HotelTonight, the San Francisco mobile booking startup, is encouraging its users to procrastinate with their hotel bookings until the last minute.
In a new feature, its app is previewing the “starting from” rates it expects hotels will charge for same day bookings over the next week.
Imagine a user is thinking about visiting New York City this weekend. On, say, Tuesday he or she could open the app, click on a 7-day calendar, and preview the “starting from” rates expected on Saturday.
The messages also note events taking place in town, such as a conference, a stadium concert, or a citywide marathon.
The feature debuts first on the company’s iPhone app for nine major US cities: Chicago, Dallas, Las Vegas, Los Angeles, Miami, New York City, San Diego, San Francisco, and Washington, DC.
Shift in direction?
Hotel revenue managers might ask themselves: Is the new feature meant to deter users from booking ahead on another channel?
If so, some revenue managers may worry that HotelTonight could be laying a brick on the path toward cannibalizing their sales from advance bookings.
HotelTonight insists that the new feature will bring people into the market who otherwise wouldn’t have risked a last-minute trip.
To this point, the company notes another aspect of the feature that supposedly helps to accomplish this: merchandising.
Says the startup:
By offering destination-specific promotions, packages and events, the feature is meant to inspire more people to book last-minute and could draw in new guests who might not otherwise have booked a hotel that day.
HotelTonight says it can coordinate with several hotels to offer thematically similar packages, such as a Valentine’s Day one that includes complimentary champagne and in-room massages, across several brands.
Citywide deals on Valentine’s Day or Black Friday may encourage some people to practice what you might call “planned spontaneity”.
But the citywide merchandizing efforts aren’t going to be a weekly feature, at least not at first.
Some revenue managers may ask themselves hard questions.
Is the type of person who is opening HotelTonight’s app to see if there might be availability this upcoming weekend a truly “new” customer in the market?
Or might the type of user who checks rates in advance be primed to book and is merely deciding when and where?
If the latter is true, the notifications could partly begin to cannibalize a hotel’s customer base across channels, unless hotels took action.
It would be left up to the property to turn last-minute guests into loyal repeat direct visitors through their own clever engagement. How tough might that be?
The answer is, pretty tough.
Still, many of the 10,000 hotels worldwide that are participating with HotelTonight may like their chances and keep playing the game.
Given that the average occupancy rate is 60%, hotels have lots of inventory to offload at the last-minute, at a quite low variable cost (housekeeping; administration) and at a potential for ancillary sales (room service; minibar).
So the move might not undermine HotelTonight’s model, which continues to be same-day access to remnant hotel rooms that would otherwise have gone unsold after time runs out.
In other words, the new “Look Ahead” notices may turn out to be just another minor effort to increase conversions of expiring inventory.
CEO interview
Tnooz spoke with CEO Sam Shank by phone. His view is that the forecasts amplify the long-standing brand proposition.
“We’re always hearing from some people that they’d like to try us on an upcoming weekend but that they’re worried there won’t be availability.
We’ve built these messages to assure them, based on our internal predictions, that there will be rooms at affordable rates.
We always have a room at each of our locations. If we start to see an unexpected increase in demand, we can have our operations team get more properties on the system.
The new Look Ahead messages can better communicate that idea to users.”
Shank isn’t worried that his company might issue a mistaken prediction and that users might get angry.
“We wouldn’t release this unless we had a high degree of confidence in the models we’re using.
We understand local dynamics. We’re mapping the demand curve with our sophisticated models.
Our actions are actually modifying the room demand curve across lots of locations.”
Some context helps to explain why:
To upload inventory, revenue managers use HotelTonight’s extranet, filling only two fields — the rate and the number of rooms.
The uploading takes place in real time, meaning that an hour doesn’t go by before the data percolates through the system, which Shank says is common in other systems.
The startup provides each hotel with guidance about what rate it should offer for revenue optimization.
The guidance suggests what the market-clearing rate will be for the rooms, complimenting a hotel’s own revenue optimization software.
A note about the extranet: If a hotel is working with a channel manager or a global distribution system, the startup can provide connections by those ways instead.
Company update
Moving on to other topics, Shank dismisses talk that the company might be diluting its brand promise by having recently added hostels in Europe and chain accommodations in the US.
Originally the app only listed properties that were three-star and above, to ensure cachet.
Boutique properties, like The Standard Los Angeles could rest assured they weren’t competing horizontally against all lodging options, as if their product was a generic commodity.
Shank says:
“The brand promise has remained the same: the right hotel for you at the best value on demand.
Early on, it was more about independent properties.
But as we’ve grown in markets where there are less independent hotels, we’ve needed to tap into the best available properties across a range of price points.”
He also doesn’t worry about Google becoming a rival, given the search giant’s recent licensing of metasearch technology from Room 77.
We don’t see Google as a competitor. It has been a fantastic partner of ours on the Android side and on advertising side.
I don’t have any concerns about our relationship.
The company also defends its unconventional hub-and-spoke approach to its organization. It concentrates its workers in its San Francisco and London offices — rather than dispersing its staff across many local operations, as most other online travel companies do. Says Shank:
Having everybody centralized ensures that there’s consistency of message and culture. That’s been an important differentiator for us.
We want to be really defining clearly our mission and values, starting from what we look for in job candidates.
Another change: Last autumn, HotelTonight shifted the hour at which inventory becomes available to 9am, from a previous noon start.
A traveler waiting for a flight in San Francisco at 6am, for example, can now book a room in New York City as that city “wakes up” at 9am, due to the time difference.
Shank says this change has boosted bookings.
HotelTonight’s latest announcement is part of a recent streak of upbeat news:
In March, the startup expanded its coverage to 50 more spots, bringing its total coverage to more than 300 destinations globally. It claims its apps have been downloaded more than 9.5 million times.
It is backed by Coatue Management and other investors.
MORE FROM TNOOZ:
How to pull back the sheets on HotelTonight and its performance
The implications of last-minute bookings for hotel operators