Hotels are tapping last minute bookings to boost room rates
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Mumbai: More travellers are booking rooms close to travel dates, benefitting hotels that charge more for late bookings, industry executives said. The change in customer behaviour is a relief for hoteliers, who have struggled to raise average room rates (ARR) despite rising occupancy in the last two years.
Last-minute bookings—where customers book rooms within seven days of travel—have surged in the last one year, according to online travel agent MakeMyTrip. In its India Travel Report released on 22 February, it said such bookings have grown significantly, with 58% of all customers booking their hotels within two days before travel in 2016, against 49% in 2015.
As per the report, around 82% of the bookings have an advance purchase window of only two weeks. This last-minute booking is driven by increasing penetration of smartphones and the growing number of young travellers, say hoteliers.
Large hotel chains such as Accor Hotels, Marriott Hotels and Berggruen Hotels are enhancing technology and infrastructure to help predict such last-minute demand accurately and strengthening their revenue management systems to take advantage of it, company executives said.
“Nearly 40% of the hotel businesses in India is getting booked from between 0-3 days (of travel). Today, getting sold out is a bad business. It’s okay not to be sold out 100%, but make sure that you are driving the rates by having availability and driving discretionary demand into the hotel,” said Arif Patel, vice-president, sales, marketing, distribution and loyalty, AccorHotels India.
The French hotel chain runs around 45 hotels in India under brands like Sofitel, Novotel and Ibis. When a hotel, particularly at the mid-scale and economy brand, approaches a ‘sold out’ situation, the company targets about 10-12% of the total inventory getting booked within a period of 24 hours at a higher rate, Patel said.
At premium and luxury chain Marriott Hotels, one-third to one-fourth bookings are made between 3-7 days before travel.
Marriott has activated social media and online channels specially to reach out to those who require rooms at the last minute.
“The overall industry needs to understand that we don’t need to cut price to pick up business. Having a right price is not necessarily low price. If they (hotels) are not able to push (room rates by) double digit, try for single digit rise at least,” said Rahul Puri, senior area director (revenue strategy) South Asia, Marriott.
At Berggruen Hotels Pvt. Ltd, which runs 21 Keys brand of hotels in 17 cities, as much as 40% of the inventory was sold through last minute bookings in the last one year. For last-minute bookings, the company charges 5-25% more than regular tariffs.
“The booking window has definitely truncated from what it was earlier depending on the geography and market segment. So, your grip on the demand on the market needs to be very strong. Unless the revenue manager knows his mettle and what kind of demand am I going to get on steady state basis, he will not be able to change much on the pricing,” said Anshu Sarin, chief executive officer at Berggruen Hotels.
Even if a hotel can get a 5% increase in price by selling 20% of the inventory at the right time, it can still make a significant difference in the overall pricing, she adds. Hotels experts also agreed that with the increasing move towards online and mobile bookings, the booking window has significantly reduced, making room for hoteliers to take advantage from a price perspective.
“Last minute bookings typically are done at higher rates and these allow the hotel to play with its ARRs. Sophisticated revenue and rate management tools and dynamic demand projections have helped hotels maximise their room rates across booking platforms,” said Pavethra Ponniah, vice-president at ICRA, a credit rating agency.