Expedia Acquisitions Signal Tougher Times Ahead for Hotels

Expedia, Travelocity and Orbitz walk into a bar. 

“We do not serve second and third rate Online Travel Agents here,” says the bartender.

“Well, they are now with me,” answers Expedia, “and the drinks are on me!”

The room erupts with joy. Drinks are flowing.

When Expedia bought out Orbitz within a few weeks of gobbling up Travelocity, it was great news for a lot of stakeholders. But it’s probably not so great for the hotel industry, which relies heavily on online travel agents (OTA’s) for their revenue and profits. Read on before you raise your glass.

First, A Trip Down Memory Lane

One of Expedia’s greatest assets was its first batch of market managers and directors. While Travelocity, Priceline (before booking.com) and Orbitz fumbled, Expedia built strong relationships with hotels and hotel personnel. Aggressive but likable market managers went out in person and made one exclusive deal at a time, pushing its competitors onto the sidelines.

Fast forward to 2015: Expedia acquires the remaining (and still flailing) OTA’s. Meanwhile, Priceline acquires Booking.com, a miracle move that puts Priceline in its own league of awesomeness. It’s shaping up to be a showdown of epic proportions.

Why This Is Bad News for Hotels and Travelers

Travelers, hotel brands and hotel operators all have good reason to fear this sort of consolidation in the OTA market. Let me explain why.

Higher Costs for Hotels

Orbitz and Travelocity lost out to leaders Expedia and Priceline a while back. Still, they had their market share and their contracts in place with hotel suppliers. With this latest consolidation, the option of selling your rooms on a different channel is gone. Your new “Expe-Orbit-Ocity” contract now will contain much higher margins for hotels because there’s nowhere else for hotels to go.

Now, why do hotel brands and operators need Expedia? I’ll say it one more time. Because they do not dominate the search engines, nor do they have a particularly good grasp on their own marketing, direct revenue and ecommerce. Just remember… if you don’t like Expedia, now you can also forget about Travelocity, Orbitz, Wotif and Trivago (all now owned by Expedia).

Airlines, on the other hand, do not have much to fear; they just walk out on the OTA’s like clockwork every year and then get back on board when the margins are corrected.

Industrial Style Customer Service

Supersizing things is generally not a healthy choice. This is especially true when it comes to larger enterprises and customer support. Try calling the ultra-consolidated United Airlines, American Airlines, Comcast, Vonage, UPS, or Network Solutions when you need assistance (as I’m sure you all have). All of these companies have grown through acquisitions, and every step has been a nightmare for their customers. This is yet another reason why Expedia’s shopping spree does not translate into anything good for the hotels that will now have to deal with a behemoth team.

Higher Prices for Travelers

Let’s not forget about the travelers. We all learned in Econ 101 that less competition breeds higher prices. Anyone checking the airfares since the Continental-United and American–US Airways mergers knows what I am talking about.

So what happens the next time you need a hotel room? Sure, go to Booking.com ( rooms only) or Priceline ( Room + Air) and check the rates or  go to Expe-Orbit-Ocity that’s the choice. Even with the astronomical growth of Airbnb, you still might require an airplane to get to your destination. You see? Owning the travel cycle is the name of the game.

Of course, several industry experts are not convinced about price increases for the end customer because travel is such a big market. It may take a longer time for these acquisitions to impact hotels than airlines, but the rise is coming.

“Coke vs Pepsi” for the Hotel Industry

First things first: Priceline’s acquisition of Booking.com under the leadership of Jeffrey Boyd still stands as the greatest acquisition of all time. It should be required reading for all business and hotel schools worldwide. Taking Priceline from a loss of $19 million in 2002 to a profit of $1.1 billion in 2011 is legendary.

Expedia’s acquisition strategy clearly reflects its need to stake out a strong market position in relation to a formidable adversary that started in Europe and is now giving them a run for their money in the US and Asia. It’s disappointing to see Expedia mismanaging its Air Asia partnership in the Asia Pacific market. Having people in the US and Europe manage Asia Pacific is a pitfall that a lot of US-based companies fall into. (APac expansion by a non-Asian company or hotel group is something that deserves its own article.)

A common theme for the two remaining OTA’s is their astronomical spending on online marketing. All this while, hotels (independent and brands) continue to bring a knife to an thermonuclear war. Even if you don’t want to admit it, you know that signing up for a $99- $599/month agency solution is not going to help you reach your full online revenue potential. Neither is hiring an agency with hundreds or thousands of clients.

According to CNBC, Expedia’s marketing costs (direct selling, Google Adwords, display, etc)  jumped 32% in 2014 to $2.26 billion. Priceline hasn’t filed its 2014 annual report yet, but in 2013 the company spent $1.8 billion on Internet marketing. This was a 41% increase from the prior year! Mark Mahaney, an analyst at RBC Capital Markets, estimates 90% of that went to Google. (To put that in perspective, I have worked with major hotel portfolios who balk at a yearly increase of $250/month in AdWords budget.)

For now, Expedia is like the Pepsi to Priceline’s Coke. It’s putting all its US-based failed adversaries out of their misery and playing desperate catch-up to mighty Priceline. As these giants fight it out, brand and independent hotels are just waiting to see what happens. They never took charge of building their own direct revenue and distribution, so they are at the mercy of whoever wins. Their marketing departments have fiddled with buzzwords like “millennial traveler,” shared “social media success” articles circulated by the hotel news media, and cycled through one internet agency after another in a race to pay less and less. As those activities have not done much to build their market share or revenue, hotels now have very limited choices.

So, would you like Coke or Pepsi to be your distributor? And, as in restaurants across the US, the answer is going to be “NO, we don’t serve both.”

Conclusion

In December of 2003, I visited the Dallas HQ of Hotels.com. The market management team had a funny cartoon pinned on their desks of a menacing looking Hotels.com valet using the Expedia.com suitcase to whack the Travelocity Gnome (which was lying sideways on the floor). I look back and realize I was getting a glimpse into the future.

I’ve been saying this for a while, but here I go one more time. It’s going to keep getting harder for hotels to make a profit unless they take control of their online distribution and dive into some real innovation. Instead of trend spotting, agency hiring and firing, and other hi-jinx the focus needs to be on owning and building your own digital assets and direct revenue.

 

 

Marriott’s War on Wi-Fi: Hotels Need to Stop Fighting the Future

Marriott's War on Wi-Fi

Big hotel brands have seen unprecedented growth over the past decade. Even when the global financial engines slowed down, they grew exponentially in global markets (ie, Asia, Middle East, Latin America). But unfortunately, they have forgotten what every Stan Lee fan already knows: with great power comes great responsibility. One of the leaders of the pack – Marriott – has decided to appropriate one of the most important aspects of modern human existence: Wi-Fi.

