Booking.com appears to have rolled out its Booking.Basic feature to European hotel listings, six months after it was first spotted on listings for hotels in Asia.
Booking.Basic is an accommodation tier that periodically appears on Booking.com’s hotel listings when the rate provided to Booking.com is not the cheapest available online. The rates it offers are nonrefundable and made via a third party that is only revealed to guests after they have paid to book a room.
Thibault Catala of Catala Consulting told Triptease of how he first came across the Basic rate at one of his hotels in the United Kingdom:
“We first came across Booking.Basic on the 19th of December 2018 here in London. It was actually an overnight surprise, as we hadn’t received any kind of official communication about it from Booking.com.
There’s no doubt that Booking.com’s tone [towards hotels] is not in the spirit of a good partnership.
"When we asked for more information, they explained how it worked and told us that there was no way to opt out. The only way to avoid it appearing to potential guests would be to improve our PQS (price quality score) and maintain rate parity online.”
Booking.Basic is far from a unique phenomenon. Many online travel agencies sell rates that they have sourced from a third party without a direct relationship with the accommodation provider. The third-party rates used by these programs and which undercut the direct price are often rates originally intended for wholesale distribution.
The impact of Booking.Basic, as well as that of other programs like it, could be significant if it continues to grow worldwide. Across Triptease’s client base, we currently observe Booking.com undercutting the direct price 11.7% of the time.
When Booking.com undercuts the direct price, session conversion rate decreases by 14.3% (data gathered from 19 million sessions, October to December 2018). If Booking.Basic continues to grow, hoteliers could have a serious parity - and therefore conversion - problem on their hands.
The role of the price quality score
The price quality score, or PQS, is the ranking by which Booking.com assesses a hotel’s ability to provide in-parity rates. In an email received by a hotelier and shared with Triptease, a Booking.com agent explains that:
“When partners have a PQS below 70, it is an indicator for Booking.com that we do not have the most compelling prices for customers on Booking.com. In that case we use programs like Booking.Basic to bring the best value to our customers.”
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This reasoning means that the onus rests on hotels to ensure they are giving their partner the best available rate (rather than allowing rogue wholesale rates to leak out to other distributors). The OTA knows that its conversion suffers when it is out of parity with other sites. For both OTAs and hotels, parity matters if you are serious about conversion.
However, if PQS is to be explicitly used to penalize hotels for poor parity, hoteliers will surely argue that its accuracy needs to be watertight and the methods for its calculation must be transparent.
Booking.com is solving its problem of being undercut by smaller OTAs offering significantly cheaper rates than its hotel partners are providing. By harnessing those rates for itself, it is making its problem the hotel’s problem.
Symptom of a wider issue
One United Arab Emirates-based hotelier (who wished to remain anonymous) put it like this:
“There’s no doubt that Booking.com’s tone [towards hotels] is not in the spirit of a good partnership. However, the problem they are trying to solve is not rate parity but rate leakage. Hotels have to retake control over their inventory, their distribution and ultimately the end-to-end customer experience.”
While it may have been executed in a manner at odds with a "partner-first" approach, the rollout of Booking.Basic will at least serve as a wake-up call to hoteliers not yet willing to approach the problem of controlling their downstream distribution.
“This issue is nothing new,” suggests Joe Pettigrew, director of revenue maximization Europe hotels at Starwood Capital Group. “It has just grown now that Booking.com is doing it, rather than Amoma or TravelRepublic or Ctrip.
"I think the bigger issue we as hoteliers need to address is the notion of onward distribution. We need to control who should or shouldn’t get rates from our contracted partners - including OTA affiliates and their networks.”
* This is an abridged extract from a report by Triptease. Click here to read the full report.