Is TripAdvisor site Tingo a wake-up call for bad revenue management in hotels?
We see it all the time: Travelers are planning trips months in advance thinking they will be rewarded with low rates for a hotel stay only to see standard rack rates.
And, their experience confirms once again online travel agencies’ brilliant marketing message — the last-minute booking will bring the best price.
For our industry, as revenue management goes, the strategy is relatively simple. Develop what should be base business with group, wholesale, consortia, in and around 90+ days out. Then follow it with incentive offers, early pre-pays, loyalty marketing and opaque package offers 30+ days out.
Only after, when you enter into your prime booking window (less than 30 days) do you begin to yield higher rates on your remaining inventory based on your “compressed” market demand. Sounds pretty “101,” right?
Then why is Tingo such a worry?
Tingo, which is part of TripAdvisor’s Smarter Travel Media, offers prepaid guests refunds when room rates, accessed from the Expedia Affiliate Network, fall before their arrival dates.
Tingo, in comparison to other opportunistic platforms, feeds directly off of our industries worst revenue management habits.
Hotels attempt to achieve multi-layered revenue expectations based on properties’ budgets. We load early all of the top rates and hold onto them past the early demand curve.
So, when demand does not produce needed occupancy, what do we do? We lower our rates in the prime booking window, exactly at a time that we should have been raising them.
All of this occurs while fighting an-ever growing OTA advertising campaign that feeds on the premise that better rates happen later rather than sooner — and they have the inventory.
Why? Because we gave it to them.
Enter the Tingo model. Although it may appear similar to Orbitz’s Hotel Price Assurance, (which provides money back when another guest books the same itinerary at a lower rate) Tingo compares a guest’s booked prepaid rate to any available rate offered for your type of reservation through the Expedia Affiliate Network.
So should the property ever reduce a rate prior to arrival, then that rate is now the new rate of the participating reservation by a rebooking process handled by Tingo.
So what about rate parity, cancelation polices, conditional offers and blended rates? Also what does Tingo say to its users about the opaque packages and loyalty incentives they potentially are missing?
How does the property get on the winning side of affiliate offers when they are the ones “virtually refunding” any downward pricing?
The simple answers are that the property can’t, and Tingo won’t. As hassle free as Tingo claims the user experience will be, in fact, it obscures the industry’s existing incentives and value offers.
Will I personally use the service? Probably not.
But, that’s not because I am a purist. In fact, I usually eagerly adopt new concepts to better understand their potential.
But in this case, my hesitation will be for the same reason other travelers will be concerned — the fine print.
The what-happens-when-it-goes-wrong process. I think we have all experienced at some point, or in some fashion the blame game between third parties and properties when a “miscommunication” occurs.
From a property-level perspective, it’s usually the property that bears the brunt of the blame and lost business from the guest standing there at the front desk. The “don’t worry, we handle everything” refrain from OTAs has been anything but, and that is very much in harmony with Tingo’s sales pitch.
Plus, Tingo has my money long in advance. What process do I have to go through if I want to change my mind about the booking?
What if I saw a package offer from the same property and wanted it instead? What hassle would that create, I wonder? Do I even want to bother with all that?
Is there a silver lining to this? To stretch the definition a little, I feel Tingo shines a bit of light on marginalized revenue management practices of bottom-dwelling’ properties and their rate practices.
You know the ones; just about every market has them. They mirror your rates, just below your market segment rates, and at the first sign of diminishing peak demand,they dive into the rate basement, effectively dragging the market segment along with them.
Now, you have Tingo to hurt everyone even more by “giving back” revenue from business you had already yielded off of.
Add that to the properties dumping inventory into OTAs and last-minute opaque sites, mixed with rate parity issues, and you have quite a negative RevPar party going on.
What was that movie with George Clooney and a fishing boat?
Hint: The Perfect Storm.
Special Nodes is the byline under which Tnooz publishes articles by guest authors from around the industry.