Let’s start with why Wi-Fi is such an integral part of guest experience in a hotel.

Now, here are your Captain Obvious facts for the day:

  1. Wi-Fi’s impact on hotel bookings: 73% (Yes, it’s beating your location.)
  2. Guests will not come back if they’ve have a bad Wi-Fi experience.
  3. Guests don’t only want Wi-Fi, but they also want it fast. Yes, they, like Tom Cruise in Top Gun, have a need for speed.
  4. Your positive reviews, which have a massive impact on your direct revenue, are directly proportional to the speed of your hotel’s Wi-Fi network.

So that’s why you have to make sure your Wi-Fi is up to your guests’ standards. But what if it’s not, or they just want to use their own? Well, Marriott has a big problem with that.

What Marriott Did

Marriott wants its conference guests to use only their proprietary Wi-Fi network when they are on property. Sounds pretty ridiculous, right? It gets better. At the end of 2014, Marriott Hotels was fined $600,000 dollars by the Federal Communications Commission (FCC) for blocking Wi-Fi signals at one of its hotels. Basically they were preventing guests from using their own Wi-Fi enabled devices, instead forcing them to use the expensive and unreliable “official” Wi-Fi network installed at their convention center.

Anyone who has ever attended a conference knows how annoying and unreliable open hotel convention center Wi-Fi networks are. That’s why anyone in the Internet trade (myself included) carries a broadband Wi-Fi device for two very specific reasons:

  1. Speed and reliability
  2. Security

Can you imagine giving a product demo or presentation on a hotel’s network? *Shudder* So, how much negative press did this get them? Plenty! The story was covered by the Economist. And CNN. Even Huffington Post took time off from covering celebrity wardrobe malfunctions to write about it. Here is the FCC’s official take on the investigation.

How They Did It

One word: jammers. Not to be confused with the little known band from Sioux City, “The Jammers.” Wi-Fi jammers are illegal devices that can be bought cheaply online and then used to block Wi-Fi signal. Here is the full definition of what the FCC considers a jammer. And here’s a quote from FCC’s head of enforcement, Travis LeBlanc: “It is unacceptable for any hotel to intentionally disable personal hotspots while also charging customers and small businesses high fees to use the hotel’s own Wi-Fi network. This practice puts customers in the untenable position of either paying twice for the same service or forgoing Internet access altogether.”

Sore Loser?

So, you’d think Marriott would take this as a (big, flashing) sign of the times; maybe they could work on improving their Wi-Fi policies, and maybe their Wi-Fi service too? No, that would be too easy, and also the right thing to do (two things which rarely go hand in hand). Instead they recruited the American Hotel & Lodging Association (AH&LA) and have petitioned the FCC asking for a declaratory ruling making Wi-Fi jamming legal. Is this real? Yes! You better believe it. Actually, don’t take my word for it…you can just read the official FCC filing.

Their official reason for doing this is even more ridiculous. Marriott argues that its hotels should be able to block guest Wi-Fi devices in the meeting spaces because their network provides:

  1. Increased reliability (LOL*)
  2. Better “cybersecurity” (LOL x2**)

*Personal Mi-Fi device can kick any convention center Wi-Fi’s behind.

**Cybersecuity is an illusion. If someone really wants something you have stored online, they can get to it no matter how hard you try to prevent it. The world is full of teenagers who hack the Department of Defense because they are bored.

Here is a quote from Marriott: “The question at hand is what measures a network operator can take to detect and contain rogue and imposter Wi-Fi hotspots used in our meeting and conference spaces that pose a security threat.” They are basically planning to use “legalized jammers” only in their meeting spaces…but for our own protection, of course. How thoughtful.

Conclusion

There is no way this is going to end well for Marriott, or any other big hotel brands that want to jump on the “security and reliability” bandwagon. Marriott, here’s the way out:

Step 1. Drop it like it’s hot.
Withdraw your FCC filing, issue a simple apology, and then issue guidelines on securing Wi-Fi connections in your meeting spaces.

Step 2. Give your guests free Wi-Fi.
Think bigger than “ancillary revenue.” Offer free and fast Wi-Fi to everyone, and win hearts and minds.

It’s possible that Marriott will ignore my advice and continue on their current path. But this time they are not going up against small individual owners or investment funds they can crush with their legal teams. This time they’re battling Google and Microsoft, who have deeper pockets, more lawyers, and stronger lobbyists than Marriott.

What other massive obstacle are they up against? Sheer public will. You can quote me here: “Charging for Wi-Fi in any form will soon lead to the quick and decisive decline of any hotel in the court of public opinion.” Think of it like indoor plumbing…hotels need to roll it into the cost of the room. Nobody is going to pay extra for “security and reliability” while using your toilet inside the room they paid for; what makes you think they’ll want pay extra for W-Fi inside the meeting space they paid for?

Marriott: Please get real. Wake up and smell your bulk-purchased, medium-quality coffee. Spending money to petition the US government to change its laws in order to make a few extra nickels is wasteful. Why don’t you spend your money on a worthy cause instead, like marriage equality, medical research, or world hunger? Even if you miraculously win the legal battle against FCC +Google + Microsoft, you have already lost in the court of public opinion. It’s a #FAIL no matter how you look at it.

If you’re a hospitality business who’s still charging for Wi-Fi:  Stop fighting the future. Internet is almost as essential as plumbing to today’s guest. Don’t hold them hostage and expect them to like you, or to ever return. Be gracious. Meet the future with a smile and some good, blazing fast, free Wi-Fi. It will do wonders for your revenue in the long term.

 

My Top 6 Articles of 2014

It’s time to say goodbye to 2014. It was an epic year for me, and I especially loved sharing my thoughts about the industry with a wonderful group of loyal readers.

This year my articles were read by visitors from 126 countries! I was most excited to see Bhutan on the list, also known as the happiest country in the world; they actually measure happiness and not GDP as their metric for being a successful country. Let’s try and get some inspiration from Bhutan and do things that make us happy. Producing meaningful content, and having you enjoy and share it, has been a great source of happiness for me.

As always, I had a very international year:

  • I famously said this year at a family party: “I’d rather fly than drive.” I completed 1 million miles in the air with American Airlines in 2014! Nine million more and, according to Clooney’s movie, they will have to name a plane after me.
  • I spent the summer working in Singapore, adding some heavy hitters to our revenue management and asset takeover team. These guys are not only the smartest, but some of the nicest guys in the industry. Also, I love Singapore!
  • I got to work in the Middle East on an amazing project, developing tourism potential for the hotel brand and the country. It’s very exciting, and a wonderful place to work.

