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Why low-price guarantees rarely deliver the lowest price

SmarterTravel

Spend an afternoon listening to the various speakers at last week’s Travel Commerce Conference and Expo in New York City, and one thing is immediately evident. There are hundreds, if not thousands, of travel providers, agents, and marketers out there vying for your travel dollars. And this year, their number one marketing tool is the so-called lowest price guarantee, particularly on accommodations. Unfortunately for consumers, these guarantees rarely live up to their promises.

With travel finally on the rise again after several down years, many providers are looking to take back control of their own products, particularly hotel rooms. And while in the immediate aftermath of September 11, 2001, most providers found themselves in the unfortunate situation of having to use any and all means to “put heads in beds,” there is now a distinct reaction to undo the actions of past years. The goal is to take back the direct interaction with consumers that many providers have yielded to low-cost outlets and third-party travel agents. The most evident trend in this direction is the move to a “guaranteed lowest price” for travelers who book directly with a provider rather than through a third-party agent.

According to the Travel Industry Association of America, more than 64 million Americans used the Internet to check prices and get destination information in 2003, and more than 42 million Americans booked their travel arrangements online. With those numbers virtually guaranteed to rise, travel providers are eager to recapture the direct-booking market and increase brand loyalty by promising the lowest prices. Hotel chains such as InterContinental, Radisson, and Holiday Inn are just a few of the high-profile providers who have moved to the low-price guarantee model. For air travelers, a similar strategy has worked well for low-fare titans Southwest and JetBlue, both of which have cornered the market on their own fares and benefited from it. Continental Airlines has even gone so far as to offer its own price guarantee, following the same model as most hotel chains.

So with price guarantees being made left and right, what does it mean for consumers? And why, if you can always get the lowest price booking directly through a provider, would anyone ever book with sites like Expedia or Travelocity again? The answer, ironically, is these low-price guarantees will actually mean very little to most cost-conscious travelers. The guaranteed lowest price at a Hilton in New York City, for example, will hardly be the least expensive room in that city. For that, third-party travel agents like Orbitz, or consolidators like hotels.com, will continue to be the most effective method of comparison shopping. In other words, unless you’re loyal to a particular hotel brand, you still need to shop around.

Additionally, the concept of “opaque” pricing?in which either the cost or the brand of one or more element of travel is hidden from the consumer?remains immune to any sort of price guarantee. For example, the lowest rate on a given hotel chain’s website for accommodations in Phoenix may indeed be the best published rate for that date, but lower rates may still be available through priceline or Hotwire, because these sites hide the identity of the hotel until after booking, therefore skirting the guarantee around lowest published prices.

Still, with price guarantees all the rage now, sites like Expedia and Travelocity are increasingly pushing shoppers to another form of opaque pricing: bundling of flights and hotels. It’s a trend that has seen online agents package airfare and accommodations together, generally at significant savings over the same elements when purchased separately. Expedia, for example, guarantees that customers will always save money by purchasing a package instead of purchasing the same components separately. This is a way of hiding the actual price of each element of the package and bettering any low-price guarantees.

Most price guarantees, it seems, are no more than a security blanket for lazy shoppers. While you may find the lowest published rate online at a hotel chain’s website, that doesn’t mean it really is the lowest rate, as long as travel providers continue to distribute their product with enough differences to render a head-to-head comparison useless.

What this means is that comparison shopping has not only become more important in today’s marketplace, it has also become even more complicated. And so the more things change, the more they tend to stay the same?at least for cost-conscious travelers.

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