How you should think about point-of-sale pricing and source markets

How you should think about point-of-sale pricing and source markets

When it comes to managing a hotel’s revenue, there are many data points to consider: target occupancy, booking windows, group sales projections, market trends, local events, and more.

Threaded throughout each of these data points is the central question for hoteliers: based on what I know, how much do I charge for my rooms?

To answer this question effectively, hotels’ marketing and distribution activities often focus on their geographical source markets. It's about understanding demand trends from specific markets worldwide, and then crafting promotions to boost bookings from targeted source markets. But what do hotel revenue managers know about the information that users are presented with when searching for their rooms online? Does an OTA or metasearch channel’s country-level domain - or point-of-sale (POS) - affect what rate is shown?

According to various OTA Insight parity reports, disparity threatens around 25% of the average hotel’s OTA-related revenue.

Our data suggests that significant discrepancies do creep in. These global platforms process millions of searches across geographies, and often offer IP-based promotions that are not always visible to revenue managers outside of that market. The targeted nature of these deals makes it nearly impossible to identify disparity on country-specific channels. Even for the sophisticated revenue manager that uses a virtual private network (VPN) to view local rates and is aware of the problem, it would be labour-intensive and time-consuming to perform these checks manually. There’s simply too much to keep track of consistently.

Now, POS disparity can be surfaced with less labour and more accuracy thanks to OTA Insight’s recently-released Parity POS with live views for proof of disparity. By shedding light on geo-rate disparity in a live shopping solution, hotels minimise revenue loss and ensure greater rate parity compliance.


The issue of point-of-sale disparity

Source markets are hidden gems for hotel marketers, revenue managers, and general managers. Knowing the originating market of a potential guest offers insights into demand trends to both the local market and the hotel itself, which can then be translated into how a property is both marketed and operated. For example, growing interest from a new country could lead a hotel to offer specific amenities, create targeted packages, or adjust marketing copy to better match that demographic’s expectations. Also, it’s useful competitive intelligence to see competitor hotel rates for specific geographies.

Of course, the point-of-sale also has implications for rate parity. Since most of the major OTAs and metasearch engines provide localised versions of their services, effectively tracking parity across so many sites (and languages) is challenging. It's just not feasible to open a dozen tabs for each OTA and metasearch site to do manual searches on each country-level domain. Not only because it’s a pain to do so, but because some OTAs don’t offer branded country domains. Without a VPN, it’s impossible to access country-level sites.

Yet, without these searches, hotels are open to the same rate integrity disadvantages they face elsewhere. Namely, that a potential guest will see a lower price on a third-party channel, triggering distrust that the hotel’s own website isn’t the source of lowest-available pricing. In addition, a hotel’s own POS-based promotions can be undercut by bad actors, such as wholesalers, which distribute wholesaler rates on specific POS so that hotels won’t discover them, or contracted OTAs, which show lower rates on certain POS and then reduce the to-be-paid commission to avoid detection by hotels.


Use POS information to maximise opportunities

You don't have to look very far to find cautionary examples of brands using source data to inform pricing decisions. One of the most notorious examples is when online travel agency Orbitz displayed higher-end hotels to Apple users. After being picked up by the Wall Street Journal, the story became a media sensation, forcing the company to explain the targeting publicly, saying that “Mac users are willing to pay more for higher end computers, at Orbitz we've seen that Mac users are 40% more likely to book 4 or 5 star hotels as compared to PC users.”

Of course, we’ve come a long way since 2012. Most consumers understand that hotels use a variety of data points to craft search results. This sophistication leads some consumers to even spoof their IP addresses via virtual private networks (VPN) to trick sites into showing a different set of results. For hotels that use origin to filter search results and influence pricing, be sure to test assumptions. Don't do anything discriminatory that could be perceived negatively were it to be made public.

One way to avoid pricing discrimination is to practise intelligent channel management. To know which channels to activate, revenue managers need to know the geographic strengths of each channel. Which demographic segments does each distribution channel bring to the hotel? This knowledge can then be combined with pricing levers to blend channel management with targeted segmentation.

One of the most straightforward segments is geography: which market does the channel serve? With this insight, a revenue manager can control inventory levels at the channel level to micro-target certain geographies. POS-based channel management is an effective way to manage disparity for specific source markets.

To manage point-of-sale information within a rate parity approach to revenue management, we recommend the following:

1. Identify anomalies. Awareness is the first step. Understanding your hotel’s source markets allows you to benchmark performance.

2. Sort into threats and opportunities. Some of these anomalies will threaten rate integrity while others will reveal potential revenue growth opportunities. Know which is which, and make a list.

3. Make changes. For the opportunities, adjust pricing to capture more bookings. For the threats, share screenshots with offending websites to correct rate disparities, and consider contacting the wholesalers you deal with.

4. Do random spot checks. Keep an eye on source data at regular intervals. This ensures that rates don’t drift out of parity based on the point-of-sale.

5. Share your learnings. Knowing how a hotel appears in a variety of markets is crucial information that can offer insights across departments. For example, POS trends could help your marketing colleagues identify an opportunity to target that region with a direct booking campaign that combats any bad actors. This is a unique POS-based approach to yield management.

6. Plan ahead. The final step is to use these learnings to plan ahead for future contract negotiations. Strong contracts protect against bad actors, and any past POS-based disparities should inform future contracts with channel partners.

Curious to see how Rate Insight monitors POS parity for you? Request a demo today!

We provide user-friendly pricing and revenue management tools to hoteliers and hotel management companies


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