Outbreak of the Coronavirus, entry into force of PSD2, etc. The stars have aligned so that the OTAs see the open sky and acquire full freedom and autonomy to continue generating disparities.
Driven by our unwavering commitment to direct hotel sales, we at Paraty Tech seek to closely follow the major players in the sector that somehow pose a threat to the work that we do. That is why we are always on guard to detect the implementation of new functionalities by the OTAs.
On one hand, we are well aware that we learn from them. On the other, despite the number of reservations that they generate, on many occasions, they are directly detrimental to the interests and strategies of our clients. In this article, we want to turn the spotlight on Booking.com, an OTA that got off on the right foot this year. It is as if the stars aligned (from the emergence of the Coronavirus to PSD2’s entry into force) to precipitate a series of events that we will list below.
Some of the following initiatives have been launched unilaterally, without notifying hoteliers in advance. In addition to enumerating them, we will focus on their pros and cons as well as provide suggestions as possible solutions to mitigate their impact.
1. Risk-free Reservations
This is a perfect example of this increasingly common action that Booking.com does without prior consultation that we were referring to earlier. We assume that, from their perspective, it is more profitable to ask for forgiveness later than ask for permission. What happened was they affiliated all the hotels in their client base to this new programme that, basically, converts Non-Refundable rates to Flexible rates. Furthermore, it is almost impossible to detect since, from the end customer’s point of view, they are being offered a Flexible Rate when in fact, the rate was originally Non-Refundable. To make matters worse, its activation depends on the OTA’s algorithm, which decides based on the date and the expected demand.
In short, the hotel guarantees that reservation but the client can cancel it since Booking.com is committed to filling that spot with another guest, or alternatively, assuming the cost of the reservation. Smart move, right? Sure, as long as you have the financial buffer necessary to face the possible expenses that you may incur.
Pros for the hotelier
- You will be able to reopen the Non-Refundable rates, which had been practically eliminated as a consequence of the pandemic because ultimately, they are converted into Flexible rates.
- The On the Books contemplated for this type of rate is guaranteed, therefore, its volatility is reduced.
- There are no costs incurred besides the discount you decide to apply to the Non-Refundable rates
Cons for the hotelier
- Booking.com, in their eagerness to fill in the cancellation slots, opens a door to the generation of price disparities.
- If the algorithm of Booking.com does not consider guaranteeing a reservation feasible, the programme will not be activated. Thus, the hotelier will have a Non-Refundable rate, which is very unappealing given the current circumstances.
- Offer Semi-flexible rates. They provide peace of mind to the guests and a certain type of guarantee for the hotelier, as the latter usually takes partial prepayment into account. With our recently released Paraty E-Payments system, managing payment collection for this type of rate is very simple.
- Deactivate the Risk-Free Reservations programme. You can simply do this action through the extranet of Booking.com by following the steps below:
- Go to the ‘Opportunities’ tab
- Click on ‘Risk-Free Reservations Programme’
- At the bottom of the page, click ‘Leave this programme’
- Decide for how long (we recommend “Indefinitely”)
- Specify the reason
2. Online payments
When we detected the much-talked-about Early Payment Benefit way back in March 2019, we were not yet aware to what extent the OTAs would try to maximise their profitability. Just a few months later, the new PSD2 regulation went into full effect, which called for mandatory compliance from the beginning of this year. The OTAs have always been one step ahead of their competitors, including the direct sales channel (the official website), when it comes to online payments.
Slowly, it has been becoming the ideal breeding ground to convince the hotelier that the most convenient thing to do is to ignore this “problem” and to leave the management of online payments to the OTAs. It is partially true but it is somehow, also, a double-edged sword because it is actually the perfect opportunity to generate more disparities.
Pros for the hotelier
- The OTAs strictly comply with PSD2.
- The OTAs have the most varied payment methods (Paypal, Bizum, Amazon Pay, Apple Pay, Wechat, etc.)
- It is convenient to delegate this part because it ultimately favours the operations.
Cons for the hotelier
- Non-Refundable rates are not charged on the spot, thus, it does not improve the cash flow nor is the money received in advance as before.
- Payment collection via virtual cards incurs costs (2% -3% depending on the bank)
- Payment collection via bank transfer will be received by the hotelier between the 1st and the 15th of the following month.
- Discounts on the website: Offering discounts on the official web used to be just a recommendation. Now, it is practically mandatory. In real terms, the RRP of Booking.com is no longer the RRP because discounts of 5-10% will be automatically applied, depending on the hotel.
- Price automation tools: The implementation of tools like Parity Maker, which matches the price with that of the selected OTA in real-time, should be enabled by default. However, as previously mentioned, they will not be able to detect discounts at all times so they will not suffice.
- Manual reviews: In relation to the previous point, it does not hurt to carry out random manual reviews. Nobody knows the rates better than the hotel. In this way, it will be easier to detect these actions by searching manually.
- Tools that justify discounts and increase conversion: Sometimes what we are doing is just not enough. That is why you may find initiatives that offer promotional codes in exchange for actions by the user quite useful. For example, activating tools such as the Rescue Seeker (active retargeting with the aim of preventing website abandonment),or inviting them to subscribe to the newsletter in exchange for a discount can incidentally increase the contacts in our database.
- Loyalty Club: Creating a Loyalty Club is probably the best way to beat the price of Booking.com, and at the same time, to take the next step to make our clients feel special when they book through the direct channel.
3. Other “shady” disparities
This list will increase as the days go by, but as of today, we are able to enumerate the following, which is enough reason to remain very vigilant:
- Discounts, in the form of direct cash to travel, in exchange for inviting their friends to book.
- Promo codes to gain money for future trips.
- Cashback after the trip, or incentives to book with a guaranteed refund of a percentage (10%), once the stay is over.
- Exclusive discounts based on platforms, for example, if the client uses the App. Price Seeker can detect them but it is important not to lose sight of this type of action.
- Temporary activation of the Genius programme just for signing up or logging in.