In 2015, I plan to continue offering content that you can use to grow professionally without getting bored to death.

As for 2014, the tribe as spoken. Here are the top posts based on traffic, engagement and social sharing:

  1. Priceline’s Acquisition of Buuteeq: Why Hotels Must Own Their Digital Assets  
  2. How Airbnb Is Crushing Traditional Hotel Brands
  3. Reality Check: 7 Questions for Your Hotel Marketing Agency 
  4. It’s Time to Burst the Hotel SEO Bubble: What Hotels Really Need to Know
  5. Hotel Pay Per Click: Your Single Most Powerful Marketing Tool 
  6.  Why You Shouldn’t Sell Rooms for $7 on Hotel Tonight 

Happy New Year, everyone!

 

The End of an Era: IHG Acquires Kimpton

How much is that boutique hotel in the window? Well, it’s around $430 million.

Yes, that’s the price InterContinental Hotels Group (one of the biggest hotel companies in the world) paid to acquire Kimpton Hotels, the original boutique hotel group, which includes 62 hotels and 71 hotel-based restaurants and bars. The number might sound big, but in reality it’s a drop in the IHG ocean of hotel brands and assets.

Having lived in San Francisco, I saw the best and most vibrant years for the local Kimpton hotels. Now it’s come to this: the latest and, I think, fatal blow to Kimpton as a boutique brand, and the Boutique Era itself.

Kimpton, Schrager and Conley walk into the hotel business.

The 80’s were a wild time. It was also the time when the concept of a “boutique hotel” was born. The three people who took this movement mainstream (in chronological order) were:

1. Bill Kimpton, 1981 – Clarion Bedford Hotel, San Francisco
2. Ian Schrager, 1984 – Morgans Hotel, Madison Ave NYC
3. Chip Conley, 1987 – Phoenix Hotel, San Francisco

These three men had one thing in common: they wanted to do something different than what the established brands were doing. Free thinking is something that does not fit the traditional style of a hotel brand (not in the 80’s, and not today). These guys transformed one boring hotel/building at a time into a hotel that had a soul and something unique about it.

Where are they now?

1. Kimpton just sold to IHG (a brand that owns Holiday Inn Express).
2. Ian Schrager is now designing hotels for Marriott.
3. Chip Conley has quit hotels and is now working with the fastest growing lodging distribution company, Airbnb. (Still crushing hotel brands.)

If the three original innovators are abandoning the boutique concept, I’d venture to say that the concept needs to change. This leaves us with only two kinds of hotels: those that are owned by a big brand (Brand Hotels) and those that are not (Independent Hotels). Soulfulness is no longer part of the equation. You just can’t be boutique and big brand at the same time.

Your call is important to us. Please stay on hold.

KimptonTweetsHow quickly things change! Check out the two standard tweet replies now going out from the @kimpton hotels Twitter account. These are used to reply to all tweets, no matter how positive or negative.

Moving forward, everything goes through IHG legal, no matter how “quirky” you say you are. Want quirky? Go to your local independent coffee house. With big brand comes bigger legal teams. No matter how you hard try and spin it, things are going to be different.

The fact is that IHG already owns two “boutique” brands: Hotel Indigo and Even Hotels. Don’t feel too bad if you haven’t heard of them. They are way under the radar, and IHG casts a pretty big radar shadow, making it hard for an independent concept to take off.

Culture Club

I love the typical response that a lot of big brands give when acquiring “boutique” hotels: “It’s the fastest growing segment in the industry.” The fact is that the best kind of independent hotel grows organically. Once under a big brand umbrella, it’s almost impossible to maintain its original culture. Reports of a big hotel company “nurturing” an independent brand are highly exaggerated. Keep it real: nobody spends $450 million and then doesn’t change a thing.

Keeping the culture of an acquisition alive is especially hard for brands because it almost never makes much business sense (at least on paper). Not that big companies are evil. It’s just that everything is based on maximizing efficiency. Culture is never given priority over shareholder value. Remember (and you can quote me): Big companies measure success in dollars and not smiles.

This trend can be seen everywhere. The technology world is riddled with small, amazing product companies that were slaughtered or ingested by larger corporations. Sure, selling to bigger brands makes the founders a lot of money. But in the long term it kills their product, which is what it was really about. I still remember when Google killed Sparrow, and when Yahoo killed Flickr. There are so many small fish (really cool ones) that will never be the same inside the belly of the big fish. Free market capitalism giveth, and free market capitalism taketh away.

What happens next?

IHG, with the limited success of its Indigo/Even brands, capitalizes on the established Kimpton brand. The focus will be on reproducing more hotels under the Kimpton banner, including sub-brands under Kimpton (Monaco and Palomar). There are already 16 Kimpton hotels in the pipeline that are going to experience the full force of IHG’s development team. Next, IHG’s owner connections, and their massive-scale distribution and procurement teams, are going to hit Kimpton, taking it beyond the US market to Europe and Asia. File it under the “big brand buys an independent brand and takes it global” storyline.

Conclusion

Independent hotels will always thrive with outside the box thinking, service and products, and a strong focus on guest experience. By contrast, a hotel brand’s focus is to have McDonald’s style efficiency and economies of scale. This approach is just not compatible with independent thinking. Sure, you can try and buy innovation, but maintaining it with your industrial-strength departments and strategies in place will be really hard, if not impossible.

The hotel industry today is ripe for innovation. As I have said many times, innovation will not come from brands, but from independent hotels and independent thinkers. We are ready for the next generation of hotel people like Kimpton, Schrager and Conley. We’re ready for the next concept. Who is stepping up to the plate to bat for innovation vs mass production? Maybe you?

 

Why You Shouldn’t Sell Rooms for $7 on Hotel Tonight

hoteldisounting

This Thanksgiving holiday in the US was an eventful one for the hospitality industry. What got my attention was the Black Friday offer of $7 rooms on Hotel Tonight (my favorite mobile travel app). Important: Before you read this – No matter who got paid how much in the end or what the real breakup of advertised rate versus actual payment made by Hotel Tonight was was like. The fact is that the guest paid $7 for booking those hotels and that is what he/she will remember.

Hotels all over the US participated in this spectacular deal. Based on my zip code, Hotel Tonight sent me an email informing me that the following hotels in the Midwest were participating:

  • The Godfrey Chicago
  • The Edgewater Madison
  • The Kinzie Chicago
  • The Pfister Hotel Milwaukee
  • The Hotel Minneapolis (a Marriott “Autograph Collection” hotel)

HoteltonightAll were all offering a $7 rooms for a limited time starting at 7 am.

