Why London's hotels are selling rooms secretly
Asa Bennett talks to Hotwire.com director Tara Stangel about London’s hotels and how Hotwire is expanding
“Opaque selling”? What on earth is that?
Whatever it is, Hotwire’s acquisition in 2003 for $663m shows there is serious money to be made in it, as it’s the company’s main activity.
Basically, “opaque selling” is an extra shot of mystery to your normal process of flogging stuff off. In Hotwire’s case, that stuff is hotel rooms. The consumer has no idea where a room is, but they know one thing - it’s a fantastic hotel at a knock-down price.
Hotwire is helping hotels fill up their buildings with bargain-hunters and punters. The firm has rolled out from filling up airlines to hotels, rental cars and travel packages.
I caught up with Hotwire director Tara Stangel to find out more.
How has Hotwire been weathering the economic storm?
London and the rest of the UK have faced some difficult times in recent years due to the economic downturn. The Olympics had a big impact on hotel bookings but we found that there were still a lot of opportunities for hoteliers and consumer alike; we were able to offer a five star hotel in Mayfair for £90 a night at the height of the Games. There has been a shift to hotels investigating ways of increasing revenue and driving sales. Unfortunately, many forms of discounting can often have a negative impact on a hotel’s brand, which is why Hotwire’s opaque booking model has had such success.
Hotwire has been helping hotels to sell their unsold rooms through the opaque model, allowing them to easily generate guaranteed business. Unlike other online travel booking sites, once a hotel is booked on Hotwire it is non-refundable. This means hotels do not have to deal with people cancelling at the very last minute and instead get guaranteed revenue. Hotels have recognised this model’s value for over 10 years in the US and now it’s becoming popular globally. So far, more than 30,000 hotels have joined Hotwire and as such are able to safely discount rooms without openly advertising these low rates, as the name of the hotel is not revealed to the customer until after booking. This allows hotels to sell rooms that would remain unoccupied without compromising their brand, and customers get these rooms at deep discounts – a win-win situation for both.
How is Hotwire introducing new customers to brands they haven’t experienced previously?
When customers come to Hotwire price is typically their main driver to booking a hotel, not necessarily the brand name. They have a specific budget in mind, that on retail sites might put them in the 2* or 3* hotel range. However, once they begin searching on Hotwire they quickly realise that by foregoing the hotel name before they book [they are shown amenities, general location, customer reviews and star rating], they can typically score a deal that allows them to upgrade their booking to a 4* or 5* hotel at the price they are willing to pay, if not less. This means that many hotel brands, that would typically not attract this customer segment, are now accessible to them. And often, once these customers experience these brands, their preferences can change to being brand- or star-level loyal.
Do only 3/4* hotels use opaque selling? Would a hotel like the Ritz use it as much as a hotel like a Travelodge?
Hotwire appeals to the interests of all hoteliers, rather than those in a particular star rating. Hotels have a fixed overhead and need revenue, so they can use the opaque model as a yield management tool that’s beneficial for both themselves and customers, whether a 3* Travelodge or a luxury hotel. In a down economy, like we are currently in, we actually see an increased number of high-end, 5* hotels using Hotwire, as many consumers are running on a tighter budget and are not willing to pay full price for luxury accommodations.
Why do hotels advertise with an opaque seller like Hotwire and not on their own website?
The opaque model creates a mini marketplace between hotels and customers that allows the hotel to sell rooms to a very price-sensitive customer segment they typically cannot reach via retail sites or their own website. By selling on Hotwire it does not mean they have to forgo selling on their own site, it’s just a new channel to help them increase their occupancy. And since they control when they load their inventory and at what rate they offer the room, they feel very safe using us as a resource.
What are Hotwire’s global (and UK) expansion plans throughout 2013?
Hotwire is currently global, with 3,200 markets now online. Last year, Hotwire added an extra 585 hotels in Europe, and we anticipate the growth of opaque travel to continue in 2013 when we launch several more regional websites across Europe, Asia and Latin America. Throughout the UK we are currently looking to increase the number of hoteliers who are part of the opaque model.
How are London’s hotels doing? How do you expect them to do?
With more than 140,000 available rooms in the London market, we will see healthy growth in the budget sector as hotels seek occupancy through the safety of our opaque model. The hotel landscape will continue to be more competitive with offers and amenities as well as ease of booking. Within the last 28 days, we’ve seen over 49% growth in our room nights as average rates moderately grow within 7% from last year.
What’s the busiest time of the year for Hotwire?
We typically see an increased number of hotels offering rooms on our site during a destination’s off-season or right before an event where demand may have not met expectations.
How does London compare to the rest of the UK for Hotwire?
London is an extremely important part of the Hotwire.com global business as London has more than 30 million travellers visiting every year.
We currently work with 302 hotels, both large and small, in London and are keen to continue to grow this number.