Q&A with Jennifer Kim, part 2: rate parity across blended categories

Q&A with Jennifer Kim, part 2: rate parity across blended categories

This article continues our series of interviews with revenue management professionals exploring the challenges and opportunities of rate parity.

jennifer-kim-featured-imageIn the first part of our interview with Jennifer Kim, Director of Revenue Management for Cycas Hospitality - which manages 14 properties in both the full-service and extended stay segments - we set the scene.

Continuing our in-depth investigation, we picked up our conversation with Jennifer, probing further into the unique revenue management dynamics and rate parity concerns of the company’s cross-category blend, from exchange rates to wholesalers, independent hotels and smaller chains often deal with a different set of challenges than larger brands.

We started with a question on one of the key differences between Cycas's set-up and more standard hotels.

Are serviced hotels and longer-stays actually more complicated on the rate parity front than your average hotel, which doesn't have all these agents and relocation services?

“As a revenue manager, it's equally very difficult - but hotels have become savvier. You have better technology to protect yourself and you look at your parity [monitoring solution] like OTA Insight, where you can catch a lot of that information and you can fix it instantly.

“This is where we use OTA Insight on a daily basis to see where the parity issues are. And because it lists the problem websites and has hyperlinks, it's so easy for us to go and look at those rates and see whether or not that issue is can be resolved quickly.

“In an extended-stay world, when you lose extended-stay bookings due to parity issues, and especially if there's a commission model on the extended stay agent-side, your loss is greater and it's longer because you don't lose out on just one or two nights, you're losing out on potentially a 30-night booking.”

Can you do anything to fix it after the fact, when the booking is already done? Is there any way to rectify it or is it mostly about realising the parity-related mistake and preventing it from happening again?

“We would love to fix it. It's down to the reservations and sales and revenue teams to work together on that rate parity. And it's a rate integrity thing that we should really communicate better from our side. Once a guest is booked, we would never take that booking away from the OTAs or from the extended-stay agents because we don't want to damage the relationship as they are important partners for us.

It's a good example for the hotels to come back and regroup to focus on the rate strategies and what the rates are in the system. It's a communication that we really need to work together on.”

With these extended-stay agents or relocation agents, it seems that the loyalty is landing on these brands rather than the hotels. What are you doing to pull bookings away from them?

“As a company, we don't participate in Booking.com Genius or Expedia VIP programs. We do have member rates and book-direct rates that are available on our website to guarantee the lowest rate promise to our customers. We have closed user group rates, like giving out special codes or joining one of our hotel loyalty membership schemes. We make sure that when the customer lands on our website, they feel like they have a better deal.

“Our public rates will be in parity with Booking.com or Expedia. But as soon as you come to our property website via our branded website we make our member rates very clear, and on our independent website we use the Triptease widget to help us push our book-direct promotions and codes that are not available on other OTAs.

“When you have an independent hotel we need to work harder than an international branded hotel to convert our guests. For example, at our independent hotel our return guest ratio has been very low due to the business mix, so instead of offering a point-based or monetary value loyalty program that can be only redeemed at our hotel, we decided to give a value-add or a discount at the time of bookings to convert more people to book direct. For example, we offered free breakfast when you booked direct. This way the guest can be instantly rewarded.

If you could only recommend one thing to drive direct bookings and therefore improve parity, what would it be?

“The most important thing is make it simple and show what guests can get now when they book direct: offer a discount when they book direct, additional discounts to return customers and get free breakfast at the hotel. We have an extended-stay property at which guests receive a pair of socks that the hotel designed to help them feel like they're at home. It doesn't always have to be a price point; sometimes it's the value-add that people really appreciate at your hotel.”

Let's talk about some of the specific rate parity problems that you face. How do local tax issues impact your operations?

“We have hotels in Amsterdam and so they have a VAT of 6%. But also they have a 4% city tax, paid by the guest. On our website, when we quote for the final estimated cost, we would put the total cost of the hotel including the VAT and also the city tax.

“Sometimes third-party websites put the VAT in but only write the city tax in a written description. Ultimately, they will show a total price that doesn't include the 4% tax and guests automatically think that the OTA is cheaper. When they come to the hotel, the 4% has to be paid and that gets added on to their own total bill - which becomes a surprise for them.

“We could quantify it by how many people get surprised at checkout that they've already paid the OTAs without knowing they have to pay the city tax. We do get a few that we catch on OTA Insight each morning. Obviously, the OTA apologises and it usually gets fixed later or someone just tells us there is no fix at the moment. But there are reoccurrences, and at times, it happens over and over again. It does become a time-consuming job for the hotels.”

Another challenge is exchange rates. How is parity affected by exchange rates for guests that pay in their local currencies?

“This occurs especially with advance-purchase rates. When an International traveller wants to know how much a room will cost them in their local currency they use the hotel website currency converter. However, the hotel cannot guarantee the exact amount to the guest until the payment is taken on the hotel payment system and has the technology available to charge the customer in the local currency. Some credit card machines can only tell you the local currency of the hotel.

