Internet undercuts hotels on price

March 24, 2004 |

A survey found 58 per cent of the cheapest room rates in the UK were available from an online travel company when compared to the price quoted by the hotels direct.

According to a survey issued by professional services firm KPMG, hotels are offering a range of different prices for a room depending on which booking method a traveller uses. This lack of pricing control is due to the hotel sector’s failure to manage its own inventories, says KPMG.

The survey found 58 per cent of the cheapest room rates in the UK were available from an online travel company when compared to the price quoted by the hotels direct for the same room.

Online bookings are growing in popularity with 14 per cent of room bookings in the United States generated from the internet in 2003. This is predicted to grow to over 24 per cent of bookings by 2006.

Nick Pattie, director of hotels at KPMG’s Travel, Leisure and Tourism practice said, “The ultimate goal for hotels is to encourage customers to book direct. In practice, this is proving difficult as third parties offer cheaper quotes. Customers will therefore continue to use these indirect channels until they are confident that hotels’ best-price guarantees deliver what they promise.”

“The Global Hotel Distribution Survey 2004” researched room rates from over 310 hotels and across 13 countries. It reviewed hotel room rates offered to customers via direct and indirect distribution channels (i.e. direct calls made to the hotel, hotel website, hotel central reservations, online intermediaries and corporate agents) across USA, Canada, UK, Western Europe, Eastern Europe and the rest of the world.

Only 2 per cent of hotels showed consistent pricing across all direct and indirect booking methods; and only 15 per cent of prices were consistent when booking through direct booking channels.

Regional variations in pricing are also highlighted in the findings. The USA hotel industry has the greatest control over pricing in terms of consistency and price differences. Just over ten per cent of prices were cheaper with online agents’ sites. But a corporate traveller in the USA is likely to get better rates by dealing with a corporate travel agent.

Eastern Europe has a relatively high level of bookings via direct channels due to the relative lack of online travel sites or lack of rooms inventory offered by those sites that are available.

The internet is most likely to offer the best deals when travelling across the UK, Western Europe or Canada. Hotels in these regions face competition from a large selection of third party travel sites such as Expedia, Travelocity and late deal sites like Lastminute.com. whereas in the USA, hoteliers are tending to release discounted room rates to corporate travel agents as opposed to online agents.

According to Nick Pattie, hotel groups are trying to regain and retain control over their inventories. For example, Hilton International is offering a lowest-price guarantee in a bid to boost direct bookings. It wants to increase online sales from 4% to 20% by 2007. If a customer finds a cheaper deal, Hilton will match the deal and offer a $50 refund.

Nick Pattie added, “Most major hotel brands are announcing best-price guarantees to woo back customers from the online agencies; but their booking or distribution management process needs to be more effectively managed and controlled because our survey finds this guarantee is rarely fulfilled.”