In general, discounting your rooms is not a great idea. But this super-aggressive deep discounting is a whole new dark territory. It’s not a good place for the industry to be, especially at a time when hotels and brands are struggling so hard to define their value thanks to hyper-successful travel startups like Airbnb.  This is scary on many levels. I am talking Wes Craven* and Eli Roth level scary.

*Sam Shank, Founder & CEO of Hotel Tonight, was an assistant to Wes Craven on the film Scream.

No matter how bad the market is, I am not a fan of discounting and never will be. Sure, discounting will fill your hotel…but at what cost? Who is this guest checking into your hotel for $7? What happens to your value perception? The fact is that you are better off giving away a free room instead of attaching a $7 rate to your product. Hotels dropping rates might appear to be winning the occupancy battle, but it pretty much ends there. When it comes to long-term profitability, GoPar and RevPar growth favor hotels who protect the value of their product.

A Great Win for Hotel Tonight

As far as creating buzz, this was an absolute win for Hotel Tonight. Sam went all the way to CNBC with his amazing “Get your $7 hotel room now!” segment. Kudos.

I’m sure Hotel Tonight reached several hundred thousand new people who now know about their wonderful deal-generating, money-saving, last-minute booking app. Are they the “enemy” for promoting themselves? Absolutely not. Likewise, I have always admired OTA’s for focusing their efforts where it truly matters: Online. Besides, anyone who is making travel better and easier for customers is in my good book.

Hotel Tonight has indeed taken mobile usability and distribution to a new level; none of the established hotel brands like Marriott, Hilton, Starwood etc. have even come close. I strongly encourage everyone in the travel business to take note of how well the Hotel Tonight App functions.

Deep Discounting Damages Your Brand and Revenue
Mo’ Discounts, Mo’ Problems (RIP Biggie)

Deep discounting conditions guests to de-value your hotel product. Value, like beauty, is not just in the eye of the beholder…. it’s based on what the beholder paid for it. Here is a chart showing the average rates I found on the participating hotels’ websites (most basic room type, for one-night stay, December 8, 2015):

[table id=4 /]

A severely discounted room rate also has a negative impact on your ongoing marketing and brand building efforts. Once you make public that a room at your fine hotel can be rented for a rock bottom rate of $7, you have created a baseline expectation that is way too low. Boosting your perceived value from $7 all the way up to your regular rate is a mighty task that you did not need to add for yourself. You can quote me on this: It takes years to build your rate, and a moment to destroy it.

To further complicate things, you are not the only hotel in the market. People will associate your competition with higher rates and therefore better overall quality. You will have to deal with this brand erosion long after the excitement of your $7 discount offer wears off.

Healthy Alternatives to Deep Discounting

Got your back against the wall? Low occupancy got you down? Want to create “buzz” for your slow season/dates? Here are some better options for you to consider:

Offer value, not discounts.
There are many ways to make your guest feel all warm and fuzzy. How about offering something extra rather than a rate discount? Adding something extra makes your customers feel they are getting something special instead of attracting bargain-hunters; and it doesn’t cost you your dignity.

Reward loyalty.
How about a special value-added holiday rate plan for your most loyal guests? Create a rate tier for them that they can use during the holidays and lean periods at your hotel. They will feel pampered by receiving extra amenities, and you’ll fill rooms with customers who like you (and vice versa).

Shift your revenue model.
How about a revenue system based on your guests’ overall value? Nobody should ever be sold a $7 room. But a case can be made for offering extras and upgrades to your most profitable guests – the ones who stay with you frequently and/or buy meals, drinks, spa services, etc. Airlines and casinos do this every day. As an elite frequent flier, I love that my total value is considered even on a small flight that I’m taking from point A to point B.

Segment better.
Whom are you selling to? Have you created segments that are priced to trigger bookings? Mass marketing and discounting are so 2001. Every hotel should be working on better segmenting every year based on geographical, corporate, and income-based data from their online and offline analytics.

Conclusion

Discounting is dead. Granted, it’s a zombie that comes back to life every now and then when hotel owners, managers and marketers completely run out of ideas. But you don’t have to be a victim of zombie discounting. There are many other approaches that can help you through a slow season.

I hope that next year on Black Friday we do not see any more $7 hotel rooms. Instead, I would love to see hotels offering great value to their guests for the holiday season, through creative outreach, packaging and upgrades. Going after a sustainable revenue strategy is harder. But, as is often true in life, the harder thing to do is also the right thing to do.

 

 

Front Desk: Ground Zero for Hotel Profitability

Want to increase your profitability, while improving your online reviews at the same time? Then start paying more attention to an area that’s too often overlooked when discussing revenue: your front desk. You need to make the front of the house a solid outpost for your operations, revenue and profitability.

There is often a staggering amount of focus placed on online hotel marketing and reputation management. But these efforts are only effective if your operations – and your guests’ experiences – back them up. As one of the departments that operates 24/7, your front desk deserves a lot more attention and training than many seasoned asset managers and GM’s realize. That saying about making a good first impression? It’s not just a myth. It’s very relevant no matter what hipster, business, or Millennial (shrug) traveler is checking into the hotel.

So, how can you start running a more effective front desk department? Here are some strategies that can help you achieve the trifecta of streamlining profitability, increasing direct revenue, and improving your online reputation.

Hire for Personality

It all starts with hiring the right front desk staff. There are two types of people: those who should be standing at your front desk, and those who should not be anywhere near it. A pleasant personality, positive attitude, and ability to face challenges calmly go a very long way in this role. Cynicism, nonchalance and a negative attitude, on the other hand, are traits that are can drive your overall revenue to the ground.

There is a place for hipness, sassiness and aloofness (The Deuce Hotel perhaps?), but it’s not your hotel front desk. Having unhappy or unpleasant team members at the front of your house is a silent killer, like diabetes. Just because you can’t feel it (or see it on a spreadsheet) doesn’t mean it is not continuously eroding your brand and revenue.

Leave No Agent Behind

Here is a typical scene: A guest is trying to check in at the front desk with a package or promotion – but the front desk employees have never heard of it. This is a source of frustration for guests and employees.

Very early in my career when I was managing the operations at a well-known San Francisco hotel. One afternoon the sales and marketing people were high-fiving each other about an amazing “SF Jazz Festival Package”; but they neglected to tell anyone on the front lines. It was only after several frustrating and disastrous check-ins that the staff realized that there must be a special package in circulation. This kind of experience not only makes the front desk agent look clueless (which is not fair), but also gives your guest the impression that the hotel is disorganized or poorly run. Why make your guest angry at the first point of contact with you hotel?  It’s a terrible feeling on both sides that can be easily avoided by keeping all team members updated.

The same advice applies to revenue management strategies you have in place. If you are not training the front desk, then you are leaving revenue on the table… or shall I say, the front desk.

