Wednesday, March 21, 2007

Taxes, we dont see no stinkin' taxes

Guest Editor Post from Michael Potts of e-interactive

A critical question is arising around the inclusion of taxes and services charges in online hotel commerce sites. The question is…should independent hotel websites hide taxes in favour of displaying a cheaper rate, or will this just make for annoyed customers?

Picture the scene: you walk into a clothes store, and quickly spot the perfect Friday night shirt. You look at the price – 19€ - perfect. You take it to the counter, the check-out guy/girl scans it, then says, “that’ll be 25€ please.” You look at the check-out guy/girl quizzically, smile and point at the price on the ticket, to which they answer, “oh, that is the tax-excluded price.” Personally I would either ask for the manager, or more likely walk out of the store in disgust.

I am used to a tax-included price in the store. I am not used to waiting until the last minute until the final price is presented to me. I am not, ever, going to buy a hotel stay at Booking.com for exactly this reason.

Booking.com doesn’t include a tax-included price in its website, even at the point where the customer is adding their credit card details to the page. In fact, Booking.com is not alone in this practice. Many hotel aggregators quote tax-exclusive prices, at least in the first step of the purchase process.

So then, back to the original question. How does the humble hotelier, hoping to get some 0% commission sales through their own website, price the stay, especially knowing that the same room is appearing on their distributors sites without tax included? Do they make me happy and provide a fully inclusive price, or accept that their wannabe customers are actually shopping around and finding (very unclear) tax-exclusive prices on their resellers websites?

Their appears to be two forces at work here. Legality and profit.

Dealing with profit first, the decision appears to be a difficult one. Does our hotelier risk customer dissatisfaction after the purchase when they realize that the price has changed for the worse (and risk a cancellation perhaps), or risk not having that customer at all?

It might be that this issue is best answered by looking at how the hotel resellers are displaying prices and thus understanding better what the customer sees when they are shopping around. I did a little research and there appears to be three main ways of displaying prices:

  • Taxes included every step of the way
  • Taxes displayed in the total price during or after the first step, but not in the “per day” rates
  • Taxes not even displayed at the point where the credit card is asked for.

The following is a list of the way that some of the popular travel sites display hotel prices

Site

Display on 1st results page

Full price quoted at point of credit card

Expedia.co.uk

Per day prices without taxes, total on results page taxes and charges included

Yes

Travelocity.co.uk

Tax included

Yes

Lastminute.com

Tax included

Yes

Booking.com

Prices without taxes

No

HRS

Prices without taxes

No prices on this page

Active Hotels

Tax included

Yes

Rates to Go

Prices without taxes

No

Three of the seven sites I looked at don’t even quote the final price payable on the page where the customer adds their credit card details. It looks like Booking.com, HRS and Ratestogo don’t really mind the negative feelings that could occur here. Perhaps then customers don’t have a negative feeling in this case.

For most hotel websites the fact is that if their rooms are displayed on any of the tax-exclusive sites then they might be better quoting tax-exclusive rates, at least initially. This would at least lead to a level playing field where comparison shoppers are concerned. It might increase conversion rates, and reduce distribution payments also. What is also clear is that pricing, regardless of the tax issue should be clear about what is included and what is not.

So what about legality? Legal or not, it appears that some large organizations with deep pockets are operating a tax-exclusive pricing policy. Perhaps then hotels shouldn’t be worried about the legality as long as far more visible websites are practising this.

UPDATE - Some nice friends and others have rightly pointed out that often the tax pricing situations I have described occur in countries where taxation is more difficult to deal with. My market of interest is Spain, and for Spain all the information written above is true. For other destinations it may not be. However, having worked for many years with the development side of online travel I have to mention that not correcting this problem is less because it is impossible to solve, but because a high enough priority has not been assigned to solve it. Let’s hope in time that common sense prevails and clear pricing practices are forced on all travel vendors.


2 comments:

Anonymous said...

the information you presented is wrong! I'm a booking.com user and one of the main reasons for that is that the hotel rate that is presented to me is the one that I'm going to pay at the hotel. The other cases I don't know but at least I would advise a new research.
Regards.

Mike Potts said...

In this case it appears that we are both right. I carried out this research recently for two of my clients who are both hotel chains in Spain (each with a hotel also in Andorra). In this case Booking.com doesn't display inclusive of taxes.
I will happily apologise for not recognising the tax included stance for other destinations, and refer you Tims follow up post on the issue of complexity.