Mirai blog for hoteliers

The perfect meta is yet to come

None of the main meta search sites or metasearch engines, among which we include Trivago, TripAdvisor, Google and Kayak have fully convinced hotels, especially independent ones, to “connect” their direct sales. This is somewhat paradoxical because it would be a highly positive relationship for both parties

  • Hotels would reduce their dependence on OTAs and would have the perfect partner if they were to offer exclusive prices on their website.
  • Meta search sites would have the only channel different to the rest (there are many OTAs but only one official website), which in many cases offers the best price. To be a price-comparison website without having the best price would be a failure.

This lack of understanding between hotel and meta search sites paves the way for OTA sales, especially for Booking.com, the undisputed king of this industry in Europe, who always wants to be in the top spot at no matter what price.

The other big loser is the final client, who shall have to expressly google the hotel’s official website in order to find its price.

Reasons why hotels and price-comparison sites do not understand each other

At Mirai, we work with hundreds of hotels to whom we explain the advantages (and disadvantages) of investing in metasearch engines. From our point of view, the real reasons are:

  • Cost. Price-comparison sites look to capitalise on each click and tend to treat hotels (chains and independent ones) like if they were OTAs, with high rates that make it hard to make a profit from these investments.
  • Slowness in registering process. Many hotels find it hard to register, especially chains. Lack of service, slowness in the reply, technical problems in the registering process or high demands are just a few examples as to why.
  • Daily management – lack of tools. Once everything is “connected”, every hotelier has to manage these investments, which he cannot afford. Increase or decrease the bids? Which markets to be in? Which budget should be set every month per market? All of these questions are posed by the hotel, which increases an already heavy daily workload.
  • Mistrust. Hotels are tired of paying more every year to sell the same in the direct sales. They see price-comparison sites as a threat rather than an opportunity. It’s obvious that it’s not pleasant to pay to have a presence in them but, if they don’t do so directly, they will do it anyway with the commissions paid to OTAs.

There are two factors that are NOT a reasons for lack of understanding, although they may seem so at first:

  • The technology that connects with the price-comparison sites exists, is affordable and tested (in other words, it’s not a technological challenge).
  • The hotel doesn’t have investment problems (in other words, it’s usually not because the hotel doesn’t want to invest).

The perfect meta search site that would have a place for direct sales

The four main ones, once again TripAdvisor, Kayak, Trivago and Google, more or less have attributes of what would be the “perfect meta search site”. However, none of them meet all the fundamental requirements to be it:

  • Real direct sale. An essential subject for hotels, who want the transaction to finish on their website, which used to be the traditional model for price-comparison website. However, there are new models where the client finishes his booking on the price-comparison website (TripAdvisor Instant Booking  is today the most popular one, although Kayak released theirs a few years ago). There are great expectations with Google and their product Book on Google (BoG), which also runs along these lines. Hotels are suspicious of this sale because it’s not direct. If they participate, they do so defensively (in order for the OTA not to get the sale, thus reducing costs). However, hotels must think in what clients want and adapt accordingly even if they don’t like it. Clients want simple and integrated booking processes (especially on mobile phones), hence the appearance of Instant Booking and similar systems.As a hotel, you can abstain from participating in models that are not real direct sales. However, you must be alert as to whether meta search sites are giving more importance to the sales model on their websites than to the one that they redirect to the hotel website (a legitimate move on their behalf if, this way, you win more clients and money).
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  • Commission (CPA) over Cost Per Click (CPC). Although the billing model is not decisive (you can make the investment profitable with any of the two models), the CPA model eliminates many of the barriers that the hotel has to participate:

    o   Risk. Commission per effective booking (after cancellations) does not imply a risk for the hotel. Costs shall always be under control.
    o   Liquidity. The hotel pays after the stay (and payment) by the client at the hotel.
    o   Understandable. Hotels are used to paying out commissions. Many owners or managers accept a commission model without hesitation. However, they will question CPC models and find many problems with them.

    Google Hotel Ads (GHA) and TripAdvisor’s Instant Booking are the only ones of the four big ones that currently offer CPA.

    Note: For many hotels (those of average price and medium-high stays), it’s probable that the CPC model is more interesting than CPA. Calculations need to be made.