Empower Your Team

You have to give your front desk team the power to make decisions and solve problems. This is especially relevant when things go wrong for a guest. There will always be unhappy guests. But how you handle them can make an enormous difference to your bottom line.

Unhappy guests can be classified into the following categories:

  • Generally Unhappy People: Nobody can really help them, but your front desk can definitely try to provide some empathy and relief. The goal here is basically not to aggravate them further. Complete satisfaction for this particular group is never going to happen (therapy perhaps?) and should not be a goal for your front desk. However, reducing their pain by offering some incentives is a good way to earn their gratitude, or at least calm them down a little.
  • Good People Having a Bad Experience: These guests need to be the key focus of your (if I may borrow from Amazon) “delivering happiness” efforts. When bad things happen to good people, that’s when your front desk agents can step up their game to try and help out. This group of guests is most likely to appreciate their efforts and then recommend your hotel to their F&F. Front desk agent feels good, guest feels good, you get more business. Win-win-win.

If you just want your front desk staff to be key card slingers, then you might as well get a McDonald’s franchise. (Would you like fries with that?) But if you want issues to get resolved before they hit your hotel’s TripAdvisor page: give the your hotel front desk the power to make decisions without the paperwork and approvals that a Vogon would require.

Upgrade Your Upselling Plan

Every hospitality business needs to have an upselling plan in place. Rewarding your front desk for upselling is a great way to boost your ADR. The catch is that it needs to be done the right way. Identifying the right prospects for upselling is a big part of the game, which means that you have to hire well. Smart, well-trained people will generally pick the right targets for no-pressure upselling.

Not only you should be rewarding for upsells (at least 5% to 8% of the upsell), but also you need to reward agents for walk-in conversions. Sales and marketing should not end once the meeting over coffee and muffins is completed. The sales process should continue 24/7 for 365 days a year at your front desk.

Conclusion

With every asset takeover, I always make it a point to personally meet and train the front desk team. I need them to be my partners in reaching the common goal of increasing revenue and profitability. Marketing and revenue plans set by management are important, but they can never reach their potential without proper support for and from your front desk team. Implement a fresh approach to improving your revenue and reputation: commit to the proper hiring, training, and empowerment of your front desk staff.

Do You View Hotel Marketing as a Cost or an Investment?

I am often asked, “What is the most important factor in a good hotel marketing strategy?” One of the top factors (that no one likes to talk about) is how a hotel’s owners and management view their marketing budget.

Those who treat hotel marketing as an investment will be able to maximize their online revenue potential. They will keep spending investing online, as that is where their audience lives, breathes, researches and books their trips.

Those who view it as a cost will treat it like any other cost; they strive to keep costs down. This group is the one that gives away revenue and market share to the OTAs and their competitors.

Here is a detailed review of the two approaches.

Approach #1: Treating Online Marketing as a Cost

If you are treating online marketing as an expense in your budget that needs to be kept under control, you are very likely on the losing side of the marketing battle. When you apply the cost reduction approach, it puts tremendous pressure on your already limited budget to perform quickly, while limiting your ability to test and optimize your marketing efforts.

No testing or expansion of marketing => Stagnation and decay in your online presence and decline in direct revenue

(Let’s be clear: Your OTA-contributed revenue continues to increase. That’s because they never hold back, while you agonize over every cent you spend.)

Cutting costs might work when it comes to laundry, lotions and soaps that you use in your hotel, but it can hurt you badly when applied to digital marketing.

Here are some specifics on why your revenue will suffer in the long term:

Online travel is huge and getting bigger.

Yes, online travel is like the Beatles in the 60s or yoga pants today. In numbers, it’s going to be hitting $830 billion in 2017. The pace of growth in the Asia Pacific region is enough to make you dizzy. When it comes time for you to sit down and plan your hotel marketing budget for the year ahead, you have to know that online is where all the action is happening. Deciding to sit this one out because you are keeping marketing “expenses” in check is a recipe for disaster that has cost the hotel industry billions in direct revenue.

ROI is a deathtrap.

I have written in detail about this and have personally seen this tragic scenario unfurl like a bad dream. It’s like my own personal Groundhog Day. “ROI” is notoriously hard to track in this multi-device, constantly connected world. For many hotels, especially the ones struggling to meet their overall objectives, any unquantifiable expense can seem like the perfect candidate for a budget cut. So, hotels keep doing online cost-cutting and “vendor hopping“ because they are “not seeing the ROI” (cringe). Agencies who try to win your business based on 5700% ROI promises are always a bad choice. You’ll pay them a small fee, helping you balance this year’s budget; but when the contract is over, you’ll just limp into the arms of the next vendor. The big picture: your direct revenue continually declines, your brand suffers, and you have to start all over again every year. Meanwhile, your online competitors (particularly the OTAs) keep building their long-term strategy and converting the traffic that should be yours.

Google is still King, and it wants more money.

Google is still the king of travel marketing, and looks like it will be sitting on the throne for some time. The beauty of Google is that it has all the phases of the booking cycle covered: Discovery, Research, Rate Shopping, Getting to and From a Destination… all the way to the drive back to your home after the vacation. Google has it all. The SEO Bubble burst in 2013, so now you have a clear choice: pay to play.

Google will be your best friend as long as you are willing to pay for it. Hotel pay per click is one of the cornerstones for generating direct revenue. You want to reduce your marketing costs? Sure, go ahead. Google will be happy to sell its ads to willing and highly motivated online travel agents who make millions billions bidding on your name, location and destination. It’s great for them when you are not there to compete, especially on your brand name searches.

Cliché Alert: It takes money to make money.

It might seem easy to cut back on marketing expenses to save money, but you have to consider what else you’re losing. Example: Reducing your Google PPC budget from $10,000 to $3000 a month saves you $7000 a month. But at the same time, your ads don’t run, your revenue starts to decline, and your leads have been cut way back. No new leads and no new conversions are a lethal hit on your profitability and direct revenue. It used to take months, but now you will feel the revenue hit in a matter of weeks. That sinking feeling? Yes, it’s your revenue tanking because you stopped spending. Welcome to the reality of doing business in 2014.

Approach #2: Treating Online Marketing as an Investment

This is the winner’s circle. Online marketing really is an investment in your present and in your future. It cannot be thought of as an optional expenditure. Think of it as a paying career and a retirement fund rolled into one. Effective marketing pays your bills in the short term and sets the foundation for the long-term profitability of your hotel. The hotels who are doing it right will exponentially increase their profitability over time.

Here is how it’s done right:

Target the entire travel funnel.

