April 14, 2015
Whether you are a busy entrepreneur or a tech enthusiast who travels to conventions, you most likely visit travel websites multiple times per year for hotel booking. And the ever-increasing popularity of Priceline, Kayak, and several other similar travel sites has been caused by the belief that this is the best way to get a good price. Meanwhile, hotel owners are dealing with the highest customer acquisition fees in the travel industry, at least in part as a result of these websites, and this cuts into their profit margin. A solid marketing push has convinced businesses and consumers that discount sites are looking out for their best interests, but is this really the case?
What Duetto Offers
Duetto is a hotel revenue management system that has recently received a lot of media attention for offering hotel ownership the opportunity to more accurately track their rental rates and overall revenue. This means that hotels will be able to determine the optimal price point that they can expect throughout the year, and they can adjust their specials accordingly without resorting to utilizing a discount site.
On the consumer end, these changes are positive because they eliminate the need to spend a lot of time researching options on various travel websites. Additionally, they will be able to reasonably expect a higher level of service with fewer booking mistakes.
The Problem with Discount Travel Sites
Hotels need to operate at the highest economic occupancy possible to remain profitable. The difference between economic and physical occupancy is important to understand, especially because it affects the way these businesses should think about Priceline.
The average physical hotel occupancy percentage in the U.S. is expected to be 65.1 percent for 2015. If each room is rented for the optimal rate, the economic occupancy would also be 65.1 percent. However, if discount sites drive the rates down, the profit margin will plummet considerably. For example, even if a hotel was able to reach 100 percent occupancy by cutting their rates in half via Priceline, they would only hit an economic occupancy of 50 percent. As you can see, this is a bad move for hotel owners, and it also affects customers because the quality of the hotel will almost certainly end up suffering as a result.
In the case of Priceline, it’s annual revenue is approximately $4.4 billion; these websites are in business to make money, and this means that you may not always get as good of a price as you are led to believe. In fact, the hotel will be giving Priceline a commission of 20 to 30 percent, so you may be able to get a cheaper price by going directly to the source. Another perk of booking directly with a hotel is that you can avoid the many nightmare scenarios that have led to many of the negative Priceline reviews on Consumer Affairs. By booking through a service such as Duetto, traveling simply becomes much more easier for entrepreneurs.
Image credit: Flickr/Damien Derouene
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