This week, Travel Daily chats with Patrick Andres, Duetto’s Vice President for Asia Pacific, about how his company is reducing hotels’ dependency on online travel agencies…
Q) Duetto is claiming to reduce hoteliers’ dependency on OTAs. How do your solutions achieve this?
Today hotels find themselves working with and, to some extent competing with powerful entities, such as Expedia, Priceline, Google, and other intermediaries. Hotels own the real estate, hire the staff and do the hard work. The third parties disrupt the price and are taking ownership of the customer. The OTA disruption is not new but rapid consolidation has created an environment where this is accelerating.
Duetto offers a Revenue Strategy solution and services to hotels, who find themselves challenged because they are not getting their fair share of the revenue. Distribution and marketing costs are growing faster than revPar. Interestingly, this is evidence by the fact that revPAR across the board over the past 5-6 years has increased by 20%, but the cost of distribution (direct and indirect) is increasing even faster; rather than decreasing. It is completely counter intuitive, because typically when revenue grows, cost of acquisition stay flat or decrease.
What Duetto does is provide a platform and services to enable hotels to price as effectively possible. This includes pricing the room for a future date, for every room type, segment, channel or even to individual customers, by assigning a value to a customer. Based on the value, they will be able to put an individual offer to that person. For example, we know that the consumer shops 15-20 websites to share a room, yet through this process, hotels in general fail to grab a customer. There’s a perception created by the intermediaries that they are better (for example, for discounts, frequent flyer points, etc) even if there is price parity. The hotels have not done a good job of presenting the right price at the right consumer at the right time.
Q) Many hoteliers are concerned by the strength of OTAs; are Duetto’s solutions a direct response to this? And how have hoteliers responded to your solutions?
The Duetto Revenue Strategy solutions help hotel maximise profitability by using better insight to price effectively on all chanels.
Duetto gives hotels the same insights that their distribution partners, including the OTAs have. When determining a price, it takes into account historical patterns, future patterns, weather, competitive pricing, social reviews and most importantly shopping behaviour on the hotels booking engine. This helps the hotel price effectively and convert business better.
Duetto believes that hotels should keep as much of their rates open as possible, but to shrink the differentials. For example, it is possible that on one particular weekend there is more demand; so hotels should issue promotions that no longer commit to a % discount, but say “up to” that % discount; e.g. if the promise is up to 20% yet demand is high, shrink the differential to 10% or 5% even if it is only for one day.
Normally rate parity is from the best available rate – that’s the price you pay with OTAs. But if as a hotel, you undercut an OTA, they will stop selling those rooms or put them on the last page; the only way a hotel can offer a cheaper rate is to fence that price or create a typed quote for example.
Duetto helps hotel increase their profitability by giving them visibility on what consumers are shopping. For example, if the standard rooms are the base, everything moves in parallel. If they are shopping on deluxe suites or more premium products, Duetto will recommend a fixed differential increase to the base price; for example, move it to $75 or $100 from $50.
Q) What kind of impact do you believe this technology will have on the powerful OTA sector?
We believe that hotels shouldn’t go the way of the airlines. The challenge for the hotels owners is that they are most affected; because, despite the fact that they are making money, there is no profit. Without profit, the hotel product will be compromised. Hotel owners won’t be able to afford to build new properties, refurbish rooms, hire enough staff etc. Duetto aims to put the profit back into the hands of the hoteliers.
Q) Hong Kong’s Hotel Icon recently deployed Duetto’s solutions; can we expect any further announcements in the near future, and are you talking to big chains as well as independent hotels?
Certainly. We are currently negotiating with several marquee brands and are working with the Banyan Tree Hotel Group as a case study for the region. Duetto is most impactful to chains of 20-200 hotels; the sweet spot is around 50 hotels.
One of the advantages of working with Hotel ICON in Hong Kong is that ICON will teach HK Poly students the Duetto system. We loved the academic aspect of the account, the ability to teach students a new system, a new concept and to implement new technology.
Q) Which Asia Pacific markets are you focusing on and which do you believe have the greatest potential?
At the moment we are focusing on acquisition of marquee brands across Asia Pacific, specially Hong Kong, Singapore, Southeast Asia and Australia/New Zealand.