Before I get into my observations and conclusions regarding the latest online travel agency, Tingo, let me take you to a parallel retail experience.
Retail price protection
Suppose you decide to buy the latest LCD or plasma television. You go to the local big box electronics retailer and make your selection amongst a myriad of brands, many of which are at best vaguely familiar. They all look great in the showroom. But, how do know if you got the best price?
In this case, we’re talking about retail price protection. Retailers generally offer some sort of guarantee their price will be equal to or better than that advertised for competitive retailers. Moreover, they’ll give you the difference if you bring an ad to them displaying a better discount. These guarantees often include protection against their own price reduction for up to 90 days in the future.
Few buyers are doggedly meticulous enough to follow every price change in the marketplace. Plus, the time taken to go back to the store in order to save a few dollars is really not worth it. Thus, the systems generally afford retailers a limited downside liability by offering such a lucrative price guarantee.
The Tingo model
Tingo is designed to work in the same capacity. Buy a hotel room from Tingo, and if the price of the room goes down in the future, Tingo will automatically protect your investment by canceling and reissuing the reservation at the lower price.
There is no additional work required on the part of the buyer. Tingo does this on its own without even notifying you until it has secured the price reduction. For the hotel room purchaser, this is the equivalent of buying a price protection plan for your stay.
Revenue management issues
While all of this may seem ideal for the guest, I am wondering why any hotel would want to opt in.
Here’s the deal in a simplistic example: You have 10 rooms and sell eight at an average of $100 each through Tingo. You want to sell the last two, so you drop your price to $90. You may not sell these remaining two rooms to new customers, as Tingo will automatically convert two of its rooms from $100 to $90. Depending upon how you manage your inventory, all of your sold inventory would now be at the lower rate. In effect, every price reduction you take now has the added cost of giving this benefit to everyone who has already booked with you through Tingo.
To avoid this from happening, revenue managers can only look at increasing prices as you get closer to the arrival date, rather than enjoying the flexibility of making decisions to alter prices up or down based on market conditions. In effect, Tingo would seriously raise the costs of any last-minute price reductions, as all previous sales would be subject to discounts.
Why would any hotelier do this?
The concept of giving something extra is a good one. Savvy hoteliers do this not by reducing price, but by giving upgrades upon check-in or through value-added features. Customers who are repeat guests, VIPs, members of hotel loyalty programs and certain credit card holders also receive additional bonuses.
But offering a price guarantee, at least to me, runs smack in the face of yield management strategies. This is one more cog in the wheel of turning hotels into commodities. Customers are already having problems differentiating one hotel chain from another. For the consumer, Tingo now takes the time of a purchase out of mind. It’s no longer about following rates or adhering to a given set of brands, but just locking in a reservation and hoping for it to drop.
Unless you are pretty certain that your rates, once established, will only go up and never be decreased as dates approach, you may want to give Tingo a pass.
Certainly, upon reading this, I hope you’d check to see how your property is represented, and if customers booking through Tingo are indeed offered a genuine price guarantee. If you are unhappy with what you see, speak to your revenue manager and have him or her manage your inventory appropriately.