In this 3-part series, Pegasus partners with Hudson Crossing to examine what attribute-based shopping is, what it means for hotels, and what benefits hotels and consumers can expect from this new technology.
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By George Roukas, Partner, Hudson Crossing
In the final article of our three-part ABS Series, we’re examining the benefits of ABS technology for both hotels and consumers. The first article in the series defined and explained both attribute-based filtering, which is widely used today, and attribute-based shopping (ABS), the future of build-your-own hotel booking. In the second article, we explored how ABS functionality will impact existing hotel systems and change the way hotels interact with the booking experience.
As a refresher, attribute-based shopping (ABS) allows guests to choose from a list of attributes to build the hotel experience they want, as opposed to filtering them at the end of the booking process in a reactive way based on room type and rate plan (RT/RP). Adopting ABS means consumers can choose the exact room they want to pay for, while giving hotels more flexibility in meeting their needs. Rare but true, the benefits are vast and exist for both sides of the transaction. Most notably, customers have the opportunity to pay a lower price than for a specific room type or rate plan and hotels gain opportunities to earn higher overall revenue. Here, we’ll list the benefits of adding ABS functionality to the booking process:
Benefits to Hotels
- Lower prices, higher conversion: Hotels will have the ability to potentially offer consumers lower prices on specific ABS products while improving revenues due to higher overall conversion and tailored products.
- Ability to offer consumers customized products: No longer limited by the conventional RT/RP combination offers, hotels can offer consumers more customized products. (If you’re wondering if consumers will put up with less certainty, look at Hotwire.)
- Better information about what customers want: Hotels can derive more exact information about what their customers really value, as shown by their willingness to pay for specific attributes.
- Richer cross-selling opportunities: With ABS, rate plan attributes become just a set of ancillaries that can be combined with the room. There is no difference between adding breakfast or a 10-day cancellation policy vs. a bottle of wine or a spa treatment. Hotels, and consumers will think about the room separate from the attributes they want to add to it.
- More flexibility in creating room types: By better understanding exactly what customers want, hotels can rearrange and recreate their room types to better align with real customer needs. They can also use this data to shape future hotel builds.
- Hotels can recapture product value: ABS products cannot be shared with OTAs or wholesalers, which means hotels can recapturing value that would otherwise go to the distributor.
- Added pricing flexibility: Hotels gain more freedom to adjust their ABS pricing dynamically and out of the range of rate shopping services.
- Future-proofing: As new interaction channels continue to emerge, including voice and text, the ABS model will stand up to time. It would be much simpler to send a text that reads, “Find me a room with a king bed and Wi-Fi in the Acme hotel next Thursday for two nights,” knowing they’ll receive the lowest priced room that meets those needs. The same voice command could be stated by saying “Alexa” first, to make hotel bookings simple enough to do with voice services. Try that with RT/RP combinations!
Benefits to Consumers
Lower prices: While more analysis is still needed, the opportunity to improve revenues by optimizing room attributes looks promising. If they can be raised enough to improve profitability for the hotel while reducing unit prices for consumers (and removing middlemen,) it will be a win for both hotels and consumers.
Improved availability: As hotels get better at optimizing room attributes at a more granular level, the chances for a guest getting what’s important to them at the right price will improve.
A simpler shopping experience: Consumers will no longer have to compare room types and rate plans across 10, 20, or more combinations, often having to click down to details to get the info they need to understand exactly what they’re buying.
More targeted offers: Hotels can achieve more targeted offers as a result of gaining a better understanding of what their customers want.
The Opportunity for Change
In this article series, we defined and examined ABS, distinguished it from its predecessor, explored its impact on hotel systems and presented the benefits to both parties. While the benefits to hotels and consumers are clear, the hotel-facing challenges of its rollout are not yet completely determined. Even so, this future-proof, flexible functionality presents a rare, enduring opportunity for hotels to get closer to their customers and at the same time, improve revenues.
The process of shifting to ABS is a complicated and potentially lengthy one that will likely inspire lively debates about how to achieve it successfully. Some changes will be harder than others but the best approach is an incremental one; hotels and third parties should embrace a hands-on, trial-and error approach to ABS, with a focus on early adoption. Hotels that embrace ABS sooner rather than later will have the advantage of refining the process and creating a virtuous cycle, particularly as companies start to use AI for the more complex algorithms. Those that wait a year or two increase the risk of losing competitive advantage.
In the book “Blue Ocean Strategy” the authors argue that true innovations are those that offer better products and lower prices – a fitting description of ABS. How would implementing ABS functionality into your booking experience impact your culture, hotel systems and bottom line?
Did you miss Part 1 or 2, or wish to download the report? Visit here and we will email you a copy.