NB: This is a guest article by Stefan Menden, founder and CEO of last-minute hotel booking app JustBook
If you are among the 51% of UK adults that have smartphones, it is likely that your home screen is littered with apps – apps you love, apps you never use, functional apps, apps that banish boredom, apps that save you money. The saying goes that there is an app for everything.
There is no denying that the impact of mobile apps on the travel sector has been massive. Mobile phones are enabling the real-time distribution of goods and services to both business and leisure travellers, filling rooms in hotels, seats on flights or tables in restaurants that might otherwise remain empty.
We think of this as the real-time market connecting the supply with the demand, which is more efficient, more fun and the future of how businesses will engage with consumers.
The market is shifting towards one that no longer penalises the spontaneous traveller, and one that also benefits businesses – a win-win situation. This is all thanks to the small but powerful computer that the consumer now carries around with them everywhere; the smartphone. Almost like a remote control, it’s available at your fingertips for every aspect of your travels.
In the travel industry, the challenge for top-rated hotels has been to maintain an air of exclusivity whilst ensuring rooms are filled. Many internet channels are too exposed for these hotels. It is very important not to jeopardise their brand and general pricing strategy for the purpose of optimising occupancy in the short term.
Apps can, however, bypass this problem by pushing out deals in real-time and packaging discounts as unpredictable and one-off. The smartphone and tablet user is also implicitly identified as an attractive demographic for hotels – young and professional. Hotels know that if they offer the occasional, one-night only discount, they are likely to attract new customers they would not have otherwise captured, and these customers are likely to come back.
Historically, such models of price flexibility in the hotel industry were hindered by rate parity clauses introduced by the large online agents, so that hotels had to offer their rooms on all distribution channels at the same prices. With this in mind, the response of new competitors through differentiated offerings was almost impossible.
In July 2012 however, the UK OFT issued a Statement of Objections, alleging that two of the major Online Travel Agents (OTAs), Expedia Inc and Booking.com B.V. had engaged in anti-competitive behaviour by entering into arrangements with a hotel chain which restricted the OTAs ability to discount accommodation prices.
While these arrangements referred to the individual OTAs’ ability to discount, wider issues were of concern as the deals also restricted other distribution channels’ discount setting, due to rate parity. This decision and a similar outcome in a separate German case mean that modern pricing structures are now a real possibility.
Hotels now have the opportunity to work freely with distribution channels offering differentiated products. In this way, app-only companies can offer same day hotel rooms at large discounts, independently from those offered by OTAs.
“Discount” is a nightmarish word for hoteliers, for perfectly understandable reasons. They have completely lost power to an ever more powerful OTA sector that squeezes them for ever deeper discounts. However, structured in the right way, the same-day discounts introduced through the mobile channel help the hotel industry keep its general pricing power, not hurt it.
Unpredictability is the bottom line for top hotel deals. Discounts have to be infrequent and cleverly marketed – hotels cannot afford to cannibalize existing demand. By helping acquire new repeat customers for hotels in this way, same-day hotel booking apps have a sustainable business model with plenty of room to grow.
The potential for mobile apps built especially for the travel sector is absolutely huge. In the future, we will see a lot more travel offerings migrate to the mobile, from car rentals to events and restaurant bookings, all the way to peer-to-peer services. As the word spreads around the success of the last-minute hotel bookings model, your smartphone will be even more powerful. The key to success lies in ensuring that all of these new services are designed in a way that is mutually beneficial for both travellers and businesses.
NB: This is a guest article by Stefan Menden, founder and CEO of last-minute hotel booking app JustBook
NB2: Mobile apps image via Shutterstock.