Cergy-Pontoise, France – 7 March 2002 – Peter O’Connor, Assistant Professor, IMHI – ESSEC/Cornell University, won the Best Research Award at ENTER’S 2002 Conference.  The study, entitled “An Analysis of the Online Pricing Strategies of International Hotel Chains” represents the first major attempt to understand hotel company’s pricing strategies over electronic channels. Bookings made on five major consumer-focused online travel sites were analysed to establish if logical pricing strategies were being used.  O’Connor shows how the major

Peter O'Connor Oconnor@essec.fr

ENTER is the world’s leading conference on new information and communication technologies in the travel and tourism industries.  Established in 1994, this annual event promotes best practice in IT by bringing together decision-makers from the travel and tourism, technology, media and telecommunications sectors in a series of high-profile seminars, debates, and networking events. ENTER 2002 was convened in Innsbruck, Austria from January 23 – 25 January 2002, with the theme “Multi-Channel Strategies for Marketing, Distribution and Communication”. 

In the Scientific Programme over 100 researchers from 21 countries presented 52 separate papers (available as “Information and Communication Technologies in Tourism 2002”, 525 pp –  from Springer-Verlag of Vienna ISBN 3-211-83780-9). This is a remarkable snapshot of current research findings and priorities in the tourism technology field. 

Peter O'Connor is an Assistant Professor at IMHI. He received his doctorate in hospitality e-commerce from Queen Margaret University College, Edinburgh, and holds a Master's degree in Management Information Systems from Trinity College, Dublin and a Bachelor of Science degree in Hotel and Catering Management from the Dublin Institute of Technology.   O’Connor’s primary research, teaching and consulting interests focus on the use of technology in the hospitality and tourism sectors.  

The study revealed that the majority of hotel brands now use multiple simultaneous electronic channels of distribution, making their products available to a relatively wide audience.  While the use of voice through a Central Reservation Office has fallen slightly, there has been a growth in the availability of hotel companies’ own websites, with 19 out of 20 of companies now making their products available for sale in this manner.

In comparison with earlier published research we see that there has been a major expansion in the use of the Internet by the hotel industry as a medium for direct selling, with an accompanying increase in benefits relative to other, more traditional, electronic channels of distribution.  Most companies offer different rates to customers through different channels.

A large number of companies, however, now have consistent pricing across all channels.  Previous research found that less than 10 percent of companies had consistent pricing and cited the lack of integration between the various inventory systems as a possible cause.  Yet over one third of brands now offer consistent pricing across multiple channels, indicating the recent evolution in the industry’s management of electronic distribution.  

Although no single channel is consistently cheaper, in-depth analysis does reveal a link between the target market and price.  Firstly, lower prices can rarely be obtained over voice channels, irrespective of market segment.  From the data it can be seen that consumers are more likely to find lower prices on hotel chains’ own websites in the economy and mid-price segments.  More upmarket hotel brands are, on the other hand, more likely to quote more expensive prices on their own website than on other channels.  This may be a reaction by the brands at the lower end of the market to the price sensitivity of their customers, or alternatively a realisation that at least some of the cost savings generated by direct selling should ethically be passed onto the consumer.  In any case, it represents a more progressive and realistic pricing strategy than that of the upper-end brands, which in many cases are charging their highest prices over the channel that represents their lowest cost of distribution.

And what are the implications of these findings for the consumer?  Firstly, it is clear that for those with a taste for more upscale products, a given hotel’s own website is not the place to shop, as in most cases better value can be obtained through other channels.  More interesting, however is the fact that, in general, prices have become more or less equal across many of the channels investigated, and thus, by implication, across many other electronic distribution channels as well.

It is well established that time is a valuable commodity in today’s society.  Since the variety of ways a consumer can book a hotel room has become undeniably complex, the cost of searching for the cheapest deal through even a small number of the many consumer-focused channels currently available in the marketplace has also grown dramatically.  Given that this study has found that many of the rates being offered over alternative channels are more or less the same for the majority of hotels, the question must be asked if spending time and energy searching for the cheapest rate is worthwhile?