Online travel agencies are digging their fingers further into the hotel industry. One of the latest disrupting features comes from Booking Holdings-owned Agoda and its Mix and Save option, which it hails as a win for budget-conscious travelers. It could also be a loss for hotel operators.
The premise is simple: Customers can split their reservation into multiple bookings, across multiple room types, in order to secure the best overall deal. In other words, a guest can book, for instance, a weeklong stay at a hotel, but move their room once, twice or more to optimize the best rate available. It’s a novel idea to be sure (although if you are like me, unpacking, then packing again sounds about as comfortable as a root canal), but it’s also a predictable headache for the day-to-day business of running a hotel.
For hotels, the program promises to enhance inventory optimization, but the question is: at what cost? Artificially shortening the average length of stay can have severe consequences on profitability. Typically, hotels want to have longer lengths of stay because it allows them to have economies of scale—one guest staying six nights is cheaper than six guests staying one night each. In this case, for the guest, it might be a six-night stay altogether, but for the hotel it's three bookings for two nights, or three check-ins and checkouts in different rooms.
Although a program like Mix and Save has the potential to actually bolster occupancy, it could simultaneously have a pernicious impact on rate, which is a hotel’s most profitable avenue of growth and where a hotel would rather draw its RevPAR growth from because higher occupancy means higher operational costs.
Who better to argue the attributes of a feature like Mix and Save than an actual hotel operator? We spoke to Chris Green, Chesapeake Hospitality’s chief commercial officer, to gather insight into this trade-off.
Here are the five issues that every hotelier must take into account when considering hacker-rate programs such as Mix and Save:
The above considerations by no means imply that hotels shouldn’t participate in the Mix and Save program, although those who find the program onerous and damaging can elect to not display on or even remove their rates from the Agoda site.
Hotels are a local business. The objective is to measure the impact of such a program on your hotel’s bottom line. Assessing a new program based solely on its ability to enhance occupancy optimization is not enough. Every strategy implies a trade-off, and understanding the costs associated with the promised benefits is fundamental toward making profitable decisions.