The hotel industry is at beck and call for disruption with the Nasdaq listed travel company with Goibibo and Redbus under its umbrella set to offer short stays in the Indian market. ‘Short Stays’, can be touted as a blue ocean strategy that could win the company a considerable market share in the travel and tourism space. You can now enjoy a cheaper stay in hotels with the options for paying only for short durations of 4,8 and12 hours.
The company has launched a project in the pilgrim town of Tirupati in Andhra Pradesh where it offered short stays targeting pilgrims who just wanted to freshen up after a taxing journey. The project is set to be emulated in other parts of the country.
The offer is a significant step towards better customer value proposition for travelers who do not want to spend hefty amounts on short stays. For the hoteliers, it will be a significant additional revenue by having more than one customer per room per day. This is a welcome especially move when the typical occupancy rates in hotels fall in the range 60-65 %.
Online retail constitutes about 15 percent of the hotel booking industry and of this MakeMyTrip accounts for about 70 percent of the business. They have a network of around 50,000 hotels and 10,000 homestays and the numbers are growing.
Even though the strategy seems promising, it can pose greater challenges to the hoteliers to deliver better service to the customers. If not properly addressed, it can lead to a long run decline in the reputation leading to a vicious cycle.
The revenue management for many online booking systems including hotels incorporates overbooking. This is important because of increasing cancellations at the last minute and no-shows which cause serious damage to the management of the hotels. With the customer footfall increasing on offering a flexible check out timing, the optimization of online room reservations and overbooking is definitely going to be challenging.
Increased Running Costs
The new initiative though poised for greater revenue, the cost impact on daily operations such as cleaning and other amenities have to be mulled over. The inventory costs of bedsheets, bath towels, laundry could bring down the percentage increase in the expected revenue without systematic pricing decisions.
Ensuring Customer Service
There can be significantly different views among different groups of online consumers based on their actual experiences. With the increasing popularity of internet applications, hotel managers and travel agents should set practical plans to meet the needs of a greater number of online buyers.