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Mobile rates: Should they be discounted?
March 27 2013

Revenue managers discussed during a HSMAI webinar whether hoteliers should offer discounted rates via mobile channels or keep rates in parity.

Highlights
  • Because overall hotel demand in the U.S. is strong, hoteliers have pricing power.
  • Revenue managers suggest using the mobile device to drive direct demand.
  • Hoteliers shouldn’t be afraid to use the mobile channel as a last-minute discount avenue when the need arises.
By Jason Q. Freed
News Editor
jfreed@HotelNewsNow.com

REPORT FROM THE U.S.—As the number of consumers searching and booking travel on mobile devices skyrockets, hotel revenue managers are adapting their distribution strategies to capture a new group of travelers.

Because overall hotel demand in the U.S. is strong, hoteliers have pricing power and should explore the myriad ways they can optimize their presence on mobile devices outside of simply discounting, said panelists Tuesday during a Hospitality Sales and Marketing Association International webinar.

The webinar, titled “Mobile: Taming the Wild West of Revenue Management,” focused on mobile users—who are different than desktop users, panelists said—and the best ways hoteliers can reach them.

“Stop saying mobile is the future; it’s here, it’s mainstream and that should correlate to your pricing strategy,” said Ash Kapur, VP of hospitality revenue management and distribution for Starwood Capital Group.

Hotel pricing strategies on the mobile device continue to evolve. Once thought of as purely a discount channel, revenue managers suggest using the mobile device to drive direct demand. Those rooms can be priced in parity, panelists suggested.

However, Calvin Anderson, corporate director of revenue strategy for Alliance Hospitality Management, said hoteliers shouldn’t be afraid to use the mobile channel as a last-minute discount avenue when the need arises. The last-minute mobile guest can represent incremental demand that otherwise wouldn’t have booked a hotel room, he said.

“I’m a big proponent of using mobile but making sure its incremental revenue,” he said. “Don’t let someone else eat your pie.”

What mobile looks like
Because mobile is a new medium, most hoteliers are lacking data on the channel. For Starwood Capital, mobile was contributing 3% to 5% of hotel website traffic and revenue just a few years ago; today some hotels are seeing 20% of the traffic and revenue from the mobile channel, Kapur said.

In the mobile world, the simpler the platform the better, he added. The best mobile experiences make it easy for guests to look around and make transactions.

Bookings, Kapur said, are occurring more so on mobile browsers than on apps. He cautioned that many hoteliers are “in a rush to get to the app lands,” but research shows that more attention should be paid to ensuring hotels have a clean, crisp mobile site.

A good mobile site gets the user to his or her destination—whether that be a content page or a booking engine—within three or four clicks, Kapur said.

“Get as much on one page as much as possible,” he said. “Make it simple to book.” A bad mobile site is the No. 1 deterrent for booking travel on a phone, Kapur added. 

He agreed that mobile discounting should be a need-based approach. “When in need of last-minute pickup, do what it takes as a revenue manager,” he said.

However, Kapur suggested not having “mobile-only rates” or discounting the rate just because it is being offered on a mobile channel. Instead, view mobile as mainstream. There are some travelers that will see a hotel’s rate and availability only through the mobile device and never even touch a desktop, he said.

“If your consumer is seeing different rates, different channels, different times, are we encouraging the guest to shop around?” he said. “Make the investment, get the consumer to the site and then suggest they stick around.”

Incremental demand
Alliance’s Anderson suggests a different approach. He said hoteliers have to learn to provide “out-of-parity” rates to capture different consumers at different points in their research and booking journeys.

Most importantly, though, hoteliers must ensure they’re not “robbing Peter to pay Paul,” or offering discounted rates via mobile channels to guests who would have booked on that channel at full rate, he said.

“Technology accesses the latent incremental demand that has always existed by showcasing the best values out there,” Anderson said, adding there’s a large customer base that will travel spur of the moment. For example, consumers looking for a short weekend getaway at an inexpensive price will book last minute but otherwise might stay home for the weekend.

Anderson said offering discounted prices via mobile channels won’t necessarily train the guest to look for discounts.

“It’s a free market, and our guests will only grow more accustomed to value-driven price points,” he said. “We’re used to seeing value and looking for discounts all the time. Hoteliers are often holding on to an old mindset that this is how much a hotel costs and you’re not going to get a deal.

“The guests are getting smarter, and unless we play smart we’re going to lose big time.”

However, simply offering mobile channels a discounted rate is not smart, Anderson said.

“Look for incremental revenue—where is the extra money?” he said. “If you can determine that, then it’s just utilizing it.”

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