Our opinion on... who is really suppressing hotel room rates? A common concern among hotel companies is that OTAs are causing hotel rates to stagnate, or decline. Through a combination of principle (transparency) and policies (limitations and rules as to what rates hotels can list, etc.) it might appear that OTAs are forcing hotels to sell rooms at lower rates than is necessary. Opaque sites add to this dy‐ namic. On first blush it certainly looks as though OTAs are the guilty party. But, are they really? Or is, as they say, there more to the story than meets the eye? A recent, simplistic exercise we undertook suggests that hotels and hotel brands make it difficult for market forces to drive rates up. According to the basic principles of marketing, there are four “Ps” – product, promotion, place (which for hotels really refers to distribution – where customers can buy the product) and price. But somehow, in the rush to build the most boutiquey boutique, most luxurious luxury, most convenient convenient and most no‐frills no‐frills, these principles seem to have been forgotten. Specifically, “price” as a component of the marketing mix has wandered off like a lost sheep, gently meander‐ ing at will with no specific purpose in mind, and un‐ aware of the harm it’s causing to the flock left behind (okay, lousy metaphor, but you probably get the point). Hotel guests are and would‐be guests are constantly being exposed to pricing absurdities that confirm over and over again that there is no intrinsic value to a hotel stay – prices are random, unrelated and mean nothing. Therefore, price shopping is the only logical way of choosing ho‐ tels. On a recent trip to Mexico, staying in a hotel with an occupancy of around 10%, we asked to stay an extra two nights. The Expedia rate for the extra nights was approximately $320/night. The hotel quoted $450 per night. When we pointed out that we could save $200/night by walk‐ ing across the lobby to the business centre computer and booking through Expedia they said (and I am not making this up) that they would
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