  • Profitability. Hotels have a specific number in their heads which is the 18-20% that they pay out to Booking.com for their bookings. Any investment that is a higher equivalent commission shall be questioned.In CPC models, the hotel must calculate the “equivalent commission” (investment/generated production). To this number they must add the partner cost derived from integration (many companies charge an amount for this “connection”), plus the commission of their direct-sales technology (search engine).The following must result after the sum of all of these costs or otherwise the hotel will raise doubts:Conclusion: many of them shy away from it and don’t participate. Those committed to a CPA model start at elevated commissions (minimum 12% on Instant Booking and 10% on GHA), leaving little profit margin (however, a profit is still generated). Price-comparison sites should reflect on and analyse the increase of hotels they would have if they reduced the costs as well as the quality of an exclusive channel such as the direct one.
  • Results order from lowest to highest.The one thing that frustrates hotels a lot is not understanding the order of results. This makes them think negatively about price-comparison sites and come up with conspiracies (real or not) that these sites benefit OTAs (let’s not forget that Trivago is owned by Expedia Group the same way Priceline owns Kayak). Does this result make sense? It probably does for TripAdvisor and Google, but it generates the hotel frustration and distrust.An interesting debate. Does the client really understand a metasearch result where the cheapest option is kind of hidden? We assume many tests have been done, although we still find it quite surprising to see these results.
  • Easy management. Only a minority of hotels and chains (including the big ones) are able to manage investment in price-comparison sites. The rest doesn’t have the staff numbers, the time nor the will to do it. Conclusion: if you leave the management of this investment in the hands of the hotel, the hotel will get tired of it and give up after a few months. A control panel is essential, since it will be able to manage many hotels at the same time and it will be controlled by specialised external companies. Google is the best example of this, since it allows to manage hundreds of hotels from a single panel. Also, it has recently allowed a hotel chain or an independent hotel to manage their hotel directly from a centralised account (Google Sub Accounts).
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  • Automatic booking reconciliation. For CPA models, the hotel has the need to contact all the different price-comparison sites and “reconcile” bookings (in other words, communicate the cancelled ones, no-shows and modified ones) so that they are not charged a commission. This exercise is yet another task for the hotel, whose time is already stretched and for which any barrier is yet another impediment to participate. The price-comparison site must offer the option of making this task automatic and to be synchronised when the booking is marked as cancelled on its engine. TripAdvisor is the only one that offers this service in its Instant Booking.
  • Sales volume. This means views and more views. Once we have the perfect price-comparison site, we will need one more thing, albeit the most important one: views, many views. Today, Trivago is the king of views in Europe, whereas TripAdvisor is the king in the UK and the USA. Google is starting to grow considerably but it’s still not close.

If we had to summarise it in one sentence, we would say that the perfect price-comparison site would be the one that offers a CPA model of maximum 10%, orders results in a transparent way, shows real direct sale, has millions of daily views and has a centralised management panel with individual access to accounts and an automatic system of booking changes.

Conclusion

The lack of understanding between price-comparison websites and hotels is paving the way for OTAs, who, without offering any value to the hotel, are channelling bookings at a high cost and with no opposition from the hotel. If a few months ago we stated that 15% of Booking.com’s sales come from Adwords by your name, have you thought about how much OTAs sell by connecting to metasearch engines? The result would most definitely be surprising.

On the other hand, it’s not easy for those hotels who want to be on price-comparison websites. No metasearch engine is being successful by incorporating direct sales of most hotels and hotel chains. This fact should be used as a starting point for deep thought about the real causes

The first meta to change his strategy and achieve that all hotels connect their direct sale and offer their best price on his site,  will win over the clients in the long term. A great reward that is still awaiting the winner.

The PCI-DSS regulation is coming to hotels… Are you ready?

Have you received a call from your bank to ask if your hotel meets the PCI-DSS security standard? If so, you’ll already know what this is about, although maybe not so much on how to do it. If you haven’t received the call, you will receive it shortly. This article will be of interest to you in order to know what it’s about and how to anticipate it.

What is PCI-DSS? Does it affect my hotel?