“For example, Expedia can sell rooms in the local currency online and collect the payment directly from the guest to guarantee the exact amount the guest will be charged. Sometimes, due to the better exchange rates that Expedia is able to secure on their website versus our property website exchange rate converter, we can lose bookings. Obviously, we can't really measure how much business we lose on our properties. However, we have had a few guests who called us up to ask the question.

“That's a technology problem that we've not been able to quantify but I do believe it's an issue. Sometimes OTAs do price better, in terms of like a dollar or two, just because of the exchange rate difference. That's something that we do need to improve with our technology but there will be guests who see that and we don't actually know. And that's tough for them because they can't compare rates as easily.”

What other actions do you use to rectify any issues, whether malicious or not? When it comes to rate parity, what are the strategies you use?

“Working with different brands, such as Marriott and IHG, we have got approved distribution lists and support if we need it. In addition, we do try out new distribution sites in our independent hotels but we are very conscious when we do make a decision.

Once we are connected we try our best to work with them closely. Most of the issues that occur at the beginning are quickly fixed. We have had wholesale and OTA partners that we had to cut off in the past as they caused parity issues and they didn’t know their rates were being sold on different sights. Especially if you're in a very popular location, that's not something the partners want to lose out on as well.”

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Do you ever feel that there's a demand channel that is too strong, even if they are bad actor, that you have to keep it on? Or do you try to make sure you keep your channel partners honest?

“As much as everyone thinks we talk about OTAs as the bad guys, you know what? They're not always the bad guys. They have a really important place in our distribution. We just need to be smarter in how we leverage these channels now.

“We're spending more resource and marketing costs to get people through our direct campaigns. But sometimes your own marketing can't reach the same number of people. For instance, Ctrip has 60 different products on their Chinese site. 70% who book via their website are Chinese-speaking people, as their products aim to satisfy the Chinese traveller's needs. These customers are not just from mainland China but also internationally located from places like the US and Singapore. How would an independent hotel be able to reach those customers if we are not on Ctrip?

“OTAs are still very important for us. It will get smaller as we put more effort into direct bookings but for some locations that OTA just has a better handle of it. What we need to do is actually revenue manage our inventory and rates depending on business needs. By understanding the lead time of each channel, the types of room being booked and the customer, you can create strategies for each OTA and manage them to get the right profit and the right mix for that hotel. That is something we would have to manage as revenue managers.”

How do you approach wholesalers?

“We still do wholesale, priced dynamically. They are in a similar model to Expedia and Booking.com, where their rates are connected through a channel manager. It's a percentage off or at rate parity. They're all equally important for us, but on a property level we need to decide whether or not we want to have that channel open for that day or can we do it without it? And that's something revenue managers would do on a daily basis.”

What are some of the most important parts when it comes to negotiating your OTA and wholesaler contracts?

“When you're an independent hotel, it's really hard because you're one hotel, and Booking.com and Expedia are such big dogs that you're like, do I have the power to negotiate?

“There's not a huge amount of room to negotiate with these contracts when you come as an independent property. I feel for every independent hotel, small serviced apartment chain or extended-stay property, because they come to you with the contract and the commission and most of the time it's a case of 'take it of leave it'.

“In the world where we live right now with OTAs, it's better to work with them and have visibility on these websites. You could use them for your longer-term strategy. It's up to the hotel to be smarter at how to actually use them. Protect the days when you don't need them, and close those channels when you can get direct bookings.”

One last question. Whose job is it then to monitor rate parity?

“On the property level, it's our revenue team who looks after it, because they'd do your rate loading and pricing set-up. So we go into OTA Insight every day to refresh and review the rates. And also there's a parity tab that lists the dates with issues and which website caused them. So predominantly our revenue manager would be responsible for it.

“Your reservationist, while they're on the phone or an email, there might be someone who says hey I saw this rate online, can you match it for me? Then that's something that the reservation person can flag up to your revenue manager to investigate.

“There are times where there are system errors. Thankfully, we have fixed it in time before we had more bookings through that channel. We would actually match that to the guest to say okay, you know we can do that for you because if that rate is available and bookable online to guests, we're only going to end up paying that commission if that guest books through it.

“We actually reward the guest to just say thanks for bringing it to our attention, here's a free breakfast for your stay or loyalty points.”

Sounds like you have a very good approach as to each individual situation deserving its own approach generally and as regards rate parity. That's hospitality, right?

“Absolutely. We believe in outrageous positive service at Cycas Hospitality. It's actually acting in a way that the guest doesn't expect. We will give that person a reward to say thank you very much.”

Part 3 of this interview has now been published.

For a deeper dive into the state of rate parity, access our on-demand webinar on the current state of parity in North America and Europe.

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