3 Things Any-Size Hotel Should Do During Times Of Low Occupancy
February 3, 2020
February 3, 2020
In a nutshell, I’ll be discussing these 4 items below.
1. More strategic use of OTAs
2. Knowing how to sell online
3. Educating and hiring the right staff
4. Apply basic money management principles to your business
Online travel agencies came to power during an economic downturn. It was at a point where hotels were unable to sell their rooms and were only too happy to let OTAs do the job for them. Hotels have been playing catch-up ever since… but why where OTAs able to do something the hotels themselves could not do?
1. Do the work required
I walked into a hotel a few months ago and asked for a room for a night. The hotel was 80% vacant. The person behind the counter quoted me the walk-in rate. The walk-in rate was $30 more expensive than what they had listed on one of the big OTAs. I asked them about the discrepancy and got the same response I’ve received countless times from other hotels. “Oh, you have to book it through the OTA.”
……wait a minute!!! I am standing in your god damn lobby and you are giving your customer and your profit margin away to some online soulless entity!?!?
It took me 30 minutes to get the GM to come out and ask me “What would you like to pay for the room?” At that point, any normal guest would’ve either booked online or gone somewhere else.
The human aspect
There is one thing technology can’t do for us and that is to save us from ourselves. The hospitality industry is in this unique/precarious position were “human interaction” and knowing your customer needs to come front-and-center or it just won’t work.
Let me circle back to why OTAs were able to sell rooms during a recession. One of the key components was great customer service. They beat the hotels on customer service. Let that sink in. The second was because OTAs got to sell distressed rates. In essence, they were able to sell the same product at a low rate with a smile on their face.
Hotels were not willing to do the work required and would rather give their rates, availability, and customers away to a middle man so guests would just magically walk into the lobby.
It’s exactly the same thing that’s happening to the F&B space as we speak where middlemen such as Food Panda owns the customer and the product owner comes second.
Your relationship with YOUR customers is everything
You know what restaurants in NYC said to Food Panda? “Go F&^$ yourself! Our customer is ours. We’ll hire cheap bicycle messengers ourselves.” They knew the business and the product would suffer if a middle man with no actual value came into the picture.
If you work in the reception of a hotel, get paid peanuts and are just happy to be working in the travel industry and your senior doesn’t tell you to never send walk-in customers to an online OTA… that senior should be fired because he didn’t explain the war raging between OTAs and hotels. If the senior didn’t know, her superior should be fired… et cetera.
And, this problem often comes from the top. GMs full of hubris who would rather play dress-up and walk around the property looking dandy than actually do what the owners require of them; honker down, gather the necessary intel and surround himself with a group of highly trained soldiers who can execute on a sound online/offline strategy. That includes offering outstanding customer service and selling a better product at all costs.
Many immediately interpret this mandate as “We need to sell more direct” and start haggling with a website designer to get the cheapest quote for a website with pretty pictures and slap a booking engine [that came bundled with your channel manager] on it. As a result, they are now the proud owners of a website that can sell direct but with absolutely no strategy. “We have a website” does not translate to sales… especially when you you are competing directly with some incredibly digitally savvy, capital-rich OTAs that are all selling the same product.
Thai hotels are in especially bad shape. Between a strong currency and a fear of a virus outbreak, it’s causing havoc on room occupancy in the region. We are basically back to the recession of yonder years. The question you need to ask yourself this time is “will I give away my power to a middle man again and make him even more powerful or will I fight?”
OTAs are loving the fact that it’s tough for hotels right now. They’ll be expecting more room allocations, lower prices, and higher commissions. They hold no inventory themselves so there is absolutely no risk for them. Beware a person with no skin in the game.
Think outside the box
It is time to level up your game dramatically. Knowing that there is no such thing as a free lunch, it’s time to get to work!
First, define regional strategies for leveraging the services of an OTA. OTAs are here to sell your left-overs for you. You know, the last room close to the elevator or above the loud night club. They’ll charge a pretty penny for it so an OTA is not something to be used haphazardly. Once you are on an OTA it will be very difficult for you to get off it. It’s kinda like that meta amphetamine on Breaking Bad; it just doesn’t want to let you go and sometimes it does funny things to you[r pricing].
