Expedia is actively promoting its Last-Minute Deals and brands them as hotelier’s’ opportunity to target high-converting last-minute audience with same-day deals and last-minute campaigns.

Last-minute sales in travel are not a new phenomenon. There have been many attempts to find a way to dispose of these empty airline seats, idle rental cars, and empty hotel rooms at any cost. Theoretically it makes economic sense: it is 4PM, I have 20 empty rooms, and if I sell them at 50% off rack, I will still be making some money from my otherwise perishable inventory, right? Wrong!

Last-minute sales have been tried and failed repeatedly in the hospitality industry. Remember LastMinuteTravel? HotelTonight (acquired by Airbnb)? Priceline’s last-minute deals? Where are these sites and initiatives today? Completely failed, abandoned or significantly weakened.

Why? In spite all the well-funded marketing efforts, not many hotels have succumbed to the propaganda of the last-minute deal OTAs, those have been primarily independents without any or with misguided revenue management practices in place.

As a matter of principle, all major hotel chains avoid last-minute discounting channels like Expedia Last Minute Deals or HotelTonight since it is against best revenue management practices, contractual obligations with OTAs, preferred corporate accounts, group rate contracts, best rate guarantees, etc.

Why last-minute discounting is bad for hotels?

Last-minute sales in hospitality at lower discounted rates are not sustainable as this approach jeopardizes all other distribution channels (hotel mobile site, hotel traditional website, GDS, phone reservations, even OTA distribution). Travel consumers are shopping around like crazy - Google claims that the average hotel booker goes through 48 digital touch points before making a hotel booking. How would they react when they find out that the $200 room they booked a week ago could now be booked for $125 on Expedia Last-Minute Deals?

In my view, last-minute discounting is a super lazy and rookie approach to revenue management and a sure downward spiral to hotel insolvency. One question: why airlines and car rental companies never engage in last-minute discounting? Because they are smart and understand that whoever books the last minute has either urgent need or urge to travel and is willing to pay more to satisfy this need or urge.

Hospitality should finally learn something from the airlines who invented revenue management more than half a century ago (they call it yield management): the closer to the departure date, the higher the airfares!

In the age of social media and mobile “word of mouth,” it will not take long for all regular and frequent guests at your hotel to hear about the lower last-minute rates offered via an OTA like Expedia. What will be the result? The hotel will soon witness that:

  • Booked guests are canceling existing reservations made via hotel website, phone, GDS, OTAs and re-booking via Expedia using the lower rates.
  • Potential guests are waiting until the last minute to see what the last-minute rates are for the property and other hotels in the city/location they are traveling to and booking in the last minute.
  • OTAs are after the hotel for these last-minute “deviations” from the contracted rate parity clauses.

What Should Hoteliers Do to Avoid Last Minute Sales?

To begin with, if hoteliers are doing everything right in the direct online channel, the hotel would not need to use last-minute discounters. Instead of relying on last-minute discounters, hoteliers should invest in the direct online channel and make it a mission to decrease dependency on OTAs and intermediaries.

The only time to engage in any kind of discounting is for a) advance bookings and b) selling on value and not on rate alone.

  • Advance Bookings: reward your guests for booking early and allowing you to have peace of mind with solid business on the books. Offer 10%-15% discounts for non-refundable 14- or 21-day advance bookings, based on your property’s booking window.
  • Selling on Value: The hospitality industry needs to relearn how to sell on value vs price alone! The OTAs are the masters of selling on price, hoteliers have no chance outwitting or outspending them in their marketing efforts. But selling on value? This is where hoteliers can truly outwit the OTAs and provide real value to your customers.

In place of “naked” rate discounts and last-minute deals, come up with weekend specials, de-stressing and spa packages, family packages, museum packages, romantic getaways, girls getaways, activity packages, special occasion and F&B packages and promotions, work-from-hotel packages, limited time offers, advance purchase promotions, packages with complimentary amenities and upgrades, loyalty member promotions, etc. that you can use to target your local, short-haul and drive-in feeder markets?

In conclusion

Revenue management 101: the closer to the arrival date, the higher the rate. Whoever books the last minute has either urgent need or urge to travel and is willing to pay more to satisfy this need or urge.

Max Starkov
NYU