It’s a security standard that affects the environments that works with or stores credit cards, something which directly affects every hotel.

It’s nothing more than a “good-practice manual” that all involved companies must adhere to. PCI-DSS means Payment Card Industry Data Security Standard and it was created by a credit card consortium that includes Visa, MasterCard and American Express among others.

What is the purpose of PCI?

Avoiding or minimising the many existing credit card frauds, something which has increased greatly with the arrival of the Internet and e-commerce.

Is it mandatory to be PCI-certified?

There is no law that enforces its compliance. However, it’s an essential requirement for entities who issue credit cards and the banks themselves, who may reduce their services or break contractual relationships in the event of not having a PCI certificate. The most usual threat from banks at this point is to withdraw the physical TPV service (dataphones).

Is that why banks are pressuring me about the PCI certificate?

It’s a domino effect. In the event of credit card fraud, issuing companies like Visa look to the banks, who then look to the business (hotel), and those look to their providers (PMS companies, channel managers, search engines, etc.).

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Up until now, the bank required the hotel for all of its providers to comply with the PCI regulation and the hotel is right to demand that from them (Mirai has the PCI-DSS certificate). However, the requirement will broaden in a short space of time and it will force your hotel to also comply with the regulation. Are you ready?

How will the PCI compliance affect me? Will it change my everyday activities?

PCI will force you to carry out a deep technological change but also a change in your philosophy. There are many requirements that you will consequently have to revise and adapt to your operation. We won’t go into details because that’s not the point of the post although we will provide you with some simple examples that are good illustrations of the significance and philosophy of PCI.

  • Unique users. Every receptionist or member of hotel staff who has access to or works with credit cards must have a unique user ID with the purpose of monitoring access individually in the event of an incident with a specific card. This will imply having many nominal accounts in the computers, the PMS and the Booking.com or Mirai extranet, something which will considerably complicate reception operations, for example.
  • Booking confirmation faxes with the client’s credit card number. Maintaining this confirmation method becomes complicated to the point where it’s unfeasible. Having the fax machine in reception within everyone’s reach will happen no more. You will have to move the fax machine to an area with restricted access, with security cameras and a register of everyone who enters and leaves the area. The automatic import of bookings in your PMS will be your greatest ally to solve this problem.
  • CVV2. Storing this data shall be strictly forbidden (requirement 3.2 of the regulation). If you cannot store it and you are not going to use it in real time, why ask for it? Also, you don’t need it for transactions with the physical TPV and it doesn’t help you with refunds. It’s best not to ask your clients for it when they make bookings (except for rates with the virtual TPV where the bank will request it to execute the charge) and this way get rid of the problem.
  • If you have the PMS at the hotel and use it to store the credit card data, get ready for a big change. You will have to adapt your whole network architecture to comply with the regulation: separate the server in a different network with physical access control, security cameras and entrance and exit register. You will also have to add a firewall that controls and registers all access also in a third environment that is separate from the two first ones. A huge fuss. It’s best to find support in your PMS manufacturer to find the best solution. There is no doubt that cloud versions are recommended in these cases because, this way, you don’t store any credit card in your hotel.
  • Training, documents and procedures. Get ready for an avalanche of documents that you will have to do (it’s recommended to find support in an external consulting company) and that you then have to follow. It will change your working ways in everything related to credit card use and handling. You will need an internal team that is responsible for the compliance of the regulation. Each new employee with access to credit cards will require training.

All of this makes us reach a scenario where every charge or guarantee method made by the hotel is made via centralised payment methods that are external to the hotel (companies like Google, Apple or PayPal are already advanced in this field), removing the risk of a security breach in the hotel itself.

What do I have to do to obtain the PCI certificate and how much does it cost?

The theory is long and tedious, so we won’t talk about it here. We will just say that there are 12 points that go from system architecture (firewall separation, credit card encryption, etc.) to security procedures and necessary documents. You can find a quick guide (40 pages, no less) here. A costly work but a necessary one, I’m afraid.

The certificate is free. However, the time and and resources employed to obtain it will cost a lot. Our recommendation is that you hire one of the many PCI consulting and certifier companies (a huge business which has emerged due to this new regulation) and let them lead you (in many cases, it won’t be an option but rather an obligation).

