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08/05/2022

Personalized Prices: The Next Step in Hotels’ Online Presence?

For a long time, hotels have been educated on the benefits of personalized offers. Algorithms can not only can personalize offers but can also pricing.
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a man sitting at a desk in front of a window

Today, hotels are so ubiquitous that we rarely think deeply about them or their origins. But their history goes all the way back to ancient Greece.

Naturally, hotels started off with very little technological support. However, in the course of their long history, hotels have been impacted by several technological breakthroughs - and in such diverse areas as transportation, energy, communications, and networks. One of these major breakthroughs was the Internet, which brought the web and then Online Travel Agents (OTAs).

So, what will be the next chapter for hotels, in terms of technology evolution?

The Evolution of Hotel Technology

All technologies need a distribution network or system. With electricity, for example, we have the power grid. In its early days, only a few companies built that grid because it was hugely complex and required high levels of expertise that weren’t widely available. We call this the early adoption phase. In the field of hotels’ online distribution, the OTA’s were the pioneers who built the distribution grid. They made the technology accessible for hotels, opening up to them the world of online distribution. All hotels needed to do was to connect.

As technology continued to evolve, access to the grid became simpler and we entered the adoption phase. While what we call Web 2.0 spread, hotels realized that their OTA distribution strategy had spawned problems that needed to be addressed: Their brands were unprotected and the cost per reservation was as high or higher than traditional offline sales channels. Worst of all, hotels were becoming increasingly dependent on these players.

At this point, the major hotel chains started to invest in designing their own tools for search and booking engines. Although web infrastructure was becoming easier to use, it was still far beyond the reach of most hotels. Until innovative tech providers identified the gap in the market and started creating tech solutions to help independent hotels level the playing field.

Following the economic downturn of 2020, hotels have realized that, more than ever, they need a robust strategy for direct reservations, with their own website and booking engine, thus guaranteeing they are not dependent on third parties for their business.

According to market data from GuestCentric’s portfolio of hotels, the brightest star of the pandemic was undoubtedly the direct channel. Throughout 2020, hotel direct bookings grew significantly and consistently outperformed OTA giants Booking and Expedia.

This increase was no coincidence. When flexibility and superior customer service were most needed, the OTA’s weren’t there. Online marketing campaigns were shut down, and guests revealed a clear preference for communicating directly with hotels rather than through OTA’s.

Hotels were ready for this shift in demand, implementing direct reservations strategies that ultimately paid off. Without ads from OTAs and other metasearch engines, hotels with great websites started appearing as the first result on Google’s search engine.

The Age of Artificial Intelligence

Artificial Intelligence (AI) is now all the rage and changing the way users interact with technology, delivering more efficiency and improving the user experience. Over the past decade tech giants have been working on infrastructure and services to make this technology more accessible for developers and tech companies. I believe we are now in the adoption phase.

From an independent hotel perspective, now is the time to, once again, embrace the challenge and opportunities of new technology, by riding the next technological wave. For we are in the age of AI.

Personalized Prices

AI is all about data. Many studies have been published about online personalization and how it helps sell more or increase revenue through cross-selling or price tuning techniques. But what does that really mean in practice, for hotels?

Not all hotel guests are the same, and not all consume the same products and experiences on property. If online data points like traffic sources and clicks provide information about the guest's intent, the data on the hotel CRM is also compelling, because it’s a more robust indicator of what the guest really wants.

By combining data from your CRM with your guests’ online behavior, you can build truly personalized offers for guests. Not only can offers be personalized, but algorithms can also build personalized pricing. With AI, we can have real-time price personalization on hotel booking engines.

Casino hotels provide a good example of how to combine data from different sources to provide personalized pricing according to the guest profile. If John, who is not a player, is booking a room to just enjoy a fun night out at the casino with his friends, he will have a different price from his good friend Martha who is a regular player at the same casino.

But this doesn’t mean that every regular player has the same price as Martha. It doesn’t even mean that Martha will have the same price every time she books at the hotel. The more Martha visits the hotel, the more the algorithm knows about her and will digest this data together with hotel data like occupancy, weather, events, and many others to give Martha the price that best fits her profile at that specific time.

Whether you’re analyzing clicks to see the guests’ intent or diving into your CRM to see what products guests actually like, you can use these metrics to personalize prices for your guests. But remember, the more information you have about your guests, via their journey through your website or the offers they pay for, the better you will be able to personalize the guest pricing.

It is important to say that personalized it’s not synonymous with lower price. The objective is to increase the conversion rate of your website and booking engine by providing the guests with a price that is aligned with their expectations.

The road ahead is exciting. AI is now commonplace in many aspects of our lives, and in ways we take for granted, including our apps, cars, and even home appliances. This phenomenon will become widespread in hotels' digital presence, throughout the very different steps of each guest’s online journey.

Now that hotels own their online presence, it’s time to level the playing field again, by moving the goalposts and adopting technologies that are already used by OTAs. Once again, the distribution network is expanding - you just need to connect.

 

 

About the Author

Sergio is the Chief Technology Officer at Guestcentric Systems. A Dreamer and Software Engineering expert, he specializes in deploying Hospitality and business-related applications, particularly ERPs. He started working in software in 1999, first as a Developer and later as a Systems Analyst. Over the years he has been focused on the development and deployment of large industrial applications like ERPs and production planning software.

Sergio started developing web applications in 2004, predominantly with PHP and Javascript. In 2010 he founded his own startup focused on web-based veterinary software and later embraced the travel industry. In 2012 he joined Guestcentric Systems as a Senior Software Engineer, where he has been instrumental in both building and leading teams in the deployment of solutions with great user experiences.