Creating a Vibrant Online Accommodation Booking Industry

Accommodation Online Booking IndustryOnline bookings are now nearly mainstream in the marketplace and more recently there has been a proliferation of new players. When New Zealand owned Ezibed started back in 2003 there were three existing players, Wotif, Ratestogo and Needitnow, all controlled from Australia.

The market has since become polluted with accommodation resellers, and at the same time, accommodation suppliers have been saturated for choice to assist in promoting & selling their properties. Recession hit both existing and these new players (some of which are amateurish websites with very little systems or processes but appear high on some search engines), and all have had to fight it out over the reduction of consumers.

With this proliferation of accommodation resellers and more recently channel managers such as Siteminder, Seekom, Staah & Roamfree marketing to potential accommodation suppliers, and the general exposure (advertising/marketing) of educating  consumers to booking accommodation online, many would have thought that skills would have been tuned and many making the most of the ‘new age selling tool’.

But, this is still not the case, and many accommodation suppliers across the country continue to display rooms that they either have sold out within hours of, forgotten to block off heavy demand dates such as ‘cycle challenge’, ‘rugby tests’, ‘New Years Eve’s’ or local events such as concerts etc, or simply just not updated their availability and claim the first two afore mentioned.

When these overbookings occur, for the most part problems are resolved quickly and efficiently with accommodation suppliers either ‘upgrading’ or moving other customers to accommodate the booking. Basically, adhering to the terms and conditions of a mutual agreement. But on the other hand there are still many accommodation suppliers that wash their hands of the problem and instruct the accommodation reseller that they need to address the issue.

Now this wouldn’t be a problem if the first priority of the accommodation supplier was the customer. But unfortunately there are many accommodation suppliers that still exist within the New Zealand accommodation sector that create headaches for accommodation resellers by not keeping their rates and availability up to date.

Thousands of marketing dollars are spent every year by many of the top accommodation resellers in an attempt to market and advertise both their own brand and the accommodation providers that have signed with them. The whole reason for an accommodation supplier to sign with an accommodation reseller is to have their own property extensively marketed to fill gaps and increase occupancy. Inevitably, creating greater profits and providing enjoyment for the owner.

When a booking is made online, the customer is in the full belief that they have booked a room and that room will be delivered without problems, the email notification will be received in a timely manner, the booking placed into the accommodation supplier’s system, the customer checked in, stays and then departs paying any balance owed. A simple process. But when an overbooking occurs the accommodation supplier is seen as not being able to complete the agreement that the customer thought that that they were buying. More often it falls upon the accommodation reseller to handle the problem, contact the customer and then try to relocate the customer to retain the sale. The worst case is a credit back to the customer of what has been provided in a transaction therefore a lost sale to the accommodation reseller.

This lost sale is one part of the equation. Brand equity is another. As soon as the customer as been advised that their booking cannot be honoured, the customer’s attention is then turned to the accommodation reseller and the service that they provide. Recent feedback from Ezibed customers that have experienced an overbooking shows that there is a 70% chance that they may not use that online channel again to book their accommodation as they want to be guaranteed that what they have booked is available as presented to them.

And that is fair enough too.

70% is an interesting statistic. The marketing investment to attract potential customers to book with an accommodation reseller can be undone with one small error from an accommodation supplier.

Many accommodation suppliers still question the value of a 10% fee of their advertised rates. This goes towards advertising, promoting, marketing  (what ever you want to call it) the accommodation supplier. Many accommodation suppliers don’t realise the costs associated with attempting to bring the accommodation supplier business, which can all be undone with one small overbooking of which some accommodation supplier’s simply wash their hands of.

How big is the problem? That is the million dollar question. From experience with Ezibed.com it happens more often that we like and results in lost revenue and associated bad pr with customers. One customer may in fact tell 5 of their friends/family of their booking experience and the result is reduced customers through the online channels and in turn reduced business to the accommodation supplier. The problem may be greater with larger accommodation resellers such as Wotif.

So how do we as an industry get through  to those responsible that they do in fact have a responsibility to preserve both their own and the accommodation resellers brand integrity? I’m not sure of the answer yet, but I hope that if we talk about it more within the industry, the closer both accommodation suppliers and accommodation resellers can work to create a vibrant online accommodation booking industry with low associated costs and high yields.

9 Comments

  1. Motella March 19, 2010 at 8:17 pm #

    Great article Gareth!

    The credibility problem is not just with the OTAs, but with the accommodation industry itself. As an accommodation provider, it is in my interest that consumers feel comfortable booking on-line. It concerns me that consumers may not have a positive on-line experience.

    I would of course would prefer that they book with me direct, however if another 3rd party can sex-up my product and place it in front of a willing buyer, then so be it! I am more than happy to pay a performance bonus (commission) for this service.

    I can only comment about the motel industry and I concur that there appears to be an “attitude” problem with many of our operators.