The smartest hotel ownership companies and individual asset owners understand the dynamics of the entire sales funnel. Their investment in hotel marketing is targeted toward prospects in every part of the funnel (research, planning, booking). Efforts include:

  • Investing at the top of the funnel to attract prospective new guests (ie, Boston Vacation, Boston Hotels, Boston Things To Do)
  • Investing at the bottom of the funnel to convert prospects into guests (ie, Your Hotel Name)

Push the limits.

The most dramatic successes that my partners and I have achieved for hotel clients had one thing in common: We were asked to investigate and give them the dollar amount needed for total market domination. Whether they were rebranding, opening a new hotel, revitalizing a faltering asset, or preparing to sell the asset… they knew that the striking results they wanted required proper investment. Instead of racing down to the bottom, the owners were looking to make a lot of money. There was no room for light or smooth jazz online marketing. Done right, with revenue as the supreme goal, we’re talking hard core Spinal Tap style marketing, cranked way up to 11!

(Effective revenue management is also required, but that topic deserves its own blog post.)

Conclusion

Hotels who treat online marketing as a scalable cost are seeing a decline in their direct revenue and losing market share to their competitors and online travel agencies. A cost-based approach hampers your growth today, and prevents you from being able to build your brand online. Vendor-hopping toward low profitability and automated marketing platforms is a sure shot way to lose revenue. Let’s face the facts: Print media is not making a comeback anytime soon. Nor are carrier pigeons going to bring you your future reservations. If not online, where else should you be investing? If revenue is important to you… wake up, and put your money where your revenue is!

Reality Check: 7 Questions for Your Hotel Marketing Agency

Everything digital, including marketing, changes rapidly. Hotels know that online marketing is crucial, yet they take a back seat on innovations. Most of the hotel owners/managers I’ve met have been hesitant to do much more than hire an outside agency to handle all things digital. They lack the time, budget, knowledge or interest to get more involved.

Change is in the air again; online marketing for hotels continues to rapidly evolve. So even if you’re not one of those typical hands-off agency clients, there are some questions you need to ask the people you have hired to generate revenue for your hotel through your most profitable channel: your website.

Here are the 7 questions you need to ask to determine how well your digital revenue is being managed.

1. Who is doing the actual marketing work for my hotel?

This is the #1 question you need to ask. Is there a smart, experienced digital marketer looking at your campaign stats and strategy, or is your work being processed by interns in cubicles, or worse… by an automated system with no human oversight.

The large hotel marketing agencies use a factory style approach, which means that the Account Managers are handling several accounts. Your Account Manager is not conducting market research or studying your campaign stats. She is juggling hundreds of emails, chasing down questions and responses, and coordinating conference calls. Meanwhile, an army of task-oriented mass marketing drones report to her; their job is to execute the exact same “strategy” and tasks for every one of her clients. (Picture the factory floor of T- 800 in Terminator. Scary.)

Other than sounding pretty depressing, why does it matter so much to your bottom line? Because mass production cannot produce personalized strategies, and therefore can’t help you compete in today’s marketplace. Personalization has penetrated digital marketing in all industries. Only a thinking person who is setting up a custom strategy and implementing it for you can help you win.

I can’t lay all the blame for this trend on the agencies. Hotels have demanded lower and lower prices, while giving less and less attention to what the agencies are doing. They practically forced the agencies to compete on price, which requires automation and economies of scale. A classic “be careful what you wish for” situation.

Now it’s time to decide how important your online revenue is to you. If you’re ready to take an interest, start by making sure that you another are not just another cog in the nameless wheel of online hotel marketing. Pay a little more if you have to. But keep going back to question #1 – make sure you know what you’re paying for.

2. Are you using any proprietary technology developed by your agency?

If the answer is yes, this is a huge red flag for your online marketing future. There is no gentler way to put this: proprietary software developed by an agency kills innovation. Anything an agency designs and invests money in developing is always going to be focused on making the life of the agency simpler and more profitable. (See #1 above re: agency survival.) Agency software, such as their own content management system (CMS) or digital marketing system (DMS), is not going to help you be an outlier when it comes to online revenue optimization.

It is no secret that I am a huge supporter of WordPress and Google Analytics. As a hotelier looking to truly make a profit, you should be too! Set your priorities right. Build your own revenue, and not just the profitability of your online marketing agency. This is what your hired them to do…remember?

3. How many clients do you have?

Here is how to translate their answer into the level of attention your hotel marketing campaign will get:

• 10-15 – You have a decent chance of getting to work directly with marketing professionals.
• 15-50 – You have a slight chance of getting some personal attention.
• 50-100 – “Your hotel sounds familiar. Who are you again?”
• 100-500 – You are just an account number. No one knows anything about your actual hotel.
• 500-1000 – “Hello, this is Sam, your 14th new Account Manager. Thanks for continuing to send in your monthly check. We don’t have time to talk to you, so don’t even try calling.”
• >1000 – “Hello Client 98765, we have been acquired by a billion dollar company and we really don’t care what happens to you.”

More clients = more employees = more layers = more automation = more mass produced marketing = lower revenue for your hotel.

4. How many clients do you have in my hotel’s market?

Online marketing has a vast reach worldwide. In order for you to reach your full hotel marketing potential, your geographical location has to be a key factor. If your hotel marketing agency has even 1 or 2 other hotel accounts in the exact same market…guess what? The same team that is servicing your account is also working on your competitor’s websites, promotions, packages, PPC and SEO initiatives. That means that everything that has worked for you (specials, packages, promotions, etc.) is going to be used to benefit your direct competitor as well. This “communal” marketing costs you profitability. There are plenty of fish in the sea, but your hotel marketing catch of the day is going to be shared with every other hotel that your agency is servicing in your location. (Yes, sounds fishy, doesn’t it?)

5. Have you done anything other than hotels?

Working in multiple industries provides great learning experience. Throughout my hotel career, I took on interesting and challenging work from diverse sectors like health care, board games, web hosting, etc. If the people working on your account have never looked beyond the hotel industry (and perhaps never beyond their own agency), then you know that they are not going to bring anything exciting to the table.

Industry experience is great. But it’s disturbing to me that hotels are so much more willing to be a nameless, faceless client with an “established” agency rather then give an industry outsider a chance to help them make more money online.

Choosing not to ever work with someone who has outside experience is going to be your loss entirely. I know hotel marketing sounds really complicated, but in fact it’s not. It’s okay to consider letting a specialist from another industry help you out or bring your fresh ideas. Don’t fall for the “do you speak hotel sector language” trap. The language your agency needs to be fluent in is marketing. Besides, if they “speak your language,” remember that they are recycling the same marketing hype to everyone in your industry.