It will incur an initial cost from 10,000€ to 60,000€ depending on the requirement level that you have (the more credit cards handled every year, the higher the required security level will be). Large hotel chains from around the world handle other costs, of course. From the initial certificate, you will have to re-certify yourself every year, with the cost being much lower because most of the work is already done.

The time frame will also vary, but it could fluctuate between 3 and 12 months, once again depending on the amount of credit cards that you handle.

Does having the PCI-DSS certificate guarantee being exempt from fraud?

Sadly, no. Complying with the PCI-DSS regulation improves your security systems and level, decreasing the chance to have an incident, but it does not guarantee that it won’t happen 100%. In fact, every year, many companies with the PCI certificate suffer from credit card breaches and theft.

Conclusion

Security and fraud control is an intangible of increasing importance and being up to date with the regulation and good practices will avoid many potential future problems. This is why it’s a good investment. It’s normal that, as business owner, you find it hard to provide resources for something that shows no financial gain in the short or mid term.

However, banks have started to put the pressure on and this now seems unstoppable. The domino pieces have started to fall and sooner or later (6 months? 1 year? 2 years? Nobody knows…) it will be the time for the medium-size hotel chains piece to fall (the large hotel chains piece has already fallen), followed by individual hotels. Knowing what is coming is the least you can do. Anticipating it would be perfect.

How to use Google Hotel Ads to strengthen your direct sales

Google is becoming a relevant player in the online hotels sector, something which makes the big existing players like Booking.com or TripAdvisor uncomfortable.

However, Google’s strategy is different to the one of its competitors. It’s not becoming an OTA per se (such as Booking.com or, as it appears, TripAdvisor) and neither is it creating a metasearch engine such as Trivago or Kayak.

Google Hotel Ads (GHA) is a platform of inventory and prices distributed over the different Google products: its search engine, its maps and the new Google Destinations. Is there any doubt now that we will see these prices on Gmail or Google Now sooner rather than later? On the other hand, strangely enough, the product that Google created as a pure price-comparison tool, known as Google Hotel Finder, was shut down in September 2015. That wasn’t Google’s war.

By the way, GHA is the new name of what was previously known as Hotel Price Ads (HPA), a name that has now been removed from its vocabulary.

Using the search engine or the maps, the importance that Google is giving these prices in real time is evident, particularly on mobile devices where its prominence in proportion to the screen size is much higher. Google calls it micro-moments and it consists in giving users what they are looking for at the right time and naturally

Why participate in the Google Hotel Ads programme?

As a hotelier, it is key to be in GHA since you are occupying an essential display window such as Google and are directly competing with the OTAs in a field in which they have consolidated themselves in by diverting many sales to their pages. All of this takes us to our final objectives: reducing the cost of intermediation and gaining independence from it.

Remember that you are already participating in GHA through OTAs and you are financing their campaigns for them. In other words, OTAs do not invest a single cent in order to place your hotel in metasearch engines, you are paying for everything.

What models does Google offer to participate in GHA?

Within the GHA programme, Google offers the following three different forms of use:

  • The traditional CPC (cost per click) model, where you pay an amount for each visit that goes to your website.
  • A model that is a hybrid between CPC and CPA, which Google calls “ROAS target”, which is simply setting a “target commission” (for example, 10%) from which they optimise the CPC in order not to surpass the 10% commission when calculating the investment from the generated income.
  • The new and pure CPA (cost per acquisition, aka commission in hotel talk) model, which Google calls Google Hotel Ads Commission Program (GHACP), which we wrote about a few weeks ago.

What are the differences between these three models?

