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When acquisition costs are high, retention is key.
A Closed User Group (CUG) is a group of people whose membership of the group is not automatic; they have to have:
- Actively opted in
- Accessed the group by means of a password-protected login
- A member profile
- Made at least one prior booking as a member of the CUG
CUGs are commonly used in agreements between online travel agents (OTAs) and hotels as exceptions to rate parity clauses, which otherwise state that the hotel cannot undercut rates given to the OTA directly on their websites.
The most commonly mentioned mechanism for this is the hotel loyalty programme, however, OTAs also offer schemes, such as Booking.com’s Genius.
Better for consumers?
Cheaper rates do benefit consumers, but placing them behind member logins doesn’t provide the best user experience for guests who want access to the cheapest rates upfront, and this is likely why some hotels are displaying member rates directly in the search results of their websites.
The hotel member rates might not be visible on metasearch sites and even if the user does make it to the hotel website, they now have to pass a sign-up/sign-in stage before completing a booking, when studies have found that interjecting a checkout process with a sign-up form can create a barrier and increase abandonment.
These campaigns do more than promote cheaper rates however, they encourage loyalty.
There is still more that hotels can do to raise the visibility of specific member rate offers, with both Google’s Remarketing Lists for Search Ads and Facebook’s Custom Audiences being potential routes to advertise specific member rates publicly beyond the website, to those identified as being part of a CUG.
It is interesting to consider what place CUGs will have in the distribution mix in coming years though, especially if negotiation or changes in rate parity regulation give hotels free reign to control pricing by channel.
Given that closed user groups are looking more and more open, we can at least hope for a more transparent market for consumers in future.