News today that a class action has been raised in the US against just about everybody who owns or sells a lot of hotel rooms made me smile.
It illustrates how silly the whole OTA sales model became under "rate parity".
Rate parity agreements must have made sense to someone at some point, but they've never made sense to me. I started my hotel career in an era when the internet didn't exist and we choked at the prospect of paying a travel agent anything more than 8% commission. Travel trade net rates were used frequently, but as a hotel general manager, you were constantly trying to find new customers, interest new markets and gently drive your selling price up. That's what we were trained to do, that's what we did. Most of the time... Then the internet came along and everybody got lazy. Or were they just confused? Nah. Lazy. Hoteliers all want sales but they're rarely prepared to invest the time and effort to make them happen. In their world online sales:
- Must cost nothing
- Must involve little effort
- Must be immediately and spectacularly successful
The OTAs delivered a sales proposition that sounded like it delivered on all these things. They could sell "unsold" rooms and everyone believed that (come on guys, like you can sell a sold room...); they could remove the need for the hotelier to make much of an effort (and hoteliers just LOVED that); and finally they could demonstrate quick wins, because that's what you can do when you know how the interweb works.
For hoteliers to want to abdicate their sales responsibility to a third party is one thing. However then agreeing eye-watering commission rates and guaranteeing that you won't compete on price is quite another. Because the result was that the industry did compete on price, encouraged price competition as a sales proposition and then paid the OTA's a commission to do it. It completed on price because price was the ONLY lever available to the OTA's. Then the whole thing was packaged up with rate parity agreements which prevented the hotels from selling their own rooms using special offers and undercutting the agents, despite the fact they could still reduce prices by 15% and be better off than selling the room through the agent. So in times of low demand, hotel prices are artificially set 15 - 20% higher than they would naturally be, because there's a 3rd party who has rigged the market to be able to take their cut no matter what. And the hotel industry lets them do it.
Sure, it's price fixing. But it's very silly price fixing.
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I blogged about this on this very blog last year. People don't seem to be paying attention.
Google Maps and hotel price data - a warning
Basically, Google need live pricing data for this hotel pricing feature on Maps to work. The only places they can get this data in the right (XML) format is from Online Travel Agent websites, large hotel chains or hotels equipped with the "right" PMS systems.
Continue reading "Google Maps hotel price data - privately run hotels beware!"
This article popped in to my inbox this morning.
Hotel marketing article
Now I accept this is an excerpt. I note that the full version is available to the rest of us for about $1,000, but I really can't accept that travel agent websites outperformed hotel websites in terms of sales conversion, simply because hoteliers put their prices up.
Continue reading "Prices to Blame?"
Hotel websites are notorious for using big words where small ones will do. In trying to look or sound clever, luxurious or "high quality" they achieve precisely the opposite effect.
Because the website visitor isn't reading the words.
Up until now, it wasn't that your website visitor was stupid, it was just that their attention was the subject of challenges from all angles.
Now, however, it's getting serious. They really are
Continue reading "Is the internet making your online customers stupid?"
The internet allows you to be everywhere with your marketing.
Be careful that "everywhere" doesn't translate as "all over the place".
There are savage forces at work which can threaten your prices, your profits and your brand.
Yet, if you're going to make the most recent trends work for your business, you will need to be "everywhere".
What are you going to be everywhere with?
Continue reading "Live hotel prices on Google maps #2 - how to be everywhere"
Now that I've had a chance to think about the idea, I've decided I really like what Google are planning.
It's a pity that it's going to be price led, but then the industry has made its bed in that regard and must now learn to lie in it.
And that's what I want to talk to you about today. This innovation from Google may well prove to be revolutionary. The hotel industry in general doesn't cope too well with revolutions and innovations - preferring, as it does, to stick to polishing teaspoons (if I'm preaching to the converted here I apologise, but you know who I'm talking about).
Hoteliers, if you thought the online world moved fast you'd better prepare yourself for this - because it's going to get a whole lot faster.
Continue reading "Live hotel prices on Google maps - no place for the passive"
Many years ago, when I was a boy hotelier, hotel prices were published as high season and low season.
There were variations on the theme for groups, conferences and whatever other market segments you wanted to sell to, but essentially you had one set of prices for times of peak demand (often "summer") and another, lower set of prices for times of weak demand (for example, "winter").
Rate seasons were valid for 3, sometimes 6 months.
Do we use these rate seasons today?
Some websites certainly do. But the days of the long life rate season are numbered.
Continue reading "The death of the rate season?"
Recent apparaisals of the likelihood of a recovery for the hotel industry have started to predict that things will get better in 2011.