CPC

ROAS Target

CPA

Payment method Cost per click Cost per click Cost per acquisition (commission)
How much does it cost? It depends on how aggressive you want to be. It works similarly to Adwords: you set a CPC maximum and Google chooses the winning option via an auction. The more bidders there are, the higher is the cost. The % of commission that you want, taking into account that Google will calculate an equivalent CPC for the auction. If the % is low, your bids will not appear. Whichever commission you want, always between 10% and 15%.
Does it take cancellations into account? No. All clicks cost the same, regardless of whether they generate a booking or not. No. The equivalent commission is set prior to the cancellations (be careful with being aggressive since cancellations are absorbed by you). Yes. Since it’s a system based purely on commission, you only pay for the bookings you have charged for.
Which model offers more visibility for my hotel in the search results? You can get the same visibility for your hotel regardless of the model you choose. The more you bid (in CPC or commission) and the better the offered price is, the more chances you will have of appearing in the top places.
Can I set an investment limit? Yes, both daily and monthly (e.g. 800€/month) Yes, albeit indirectly. By setting an equivalent commission you will ensure the profitability of the investment. Being a commissionable model, why set an investment limit? The more sales, the better.
Can I hire this service directly from Google? No, you need an integrated partner with theCPC model. You can find a list of them here No, you need a partner integrated with the CPA model. Not all GHA-integrated partners support the CPA model. Ask your provider.
When do I have to pay? When the click is made, before the client arrives. Therefore, you pay in advance, just like with Adwords. Monthly, after the client’s stay.

Which is the best model for your hotel?

Since you can receive the same income results with all three models, you must choose the options that incurs the lowest cost.

Conceptually, hotels with higher average price and higher average stay are candidates for the CPC model, since they will have an equivalent commission lower than 10%. Our recommendation is to start with this model.

For the remainder, the recommended option is the pure CPA model, since it minimises risk, minimises the budget management and optimisation and, on top of it all, it generates a positive cash flow (you pay when the client has paid). At Mirai, we are transferring almost all of our clients to this model.

Having a pure CPA system, we do not see any reason to hire the “CPC ROAS target” model.

What should your strategy be in Google Hotel Ads?

Participating in GHA is only the first step, but it’s not enough. To be there for the sake of it, in other words, participate without generating bookings, is not the objective. You have to have a strategy behind it, a strategy that allows you to generate a high number of bookings and save money from the commissions paid out to OTAs. At Mirai, we believe that the following strategy is the right one:

1. Choose the GHA model which offers you maximum profitability while maintaining an adequate number of bookings. If you have any doubts, CPA is the model for you.

2. Remove all intermediation from GHA. An essential objective for hotels and hotel chains but that is rarely seriously posed. What value does Booking.com give you in this search? If you can be there directly in metasearch engines, intermediation offers no value. Sadly, this is a difficult battle in today’s day and age due to the refusal from OTAs.

 3. Remove the disparities from OTAs who are fishing for these prices via bed banks or another OTA by taking advantage of the many holes that hotel distribution has. Being present in GHA to see the result of the image below is pointless.

 4. Maximise your visibility

Once you have done your initial homework, you must understand how GHA shows the results and how it sorts them. By default, it shows two entries in its results. The ranking is determined by two main factors: the bid (how much Google earns for having you up high) and the quality where price competitiveness and conversion come into play.

Booking.com brings the same strategy to GHA as it has on Adwords: occupying the first position at any cost. Fighting for the first position will be very expensive. Since you cannot remove Booking.com from GHA (because they will refuse and because, I fear, you are contractually obliged not to), play to occupy the second position like we explain below.

If you maintain a price-parity policy, it’s probable that, as well as Booking.com, any other OTA may improve your bid and your entry ends up buried in the “See more prices” link. This is not the correct strategy.

Your most profitable option, and the one that will generate more bookings for you, is the one that offers the best price on your website. This will all but guarantee second position, something which will maximise your entry’s visibility and will show the client the advantages of booking directly with you (which will also save costs). This is the strategy that all large hotel chains and advanced hotels are following, an unstoppable trend which many independent hotels and hotel chains are joining.

Conclusion

Google has slowly been entering the travel sector, especially the hotel one. It’s here to stay, whether we like it or not. On one hand, it’s another toll to pay but, on the other, it’s a great chance for hotels who wish to reduce the large dependency they have on OTAs. Finally, a powerful weapon with no risk.

However, remember that technology is just part of what you need. The key is in the knowledge and skills of being up to date and making the most of the opportunities that come along. GHA, undoubtedly, does much more good than bad, although it confirms once more that direct sales aren’t cheap -much to the delight of OTAs. However, they are still cheaper than intermediated sales, no matter what some OTAs say.

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