In a nutshell, if you continually allocate 75% of your inventory to OTAs, you are being lazy and not doing it right.
2. Sell a better product
Stop competing with OTAs! Every OTA is selling your same generic room rate w or w/o breakfast. You basically have 2 large companies owning most of the B2C space and they are competing for a global set of eyeballs for an identical product. Of course, it’s going to be a price war and of course you will be the one suffering. If you’re going to be on more than one OTA, at least think about the WHAT you are selling through that channel.
I like to sometimes pose the question to hoteliers “What if your room type was cocaine. As the product owner, what would Pablo Escobar do in your situation?” You have a bunch of coke runners trying to own your business. … what do you do?
Two things you can do right away:
1. Sell a higher priced, more luxurious product [Think Apple vs generic PCs]. The premium 5-star hotels are already doing this and most or all of them have a well-defined strategy for whether to even use an OTA because their brand is strong enough to stand on its own. It’s like asking yourself “Does my product deserve its own website or is it so generic that it should be sold in a place with lots of eyeballs; all looking at many similar hotels and maybe then I stand a better chance at being seen?”
2. Sell a bigger experience. If you answered yes to selling boring generic rooms in the lower price ranges, I would say “OK, that is a market… but are you ok with staying there?”
By selling the bigger experience, I am suggesting to first distance yourself from the products you are selling through an OTA. I am also suggesting to start thinking bigger, What else can you sell on/off the property that would differentiate you from your competitors and make you stand out more easily from a crowd, on Google Maps and Trip Advisor? Is there something about your location. Your chef. Your facilities. Do you have nice meeting rooms or restaurants that are never used? Are you able to bundle products together? Is there something seasonal in your area that can be leveraged? Can something on your property tell a more compelling story that you can add some marketing behind and stand out from hotels in your area?
There is a lot more to talk about here but the first thing you want to do is immediately think about selling more than a room night with breakfast. What’s your story going to be about and how will you tell it?
3. Apply proper money management principles
Finally, the most important strategy for any money manager in charge of billions of dollars of other peoples’ money is to diversify risk across multiple investment vehicles.
When a mutual fund manager wants to create an attractive fund that performs well for his customers for years to come, he knows that some stock will go up while others will go down. He needs to pick the ones that have the most chance of going up but that are also not directly correlated. The more variety he is able to find the lower his overall risk coefficient will be.
There are 7+ billion people on planet earth. Some of them are traveling right now and some of them could be staying at your hotel IF they knew it existed. Applying the principles above, your goal would be to make your property available to your most profitable channels and, at the same time, niche channels, where you can tell a slightly different story, in order to lower your risk coefficient. There is no limit to the number of channels. It just needs to make sense strategically the same way it would be for the money manager to choose his stocks. Is it biotech? Is it green? Is it oil and gas? Again, what’s your story and who are you telling it to?
Yes, this means more work for you.
What are my options?
You have your segments and for some hotels, it makes total sense to be a corporate hotel or a destination site for bus loads of tourists traveling the world through an agent. Segments depend on your story. Where are most of your customers coming from? “Most of” is still just your best performing stock at any current moment. Here today – Gone tomorrow. In order to go the Warren Buffet distance, you need to commit to more than just a segment.
That’s where we come in. If you currently use only two OTA channels, a lot of things can go wrong. Commissions go too high. There are too many similar hotels in the area. You get blacklisted. They play with your pricing. One of them goes out of business. Et cetera.
How would you like to sell your inventory across 1000s or even 100000s of other channels at the same time? We decentralize your inventory and make it available everywhere where the OTA is not. You focus on selling a unique product and we will see to it that it is seen by lots and lots of people. We partner with influencers, Facebook, Instagram, YouTube sensations and, most importantly, 100+ million travel bloggers to get your products out to a millions of potential guests. In turn, they earn a real commission for helping you sell the inventory you allocated them.
You can track the KPI of each influencer, budding blogger and YouTube sensation and assign each of them a commission and any kind of inventory you want. You only pay when there is a booking and the commissions will be lower than what you pay the OTAs because all these channels will also be competing amongst themselves. It’s no longer just 2 monopolies fighting each other and fighting you.
Hope this was entertaining. Until next time!
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Bjorn Harvold is the CTO and co-founder of iko.travel and traveliko.com