In the article I have chosen to review this week, we learn about an increasingly popular technique that OTAs are using just now to boost their conversion rates. Inspired by the business model of designer brands, they organize private sales for their members and sell their inventory at discounted prices.
Contrary to what one may think, it is not just average packages that the OTAs sell; you can find even more upscale ones for up to 60% off. It also pays off for the OTAs, because one of these websites, Jetsetter.com, indicated its revenues increased by 30% from November to December 09.
While this may sound like good news for travellers around the world, my question is: does this trend put the luxury hotels at risk?
On one hand, it is a good thing that the packages are still sold to a minority of people (invitations only, members of the elite programme etc.); this is coherent with the exclusive distribution for luxury products.
On the other hand, beyond the accessibility restrictions, the packages are still sold at half their values - sometimes even more - and while this can reflect the difficulties that the OTA may be facing, it can also affect customers' opinion on the brand. I cannot think about the reasons why hoteliers would agree with this strategy. It does help to get rid of distressed inventory, but it suggests a situation of difficulty for the luxury hotels to sell off their products, and it raises another question: what will the customers who buy at regular fares think when they know about this pratices?
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