6. Are you a full-service agency?

If the answer is yes, then most likely you are dealing with the Wal-Mart of hotel marketing agencies. Generally, a company’s core competence cannot stretch beyond a few specialties. So how do you think they’re pulling it off?

Agencies often inflate and add services based on the latest buzz in the market. I have seen overnight additions of “Meta Search Marketing,” “Social Media Marketing,” and “Millennial Marketing” on so many agency websites. Every new travel buzzword is promptly packaged into the “full service” offered by hotel marketing agencies. Why don’t the hotels realize that they’re really not getting anything special? Because so many in-house hotel marketing professionals are not only outsourcing the strategy and the work, but they are also being lazy about having to talk with more than one person! C’mon! It’s only your must important revenue channel, right? Show it some respect and get yourself A-Team specialists in different fields, versus the average-performing C- and D-Team players that are conveniently housed under one roof.

7. How big (and how responsive) is your team?

This is the age of rolling out initiatives. Large teams do not translate into effective deployments. I have seen many examples where a 3- to 5-person team skated circles around big agencies. The bigger the ship, the harder it is for them to maneuver when the online market changes. Anyone who has ever dealt with a utilities company knows exactly why there is a phenomenon called “too big to care.” Working with layers upon layers is always going to slow you down. Time, money and online revenue wait for no one. Speed is key, and your hotel marketing has a need…a need for speed.

Conclusion

Google and the Online Travel Agencies (OTA’s) are gearing up for the next level of products: more ways for them to make a direct connection with your potential hotel guest. Also, with the cost of guest acquisition going up for hotels worldwide, it’s crunch time for owners and their marketing budgets. Basically, it’s time to start doing actual marketing versus having it served to you on a platter by a behemoth agency. Big agencies thrive in meetings, conference calls, and monthly reports…basically processes that streamline their lives and give you the illusion of work being done. Remember: Processes equals revenue for them, but not so much for you.

It’s time to focus on quality work from quality people. I recommend that you start by revisiting the budget restrictions you have set for online marketing. Consider how much more revenue you stand to make if you invest a little more in the right people, the right strategies, and the latest technologies. It can’t just be about the number in your expense column. It has to be about winning over your market, your guests, and your rightful share of the revenue pie. Make it about the future. Make it about getting promoted because you took the hotel into the next age of online marketing, and up to a new level of online revenue. Don’t make it about fear of getting fired for spending a little more than you did the year before. Because the future is already here. And in this industry, you can still be one of the first to arrive.

 

A Brief Guide to Managing Your Hotel’s Digital Assets

One of the most crucial aspects of running a hotel or a lodging business is asset management. The same efforts and energy should be used when it comes to your hotel’s digital assets. In my experience working with hotels and asset management firms worldwide, I have seen most of the hotel managers and marketing departments show apathy towards owning and managing their digital assets. Their neglect is usually a result of trying to keep costs down (ie, hiring low-cost digital marketing vendors and leaving management to them), or just a general lack of knowledge about how and why they should pay attention to their digital assets.

Thanks to innovation in open source technology, it’s easier and cheaper than ever before to own your most profitable channel (aka, your website). Here is a brief guide to Hotel Digital Asset Management that any hotel can implement.

Domain Name

Your domain name is the most crucial item in your digital asset portfolio: it’s your identity. You must make sure you that you ALWAYS own your domain. No exceptions. You can check whether or not you own your domain on several registrar websites like this one or this one.

In the event that you are not currently the owner of your website domain, you need to issue a DEFCON 1 level emergency and make the transfer of your domain a high priority.

Worst Case Scenarios

These happen when a domain is registered: in an employee’s or vendor’s name; to an email address nobody is monitoring; or to a member of the previous ownership, when the new owners of a hotel fail to add domain transfer to their acquisition agreement. All of the following scenarios have happened to our clients:

  • One fine morning, the website of a major hotel in NYC went offline because nobody was monitoring the renewal alerts. Luckily, after days of frantic work, the domain was salvaged before going to the open market for auction.
  • A hotel in Chicago had its domain registered to an employee who one day decided to live off the grid. Again, a ton of effort was required to reclaim ownership.
  • In other cases, a web marketing agency registers the hotel’s domain. This is particularly true in cases where owners are clueless about internet and let the agency buy the domain for them. Beware: there are vendors out there who keep their ex-clients’ domains and use those sites for shady link-building purposes; or charge the ex-client a lot of money to re-acquire the domain and keep their website running.

Pro Tips:

  • Use an official/generic email address that you monitor and maintain.
  • Please renew for more than 1-2 years. It costs less than the cost of a meal at a fine dining establishment. Never let the cheapest asset you own cost you the most amount of agony.

Website & Content Management System (CMS)

If you have been reading my articles for a while, you know this is something I am very passionate about. The majority of the world’s hotels are not knowledgable (or choose to be in the dark) about owning their website, their single most important source of direct revenue. Ownership of your website simply cannot be ignored if you are serious about making direct revenue and building your online presence.

Worst Case Scenarios

Your investment in online marketing is about generating direct revenue from your website and building your brand. After years of paying a hotel marketing agency and investing your own time, you may be forced to start from scratch when you switch vendors. Will this will happen to you? Yes, you will lose everything if your website is built on a rented structure that you do not own and cannot take with you.

[What is a rented structure? A “proprietary CMS” that is exclusive to your design or marketing agency. And before you get caught up in the sales pitch, remember: it wasn’t created to be the best CMS; it was created to keep clients from leaving. To put it another way, anyone using a custom CMS is just like Sisyphus, cursed to start from scratch time and time again, no matter how much money and effort you have put in.]

Pro Tips:

  • Please read this article every time someone tries to scare you out of using an open source CMS like WordPress.
  • Remember, any design and any kind of website can be powered by WordPress, so you are free to pick any designer and any marketing agency you like.
  • Make sure you don’t rent the engine of your most powerful revenue machine!

Website Analytics

Your website analytics data is another crucial asset that you cannot leave in the hands of a hotel marketing agency. I have been an evangelist for using Google Analytics for as long as I have been in this business. Do not let agencies push you into using expensive analytics programs like Adobe Site Catalyst (Omniture). Please know that it’s for their benefit not yours, and you will never be able to afford to keep it once you switch vendors unless you are a super rich hotel. Even then, why drive a Ferrari to the grocery store?

Worst Case Scenario

With one click, you can lose years of data on how your website has performed. Loss of revenue, conversion and site performance history will result in starting from scratch and a brief period of flying blind. Historical and seasonal data loss is scary when you are setting up your KPI’s (key performance indicators) and benchmarking website performance. Cowboy marketers who do not care about any historical data might disagree with me. But in reality, you simply cannot abandon your historical data every time you switch vendors.

