The 800 Pound Gorilla In The Back Office

It is every hotel’s nightmare.  Revenue managers stay up night’s scratching their heads wondering whether or not they are advising their clients to do the right thing.  Yes – I am referring to the ‘800 pound gorilla” in everyone’s back office!  The opaque channels.

I like a deal just as much as any consumer.  I use coupons, I shop for deals, I purchase things on Living Social and Groupon.  But as a hotelier – I hate opaque websites.  I would never shop on an opaque site because the unknown terrifies me – but I know people who do and are happy doing it.  I have had many a heated conversation with a friend (non-hotelier) who confessed to me (the hotelier) over a glass wine that they use third party websites to make their vacation plans.   I liken it to buying coffee.  Buying coffee at a gas station isn’t the same as going to Dunkin’ Donuts…. you get what you pay for.  Would they buy their wine in a box?  My mantra is “Go Direct Young Man!”

But I digress…….

It is such a huge decision whether to play or not to play in the opaque pool.  And, you’re kinda in a damned if you do and damned if you don’t scenario.

Obviously the opaque customer is looking for a deal.  They are less brand or property loyal than our typical corporate customers.  They are stereo-typically budget-conscious, leisure and pleasure customers.  But given the state of today’s economy, we’ve noted that has started to turn and we are finding that more companies are asking their traveling employees to look at opaque websites for the perceived deal – and hotel rates are eroding because of the fees.

So why do we play?  And, do we have to play?

I did a little research today for one of our hotels.  This is a branded property located in a large city with other branded hotels in it’s comp set.  Historically they have booked an inordinate amount of opaque business – business unchallenged by the previous management company.  The previous GM and DOS told us when we took over – ‘don’t raise the rates or limit the inventory on opaque because the business will go elsewhere!”  And, I’ll be darned if that isn’t the case.

I have tossed and turned, and lost much sleep over this situation.

While researching this city’s opaque websites I wondered whether all of our hotels know who in their comp set is playing in the opaque game in their market.  When was the last time you went on Hotwire or Priceline and shopped your market?  And your hotel?  In this hotel example, the information uncovered was very interesting.  While we were offering bargain basement rates in opaque, our comp set was holding strong – at least $30 higher in the lowest threshhold, mirroring our Star Report ADRs!  Yes, they are playing in the pool for visibility (that darn supermarket example again) but they only have their toes in the water!  No wonder we are getting so many bookings through opaque.

Priceline is easy.  You can see your hotel and you can see your competition.  You must be in parity if you are a branded hotel and a similar rate must be available on your website or you will get dinged.  Participation in Priceline is a no-brainer – if you are playing in the third party arena – it doesn’t hurt to play in Priceline’s yard because the price is the same as your website.  (You are on more supermarket shelves!)

Hotwire on the other hand – is a different story.  Your hotel, at your price point, is lumped into a rate category with at least 5-6 other hotels.  They will list the brand options in that price range and the customer plays hotel roulette at that point – getting the rate but not being guaranteed at what property they will be reserved.  If you are not brand or hotel loyal – then so what?

To determine what price tiers you need to have open at your hotel will take careful consideration.  Research all of your competitor hotels.  Go into each price category and see what hotels are listed under each dollar amount.  (You can figure out what are who!)  What price point do you fall under?  Are you in the same category as your comp set? Or are you higher?  Or lower?  Where do you want to be?  Do you want to be there at all?  It is important to really understand if the customer will continue to buy you versus the competition – but in a higher tier.  My suggestion is to start by offering a limited number of inventory in the lowest category you want to play (like 2), then add 3 rooms to the next category up, 5 rooms to the next category up until you get to a category you are comfortable being in with wide open inventory.

I challenge each of our hotels to go to these sites and really dig deep into pricing.  After you gather all the information, send it to me and let’s review whether or not you are playing in the best pool, and how to maximize your revenue potential.

(Oh, by the way – the hotel I was referring to in this example, is still playing in the Priceline pool, but picking, and choosing when to play (with inventory and length of stay restrictions) in the Hotwire pool.  They have put a Go Direct program in at their front desk, they are asking every customer who checks in where they would have stayed if not at their hotel.  We are using the information gathered to better price BAR and discounts, AND although we are not over the hump, we are finally starting to build rate.  I am back to sleeping most nights again.)

Happy researching!

Linda

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