Why price transparency is vital for boosting hotel bookings

hotel booking

The internet has completely changed the way people book and pay for their holidays over the past ten to 15 years. Statistics show that 148.3 million travel bookings are now made via the web every year, accounting for 57 per cent of all reservations made. Hotel bookings are undoubtedly a huge part of that. However, online conversion is a huge issue for hotel marketers, as many more people are looking at potential accommodation than actually go on to make a booking with those properties.

Indeed, a poll by SalesCycle.com discovered that 81 per cent of travel industry website visitors leave before completing their booking, even though 86 per cent of respondents typically make their travel bookings online. What can be done to prevent this level of dropout and avoid unnecessary lost revenues?

The price needs to be right

Of course, a large percentage of part-bookings that people abandon come about because of unavoidable factors. For instance, 39 per cent were either just looking or wanted to do more research, suggesting they were only testing the water and probably weren’t ready to book. A further 21 per cent needed to check with other travellers before going ahead and nine per cent had technical difficulties or lost their internet connection. But 37 per cent of those polled abandoned their booking because they thought the price was too high or they wanted to do further comparisons. Importantly, 53 per cent also ditched the transaction when they were shown the total price of the booking, which indicates that cost is very important to consumers when it comes to looking for hotel deals online.

What’s a hotel to do?

This can feel frustrating for hotel marketers, since it can be difficult to always offer the cheapest price when there are so many competitors out there. However, it’s essential to highlight price transparency at this point. Holidaymakers aren’t always looking for the very cheapest deal they can get when it comes to hotel prices – they simply want to know upfront how much their trip will cost, feel they are getting good value for money and not perceive that they are being tricked by the brand they’re looking at. Importantly, 87 per cent of the respondents to the SalesCycle.com research said they would consider returning to the booking they had abandoned, with a third saying they would be prepared to do so on the same day. It is possible to recapture that dropped-out revenue – but the best chances of doing so involve being completely transparent from the start of the transaction.

Transparency pays off

A study by Harvard Business School on price transparency discovered that consumers are more attracted to brands when they voluntarily disclose their costs, with those involved in longstanding relationships with said companies just as likely as newcomers to respond favourably to this technique. Indeed, the research showed that transparency only fails when prices become so high that they are perceived as being completely unreasonable when compared to the market norm (and when the brand makes it clear that their markup is significantly higher than its competitors). It might seem counterintuitive to publicise a price if a hotel knows it isn’t the cheapest on the block, but transparency actually works in the seller’s favour by protecting buyers from questionable prices and ensuring they know how the cost structure works. From the buyer’s point of view, it makes it easier to compare pricing options and get an idea of how much they can expect to pay for a hotel in a certain location at a certain time.

Tips on ensuring price transparency and boosting bookings

For hotel marketers who fear losing out on the battle for low prices if they make their prices clear, there are some things that can be done to lessen the chances of holidaymakers dropping out of transactions.

They include:

1.    Check up on the competitionWe’ve mentioned above that there is no need to have the very cheapest hotel, as this isn’t what guests are always looking for – they might want something really luxurious and be willing to pay accordingly. However, the Harvard study showed that nobody wants to feel ripped off, so do some research on your nearest, most similar competitors. If they’re all charging significantly less after things like temporary offers are taken into account, it may be time to tweak your prices to become more in line with theirs.

2.    Get some details early onTry to get permission to email or otherwise contact potential holidaymakers as early as possible in the booking process, perhaps by encouraging them to set up an account. This way, you can email them with offers and seasonal low prices even if they drop out later because of the price.

3.    Emphasise your valueA Cornell University study found that the best way to beat perceived unfairness in pricing without having to lower prices is to improve pricing methodology. That means emphasising the value of what you’re offering over your competitors, as guests are more likely to pay more for a room if they feel they’re getting a better deal. Show off the room’s features and added extras – and make it clear what they could have done to get a better deal next time (e.g., by demonstrating demand, showing prices for ‘early birds’, etc).

4.    Don’t be tempted to hide other costsIt may be tempting to knock off your booking fee and things like VAT, surcharges and other hidden costs when publishing the cost of your hotel rooms, but don’t do it. A price that suddenly goes up when the consumer reaches the payment page is a surefire way to lose the booking. Be candid instead.Price is undoubtedly important to many people when they look to book hotels – but it isn’t the be all and end all, and by ensuring cost transparency, hotel marketers should be able to reap the rewards.