    There is a hard core of motel accommodation providers that have difficulty understanding the business relationship between themselves and an OTA.

    There are problems with operators that do not have a long term commitment, lack business acumen and have scarce industry knowledge.

    Some moteliers are under financial stress and are focusing on day to day issues of working IN a business. Few seem to have the luxury and the ability to work ON their business and make the most of unlocking the potential of working effectively with an OTA.

    This is a vexing problem and it is frustrating that we have an industry association that does not appear able to prioritise real issues and is lacking in credibility.

    Maybe it is time for OTAs to get tough and start firing their customers? (ie Accommodation providers). Have you made it too easy to sign up for your services and created an entitlement without consequences culture? Should you start filtering providers that wish to expose inventory via your medium with no accountability in return?

    Unfortunately, forums like this are preaching to the converted, however there are benefits in acknowledging the issues and the ideas expressed here can filter beyond…

  2. Michelle Ackers March 21, 2010 at 11:21 am #

    My perception is that the issue tends to be more with the smaller accommodation operators who:
    1. Have limited room inventory and so vulnerable to overbooking
    2. Have manual systems in place for booking management, and
    3. Often are only “lifestyle” or part time providers so don’t update their online availability in a timely or automated manner.
    Motels and Hotels really don’t have any excuse for this issue, about the only area of weakness for them is in staff training to manage their systems. If they haven’t yet invested in technology to automate availability and pricing updates then their businesses are at risk of being left behind in this increasing world of online bookings.

  3. Steve Davies March 22, 2010 at 4:45 pm #

    Commission – No commission – Vacancy – No Vacancy

    Very early on I could see the issue’s start to play out in the market as more properties began using online booking widgets.

    One of the best decisions we made with Accommodate Me was to integrate Vianet, BookIt, Availability and Tourism Exchange calendars directly onto property listing pages.

    The issue I am hearing most these days from boutique operators is updating them all has become a hassle.
    (ie if a sale is made using 1 particular widget, they must then log-in and update 4 other services to reflect the rooms unavailability).

    • Michelle Ackers March 23, 2010 at 12:50 pm #

      Steve, these operators should try using a Channel Manager to update all the different booking channels automatically (so they only have to update one system).
      Examples include Siteminder, Seekom and Roamfree. Many property management systems also offer updating to different channels. There is a cost to do this but the benefit of the time it saves, the assurance of no overbookings and the exposure they can gain on being on a large selection of booking websites is worth it.

      • Steve Davies March 23, 2010 at 10:30 pm #

        Yes I usually suggest Siteminder but as you say there is a cost to using it. Last year I believe many smaller operators were focused on saving money whilst testing the waters with the many online booking calendars available.

        I think as time goes by, more and more of the actual booking management applications will all communicate with each other directly.

        I know that Availability has invested enormous resource into integration with many of the other engines out in the market. This kind of integration comes free with their software. Time will tell if others follow suit.

  4. Justin June 4, 2010 at 9:23 am #

    It would be great to see organisations like RTO’s and perhaps MANZ offering or even insisting new Motel managers undertake some form of training when or before purchasing a new business. I have seen so many managers who have no clue about how to price their propery and the beneifts and pitfalls of discounting, not to mention simple customer service and computer skills. It is amazing how many seem to look to this industry as a lifestyle choice for the semi retiremnet without really looking at the skills and hardwork required. To start making in roads into a solution would be nice if local tourism organisations like RTO’s invest in their local providers by offering assistance with training and advice for those starting up a business and investing in their region.

    • Robyn Bolton June 7, 2010 at 10:34 pm #

      In a perfect world…RTO’s would love to have such power (operator training before purchasing)but alas the case is more like this. The meagre funding (in most cases) that RTO’s receive goes to marketing the destination (not an individual motel).

      I’ve seen it happen all too often – the motel owner fronts up to their RTO for the first time – having purchased the business 12 months earlier. At first contact the communication goes like this “well I have bought my motel and I have no bookings. Its your fault what the ?%&*!! are you doing?”

      The expectation is that tourism business investors will look after their part – just like any other industry does. Would you buy a service station or a supermarket without doing your homework?

      As to support for training providers there are plenty of opportunities out there, and there is no lack of trainers with excellent industry experience. RTO’s are also happy to provide input and do.

      The unfortunate truth is that those businesses that really need the training are usually the last ones to front up for it!

      • Michelle Ackers June 8, 2010 at 7:28 pm #

        From what I’ve seen regional training and business mentoring organisations that have been part of the NZTE enterprise training programme have been a great source of this type of specific training for tourism businesses in the past (although this may vary with each region).
        Alas, this training programme is currently being restructured and it appears the new funding policy will make it less attractive for tourism operators to participate. Unfortunately as Robyn mentioned, those that need the training the most don’t tend to front up, especially if there is a cost involved.
        Time will tell as to whether the new programme will cater for the needs of the businesses targeted.

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