Tourico’s CEO gets Feisty about US Hoteliers and their Ridiculous Dependency on OTAs
The founder and CEO of Tourico Holidays, not known as one who is timid or shy—Uri Argov is known by many as the travel industry’s original disruptor—was feistier than usual when he spoke recently during his participation in what was supposed to be a panel discussion on the impact of the weak euro on the outlook for U.S. inbound travel from Europe.
Instead, even though there was some allusion to the subject (referred to later in this article), Argov unleashed an unusually aggressive attack on hotel pricing practices during a session at NAJ’s recent RTO Summit in Orlando. And there was no disagreement from the other panelist in the discussion, Peter van Berkel, president of Travalco, although van Berkel’s tone was more restrained.
Perhaps because Argov, whose degree in computer science and whose background includes work in intelligence activities when he served in the Israeli Defense Forces, has a more formidable knowledge of the mechanics of hotel pricing practices than most travel industry executives regardless, his criticism was blunt and sometimes mocking.
It should be noted that, earlier in the RTO Summit, van Berkel had started by being sharply critical of the practice by hotel revenue managers to rely on dynamic pricing. “We have to educate the hotels,” he said, adding, “keep in mind … that hotels that only work in the dynamic (pricing) way are limiting their ability to have their product included in our packages.”
How Much is a Bottle of Coke Worth? Then, Argov—in the past, he has described the hotels’ practice of rate parity “a fundamental violation of human rights”—weighed in by illustrating just how dynamic pricing online has made it difficult for B2B receptives to package and sell product that includes a hotel room. “It’s all about dynamic pricing,” he said, going on to use as analogies the way we purchase soda from a supermarket or a movie ticket from a theatre.
Suppose, he said, one were to go into your favorite grocery store to get a bottle of Coke that was posted at a price of $1.99 only to reach the checkout counter and find that the price had just gone up to $2.49. Or, he added, suppose one went to a movie theatre, only to learn that a ticket that had been advertised that morning at $7.50 had increased to $9.00 that afternoon.
“You would never come back again,” said Argov.
And now, he noted, “so many hotels have taken the American way of traveling and tried to impose it on the world”—implying that dynamic pricing in an overseas B2B marketplace alienates the buyer and creates that perception that the hotel is a bait and switch practitioner.
“Every revenue manager in New York City needs to change the price five times a day,” he suggested. He said that, in selling to overseas markets of France, Germany and China, “if the price changes, they will go someplace else.”
The principal culprits, he asserted, were the largest online travel agencies (OTAs), such as the Priceline Group and Expedia which, through their advertising, suggest to the consumer that there is considerable competition among online travel sites when, Urgov said, in reality, there is not because of rate parity.
The Weak Euro Has Hurt, and Will Continue Hurt, the Inbound Industry: Because the euro has been at levels ranging from 25 to 35 percent below 2013 levels, “we definitely see a decline of 10 to 15 percent (in sales volume) in western Europe,”even though actual reservations are experiencing small increase,” Argov told RTO Summit delegates, explaining that, at Tourico, “we charge in euros, then pay in dollars … It hurts a lot.”
Van Berkel, too, acknowledged that the weak euro has had an impact on his company’s business. But he suggested that receptive tour operators can help counter the slide in activity by recognizing that the U.S. is not a budget or economy product for consumers most affected by the weaker euro, but is a luxury product.
He also indicated that Europeans now seem more interested in destinations that are “beyond the gateways,” and that there is an increase in interest in U.S. national parks. As well, he noted, the U.S. is perceived as a safe destination.
And one more thing … Just prior to the panel discussion by van Berkel and Argov, Malcolm Smith, senior vice president of business development and general manager of IPW for US Travel, spoke to summit delegates and he pointed to the growing importance of the MICE market in western Europe as one way in which U.S. travel suppliers can supplant lost business from the leisure sector. He noted that increased MICE traffic to the U.S. last year helped to more than offset lower leisure visitor counts from France and Spain. There were 100 more MICE buyers at the 2015 IPW in Orlando, and another increase in MICE buyers is expected at the 2016 IPW in New Orleans.