You'll notice that the pundits have stopped short of suggesting things might get better in 2010.
That's because they won't be getting better. Indeed, there is evidence to suggest we're going to see things getting worse...
Continue reading "The Economy - Signs of the second dip"
I never thought I'd ever say this - at least not out loud - but I like Ryanair.
I've flown with them three times now. The first trip several years ago - out to Germany which was fair enough. There should have been a return trip of course, but it resulted in such a mess that I was left stranded and I vowed never to darken their door again.
I was wrong of course, the lure of "cheap" is a powerful one. I'm just back from a holiday in Portugal - Ryanair flights out and back, blighted only by a technical failure on the homeward trip which could happen to anyone.
With Ryanair, you need to be aware of what you're buying and WHY you're buying it...
Continue reading "Ryanair - I like it"
Several years ago I was lucky enough to study for a Masters degree at a brilliant business school in Scotland. Even more fortunate - they let me have one...
One of the techniques we learned was how to develop things called scenarios. These are best described as "stories of the future". They're based on a mixture of fact, calculation, insight and understanding. The best ones are tied back in to present day events so you can see your "stories" unfold (if your research has uncovered the right things).
The thing about scenario planning or development is that you create a range of stories covering a number of "possible" futures (typically four of them) - you make no judgement on what the future will be, you can only craft a range of stories that describe the rough directions in which it could go.
"He who predicts the future lies, even when he tells the truth" is an ancient proverb (I can't remember who said it and I apologise now to my old lecturers) which tells us that people who try to tell us what's going to happen are a shower of *******s. At least, that's my interpretation.
Some organisations have tried to use scenarios. In my part of the world, a notable example was VisitScotland, where the chief scenarist described himself as a "crystal ball gazer" - a term which had those of us who have been regularly involved in developing scenarios recoil in horror. His description makes us sound like fortune tellers, which we are emphatically not.
Hotel revenue managers use some scenario derived techniques to help them understand trends and how they might play out. But I don't think the craft is practised quite as effectively as it could be.
Here's a wee look at one "possible future" for 2010: The double dip recession.
Continue reading ""He who predicts the future lies, even when he tells the truth""
It's interesting what can happen when you place a business name or a brand name in an online article.
One of yesterday's blogs mentioned Laterooms. Sure enough, this morning there was somebody from Laterooms having a look around the HotelSphere website. If you're still there - "Hi!".
...and thanks for making me look at my own site and making me find at least one page which wasn't working quite as it should.
Do you know who's looking at your website?
Continue reading "Big Brother is watching you..."
One major OTA - Orbitz - has announced that it is using a "revolutionary" new pricing model
Essentially, they're offering customers yet more peace of mind that they have booked at the best possible rate
. Note, not the best available
rate, the best POSSIBLE
. If you make a booking at £90 and somebody later books the same offer in the same hotel at a lower price, say £80. Orbitz will send you a cheque for £10. Although I must admit, it is not clear at time of writing, just where that £10 comes from...
So what effect might this have on the way you promote your hotel online?
Continue reading "The beginning of the end for late booking discounts?"
At last! Somebody who tells it like it is.
You can say what you like about accountants, but at least some of them are getting people used to the idea that the current economic malaise might not be as much of a "short dip" as a "deep trough".
PKF in the USA are forecasting 60% occupancy for Florida hotels in 2009. PWC are talking about 70% occupancy for London hotels.
The first step in preparing yourself for what may be about to hit in 2009, is to recognise it for what it is.
However, it is not the end of the world.
People will still go on holiday.
People will still stay in hotels.
* people will still go out to eat.
How will you make sure they choose to do these things at your hotel?
Continue reading "PKF and PWC forecast doom and gloom for 2009"
The challenges posed by the economic downturn always seperate good marketers from the rest.
It's a question of waking up, realising what's going on and understanding how your market segments will respond.
There is certainly going to be a recession. It's probably already here.
My information is that house prices will "reset" by at least 30%. I have no reason to believe this won't happen - this insight comes from a man who predicted the Northern Rock debacle as well as the Fannie Mae and Freddie Mac problems. When he speaks - I pay attention.
Energy prices will not stabilise.
Governments will continue to tinker with the economy in the mistaken belief that they can fix it.
But it's not all bad news. You are not all doomed.
There are market segments out there who will be doing very nicely. They still have money to spend. They might be more discerning and they might not be willing to pay full price - but they're out there.
Good marketers will find them, attract them, embrace them and sell them stuff.
Bad marketers will blame the economy.
...they're all doomed.