If the price-parity is carried to the grave

If the price-parity is carried to the grave

What would you say if Edeka, Reichelt, Aldi, Aral, and Lidl deny the price for a Milka Chocolate table and Kraft Foods, the manufacturer of the Milka chocolate, supports this agreement with a full heart? Would you call the cartel office to investigate unauthorized pricing? Or at least ask how different dealers with different service levels, customer service, and opening hours can come at the same price? At least we expect Kraft Food to always have the best price in the factory, or only in the hotel industry does it seem to be different.

Many hotels are unsure of how they should get involved in the “parity yes or no” strategy. “So let’s take a look back. Sometimes one understands the current situation better, because one remembers how it all began: Through the contracts of large Reisemittler was effectively an industry-wide equalization of the selling prices in all intermediate shelves introduced. Our hotel students learn (if price and sales strategy is at all a topic) that the price is right and profit-optimizing.

To be honest, I have this, with the strengthening of the Reisemittler (example Hapag Lloyd and the DER) the so-called “retail model” (purchase of gross-price travel, negotiation of the sales commission, resale of these gross prices to consumers and companies), was also requested by my then-co-operation partners, the Best Western Hoteliers prevented the intermediaries selling at better prices than did the cooperative or the hotel itself. This was the greatest threat to the sales strategy from the merchant to the retail model.

Let us remember: the hotel reservation service, for example, had originated from a travel agency and gave hotels to reduced volume business travel prices. A small “B to B-bude”, which could not tackle the big travel agency chains, but in contrast to the big ones recognized early on the importance of the internet for the travel agency. The “volume price” was at this time the main sales argument. In the first 10 years of the HRS Online sales strategy, an attempt was always made to derive this advantage from the hotels. “HRS is a volume producer and therefore may offer more cheaply than the own reservation department …”, this statement was often heard in the hotel industry. Between volume decision makers and volume mediators was not differentiated. The demand for price stability should prevent the clever medium-sized buyer from having a strong influence on the booking route with the better prices.

What advantages does this price offer today?

It allows a whole industry to not deal with the more complex mechanisms of the sales control and differentiated price strategy by sales channel. There are other advantages in the first place from the point of view of the big mediators, which are at least as bad as the producer, as the hotel itself.

Which disadvantages brings the price parity?

The hotel industry allows each hotel mediator its own, quite individual sales – and thus to calculate profit margins and “thank” independently of the sales performance with parity prices. One intermediary receives a margin of 30% and the other a commission of 12%. This is independent of the individual sales performance of the mediators. This, of course, strengthens the most expensive intermediaries, which now have more resources, to leverage the latest direct customers from the industry through SEO & SEM and CRM strategies. The end of the price and the consequences.

The end of the price-parity and what follows.

What will happen if the industry aggressively abandons the price and either strengthens the direct sale because the best offer in combination with strong marketing messages is only available in the company’s own reservation, its own call centre and on its own website? And secondly, the tariffs for intermediaries and sales partners are differentiated according to meaningful factors: sales costs, volume, quality of the volume, fairness, and reach in attractive target markets.

My forecast: It will happen when what the industry wants and pursues is made clear. If, however, they do not pursue an objective, then those with a clear goal will also be able to use this situation for themselves.

The hotel industry should want an important and necessary pursuit of their own interests:

1. A sector-wide campaign (each for itself or one for all) must implement the following strategies and communicate as clear messages: the best offer is always in the hotel or at the hotel brand, and this performance promise is always to be observed (also late in the evening when the night porter goes to the phone). Price and / or availability are negotiable surplus values. In return, the hotel as a whole requires a declining sales volume or falling selling costs. Quality business, the reach in difficult markets or even business at demand-weakening times is paid better than the resale of the bestsellers.

2. Mediators will be negotiating with the hotel industry. Simple rule: Whoever implements the best sales will get the best prices. Of course, the hotel industry and brands have to go ahead. However, in order to give the best price to the own hotel website and to communicate this everywhere, even the smallest landlord can start from tomorrow.

3. The margin in the hotel industry will rise as the most expensive intermediaries are no longer the most successful. The explosion of sales costs is to be stopped by smart investment in personal strategies, knowledge, training, and mature technology. It is better that our own employees are paid well, as the best of them change to our sales partners.

4. Agents who can only sell with high margin or high discounts (this includes all deal providers and last minute margin burners, who have no market entry without a 50% discount promise) will disappear in insignificance. Even the best deal should only be in the hotel directly if weak demand (seasonal and not quality) is called for “smartshoppers promotions.”

Clever PR strategists from the middle country want the hotel industry to believe that the end of the price will lead to another wave of price depreciation. This statement, however, cannot be proven. A price decline is a factor when the economy weakens. Margin depreciation starts when rising costs are not passed on resolutely to customers (or offset by falling sales costs).

What the hoteliers want will happen. This is because the switch buttons make an intermediary successful, “availability” and “price” are called and controlled by the hotelier.

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