Empty rooms are an hotelier's worst nightmare: paying staff at a half-empty hotel can quickly drain finances. In Spain occupancy rates for the eight months to August 2012 were only 56%; by one estimate each of the country's hotels loses €1.5m ($2m) annually due to empty rooms. Spread across the Spanish hospitality industry, unoccupied rooms take away €14.6bn ($19.5bn) of revenue. Any opportunity to reduce that loss is warmly welcomed by hoteliers.
A clutch of new smartphone apps promises to do just that. They offer discounted last-minute hotel bookings. Vacant rooms are released on the day, a day in advance or up to a week before travel to the app, which allows users to filter hotels by city, cost and quality. The operators of the app take a cut of the price, usually around 15%.
The latest such service is Hot Hotels, which launched in Spain in early 2012 and recently expanded into Britain. More than 100,000 people have downloaded the app, which lists hotels in 21 countries, including Peru, Andorra and Colombia. Most users are business travellers and people in their twenties and thirties who often decide the night before to go on a trip, explains Conor O'Connor, the firm's co-founder. Half of those who book a hotel through the app use it again, he says.
The pioneer of the business, however, is HotelTonight, which was founded in December 2010 in San Francisco. Three rounds of venture funding have brought in $35m, which has allowed the start-up to expand into Europe in June 2012. Each day at noon local time, the service releases a new set of deals. It is now available in ten countries and boasts more than 4m downloads.
As with other last-minute travel services, the big question is whether such offers will eat into firms' regular business. This seems unlikely, at least in the short term: for decades, travellers have been conditioned to believe booking early-rather than playing chicken with hotels-secures the lowest rates. And most people do not travel on impulse or do not want to arrive somewhere without knowing where they will sleep. Two-thirds of HotelTonight users, for instance, are either too tired, too drunk, or are unable to make it home due to transport problems. About 60% say they woke up that morning not needing a hotel room. Still, to make sure that customers do not simply wait for its noon deals to come up, HotelTonight regularly changes the discounted hotels.
In the longer run, Hot, HotelTonight and their rivals hope to be able to ride two trends. The economic crisis makes people look for better deals and could permanently alter attitudes. And then there is something which Jared Simon, HotelTonight's chief operating officer, calls "on-demand consumption": from factoids to films, people are increasingly used to being able to access everything they need or want immediately. Hotels are somewhat different to Hollywood films, but why should instant gratification not become more widespread for holidays, too?
Source: The Economist
