In a previous post I demonstrated the shortcomings in the pricing capabilities of hotel reservation systems. But after posting I thought that someone must be doing something correctly. But who? Could I find any res system that enabled more sensible pricing?
After poking around, I found that the Accor Reservation System (TARS) is better able than most systems to:
- Simplify hotel pricing
- Provide the ability for revenue managers to implement a coherent pricing strategy.
Like my previous entry, the purpose of this post is not to evaluate revenue strategies as much as it is to evaluate the ability of a reservation system to support a coherent revenue strategy. Note also that all conclusions in this post are based on analysis and inference. I have no direct insight into how things work in TARS and neither have I spoken with anyone at Accor.
So, I take responsibility for any and all factual errors in this post.
I tested using two availability searches:
- Sofitel in New York, 11th Aug for 2 nights, 1 room, 2 adults
- Sofitel in New York, 11th Aug for 7 nights, 1 room, 2 adults
As you can see the the only difference in the two searches is the length of stay.
I found the following:
For the 2 night stay: 5 rooms and 4 rate plans were returned, summarized in the following table I created myself.
And for the 7 night stay, 5 rooms, 6 rate plans for the 7 night stay were returned as follows.
(Note: I’ve trimmed the prices to remove the decimals as they are not relevant to the analysis.)
Side Note: The Early Rate (a full non-refundable pre-paid rate for advance purchases) is not offered for a 2 night stay. The absence of the advance purchase doesn’t make sense to me. Why put a length of stay restriction on an advance purchase offer. But fair enough – that was Accor’s revenue management strategy and we’re not here to question a strategy but to analyze TARS’ ability to allow its revenue manager to implement a chosen strategy.
So what do I think TARS is doing well?
Length of Stay price changes enabled without adding rate plans
Typically when a hotel wants to offer a lower average price for a longer length of stay, the reservation system requires the revenue manager to create a new rate plan, which is returned in addition to the base rate plan (often called Best Available Rate or BAR).
In Accor’s case however, for the room only offer there was no need to create new rate plans to handle different price points for the longer length of stay. The average rates or the base rate plans decrease based on the length of stay. A 7-night stay costs 29 dollars less per night than a 2-night stay regardless of room type.
Sensible package pricing
In my previous post I pointed out how package pricing is often out of whack when presented alongside room only promotional rate plans. This is because the room component of the package does not discount in synch with the room only promotional rate, and the result is that the package rate is too high given the value of the extras included in the package offer.
With TARS, however we can see that not only does average daily rate decrease in the room only rate plans as the length of stay increases, but the average rate also decreases in the package rate plans. And to ensure consistency, only the room component is discounted in the package rates. The Business and Haute Cuisine rate plans for a 7-night stay cost $29 and $38 less, respectively, than same rate plan for a 2-night stay regardless of the room type.
Differential pricing between room types
The price difference between room only and package rate plans is consistent across room types – this makes sense because the extras that are part of the package (non-room items) should not cost more based on which room type is reserved.
Pricing package components by length of stay
The price difference between room only and package rates is also consistent across length of stay. This makes sense because the hotel is only discounting the room component for longer lengths of stay.
However it would also make sense if the extras were also discounted for longer lengths of stay, if the reservations system had the capability to price extras based on lengths of stay. And it turns out that it can! The per day combined price of daily breakfast, daily three course dinner and a Zagat restaurant guide book falls from $50 for a two night stay to $41 for a 7 night stay.
Number of price points
Lastly, the 19 and 26 price points returned for the two different lengths of stay are far fewer and more manageable than most other systems would return in order to handle a similar strategy.
But yet, there is room for improvement
Up-selling reservation policies
Accor has three clearly distinguished rate plans which differ by their cancellation policies:
Early Rate (Non-refundable), Smart Rate (must cancel within 72 hours), and Premium Rate (must cancel within 24 hours). Accor has done a job of creating clear and consistent guarantee policies.
Accor’s mistake, however, is in returning each combination of these guarantee policies with each rate plan. This complexity adds 5 and 10 of the price points respectively in the 2 night and 7 night stay searches above. A better approach would be to offer a standard guarantee policy on each rate plan and offer alternative policies once the guest has selected a room-rate. This would result in a reduction to 5 price points (one for each different room type) for both the 7 and 2 night stays
By simplifying per above Accor could reduce the price points to 14 and 16 for the 2 and 7 night stays respectively.
Handling multiple bed types within a room type
Accor creates multiple room types to account for each bed type at the hotel. This is a needless complexity for its revenue managers and guests. Accor should prompt guests to select a bed type at a later stage – after the rate plan and room type has been chosen. Accor could therefore merge the Superior room with two twin beds with the Superior room with 1 queen bed, leaving us with just a Superior Room.
This would further reduce the price points to 12 and 14 respectively.
Clarifying the Extended Stay Rate
Lastly, let’s look at the Extended Stay Rate. This is pitched as an upgrade offer available for the 7-night stay. “Extended Stay Rate” is not a good name for the offer since it does not change price based on extending the stay. Secondly it is not available on the Luxury Room, whereas it easily could be since reserving the offer would not impact the inventory of the Luxury Room as the guest is given the Junior Suite. Lastly, the Junior Suite should be priced at $386 per night for the 7-night stay (the price it can be reserved at by availing of the Extended Stay Rate available for the Classic and Superior Rooms.
This would bring the number of price points to 12 for both the 2 and the 7 night stay and would look something like this:
11th Aug for 2 nights, 1 room, 2 adults
11th Aug for 7 nights, 1 room, 2 adults
Note that the policy options available for any rate plan and bed type options available for any room type can be offered after the initial room-rate has been chosen. This would be much easier for consumers to understand leading to higher conversions.
So while Accor is doing things better than most, I have still not found a booking product that comes close to RezTrip 2.0!
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