings app has been downloaded over 3 million times, and is most certainly the leader in changing the way that some travelers book hotels. Conference goers are bouncing around hotels each night, vying for the cheapest deal. Connoisseurs are using the app to check out as many hotels as possible in one city. Business travelers are waiting to book hotels until they are on location.
Nonetheless, the potential upside to capture business that might not have existed before is much more important than any worry about training consumers to only seek last-minute deals. HotelTonight's COO Jared Simon explains:
There's no question that mobile is quickly becoming the dominant online booking medium. With regard to the distribution of advance purchase vs. last minute purchases, we see the trend toward tighter booking windows that has been in place for the last decade continuing, but the proliferation of new booking tools will never eliminate consumers' interest in booking in advance in many situations. The best revenue managers will recognize that a single person may have different booking needs at different times and will ensure that their hotels are in front of those bookers with a relevant offer regardless of the booking need.
Max from HeBS Digital also points out that consumer behavior generally follows supply:
Overall, I do not expect travel consumer behavior to change dramatically in the near term. It is only natural last-minute booking to increase during economic downturns. Travel consumers know that there is plenty of availability and this is why they tend to book closer to travel date. Advance bookings will go up and down in synch with supply and demand.
The big players continue to push aggressively into the last-minute hotel deals space, with Travelocity's Lastminute.com releasing a hotel deals booking app that promises "instant access to 3-5 star hotels with discounts up to 55%."
Two of the key differentiators that will certainly convert more consumers to last-minute are the Top Secret Deals that provide super-discounted stays at unnamed hotels, and the photo-based card capture that eliminates the onerous typing of credit card information.
Of course, a brand like LastMinute.com has baked last-minute into their brand promise. Consumers have already been seeking last-minute deals prior to mobile apps. In addition, the opaque secret deals will likely be preferable for those hotels still reluctant to publicly discount their room rates.
There are still risks for hotel brands to participate in these channels, as Minoo Patel, VP of Mobility and Social Media Practice, NIIT Technologies, points out:
"Hotel revenue management needs to be managed very carefully so as to avoid conditioning customer expectation toward last minute deals. As with other aspects of the travel lifecycle, there is always a segment of consumer demand that can be leveraged towards higher yield rates, but last minute deals need to be carefully managed in order to prevent revenue dilution. Hotels need to put these deals into context, assessing the relative value of discounted deals for consumers versus the discounted advance booking deals, which are made via higher commission outlets such as hotwire.com or hotels.com."
The consumer will book hotels last-minute when the deals are there for hotels they want, and when the inventory tightens up, they will shift back to advance bookings to lock in the hotel they want. And for the price conscious consumer, there will be dozens of tools across channels to help them secure the best price for their travel dollar.
Simple supply and demand should regulate the behavior, but for those hotels looking to graduate the last-minute guest into a loyal repeat visitor, Minoo offers a closing piece of advice:
"Consumer experience at a hotel is a significant motivator when it comes to re-purchases, even at the last minute. Hotels should be careful not to alienate guests that want to return for a subsequent visit by demanding exorbitant room rates in order to avoid slipping into a commodity relationship with their clientele. Leveraging mobile and social media channels as key relationship-building components of an overall customer engagement practice, provides hotel guests with reasons not to treat you as just another “hotel-room-for-the-night” supplier."
NB: Hotel check-in image from Shutterstock