Pro Tips:

  • Google Analytics has replaced older “Administrator” and “User” roles with four cool new options: Manage, Edit, Collaborate, and Read/Analyze.
  • Always ensure that you own the Google Account that is associated with Analytics.
  • Never use an employee/vendor email to register your Google Accounts.

Social Media Platforms

Every hotel today is registered on a number of social media platforms. Depending on the hotel, a lot of time and effort may have been spent on maintaining these accounts. Not only are all of your connections, friends, and customers there, but also your analytics and conversation history.

All of your social media platforms are associated with an email account. Make sure that you maintain a list of the emails/usernames that were used to register these accounts. If you lose access to your account, portability of your history and followers to a new account is hard. Also, you cannot really make the social media network do anything to help you. Why? Elementary: you clicked Agree on their 131-page user agreement when you opened the account.

Worst Case Scenarios

It takes years to build a reputation and a second to ruin it. This is particularly true when disgruntled employees/vendors who are registered users on your hotel’s social media accounts decide to “teach you a lesson.” Negative and offensive content posted under your handle can cause you a lot of online and offline heartache. Don’t waste time apologizing when you could be doing something productive with your time instead.

Pro Tip:

  • Use an official/generic email address that you monitor and maintain. Instead of john@yourhotel.com use marketing@yourhotel.com.
  • Please use better passwords than “password” or “123456,” and change them periodically.

Conclusion

The age of renting digital assets has already cost the hotel and lodging sector a lot of revenue. Restarting from scratch is simply not an option when it comes to your digital presence. Your hotel’s digital assets deserve the same respect as the deed to the property. Those who don’t respect their digital assets will continue to pay the heavy price of losing revenue and momentum every time they bounce from one low-cost vendor to another.

Priceline’s Acquisition of Buuteeq: Why Hotels Must Own Their Digital Assets

The hotel marketing and distribution world was recently shaken when Priceline Group (aka, The #1 Lodging Online Travel Agency in the World) acquired Buuteeq for an undisclosed sum. This officially makes them the first OTA to directly enter the B2B hotel marketing services sector.

Can you hear me now?

For over nine years, in every one of my lectures, workshops, consultations – just about every interaction with hoteliers – I have tried to stress the importance of owning your digital assets (your domain, website, analytics, etc). I have evangelized WordPress to the hotel sector for quite some time now. I could not have more strongly urged hotels to own their own website, their single most profitable marketing and revenue channel.

If you haven’t been listening, this acquisition should be a huge wake-up call. Ownership of your digital assets is more important than ever before in the history of the lodging business. Who provides your technology and in what format really matters. In this case, if your hotel is using a website made by Buuteeq, your site is now essentially a subsidiary of one of the biggest OTAs in the world.

If you find your hotel in this situation, you’re not alone. The majority of hotels worldwide are renting their digital assets, and this is hurting their long term direct revenue potential. Every time a hotel goes through a change in vendors, ownership or management, they are practically starting from scratch with a brand new website, marketing campaign, etc. In fact, in my experience, many hotels make their digital asset purchasing decisions on the basis of the lowest possible cost, likeability of sales people and existing relationships, with little regard for long-term profitability.

Stop Renting Your Most Profitable Channel

Owning and managing a lodging business worth millions of dollars and then renting its website from a vendor is a bad idea that has become very popular with hoteliers. I have never passed up an opportunity to try to steer hotels away from proprietary content management systems (CMS). It’s fine to hire someone to do your online marketing, as long as they build upon a platform that you control. This ensures continuity in your online marketing efforts.

Each of the leading  hotel marketing agencies has its own “special” system that is billed as being “much safer and magically superior” to open source platforms like WordPress. These agencies boast of having hundreds or thousands of hotel clients; the size and ubiquitousness of these agencies is exactly what makes them feel like safe choices when they are being hired by hotel marketing departments. But it’s the agency who gets security from this setup: hotel websites built on their proprietary platforms make it difficult for those clients to leave.

The Art of Misdirection

Last year, I wrote a popular article about why hotels should ignore the hyperbole of software vendors and hotel marketing agencies, and should embrace WordPress when selecting a content management system for their websites. (You can read it here.) I was specifically addressing a ridiculous article that Buuteeq’s SEO manager had written about WordPress being a bad choice for hotels. His agenda was clear: spread misinformation about the open source systems hotels were starting to ask their sales teams about.

How bloody ironic it is that less than a year later, Priceline has acquired Buuteeq along with the content management system that now powers hundreds (thousands?) of hotel and B&B websites. You cannot buy this kind of irony with bags of cash, even Priceline’s cash. Buuteeq obviously had a goal: to steer hotels and other lodging clients into their proprietary system in the hopes of gaining enough volume to cash out. Mission accomplished.

Hotel owners and marketers who made the choice to forfeit the ownership of their most profitable channel are the ones who lose in this deal. Today their website is owned by a company with market capitalization of 63.17B. (Yes, that is billions).

The Truth About Your Agency’s Website CMS

There are a quite a few mega hotel marketing agencies in the US and Europe that boast of having thousands of hotel clients. They all have one thing in common: hundreds upon hundreds of hotel clients sitting on a clunky, proprietary CMS platform that is years behind WordPress (and they know it). Here are the three real reasons custom CMS platforms exist in the hotel marketing industry, despite what your sales rep might tell you:

  1. Sales: They help the agencies make a phony but appealing sales pitch. Fake awards are won, security touted, new versions released with much fanfare; even CMS systems with “secret SEO sauces” are peddled. Salespeople know that hotels will not be asking them digital asset ownership questions; they will keep making sales as long as customers are willing to be dazzled by superlatives and a low price. So the reviews and awards keep getting shinier, and the prices keep getting lower. The systems, however, aren’t getting any better. (Psst: WordPress gets better all the time. That’s the beauty of open source technology.)
  2. Efficiency: A proprietary website platform creates massive efficiencies in website hosting, production and management. This is the reason you can get a website for as low as $100. Overworked, underpaid project managers use the CMS to manage hundreds of websites. You too will have access to change your content and photos, but only the limited access that is built into the system. Please don’t think you will ever own your website. You are just renting, as they intended you to do. You don’t have ownership or control.
  3. Pain: The CMS delivers a potent kiss of death when a customer decides to leave. You think you have paid for a website, but without the content management system it’s worthless. When you leave, you take only the contents of your former website with you (usually in a Word document that is emailed to you). The platform – the framework that holds the whole thing together – doesn’t belong to you. Sometimes even the photos don’t belong to you; certainly not the SEO ( Search Engine Optimization) efforts you paid for over the years. Every time you switch, you leave it all behind. You start from the beginning and lose all momentum, so you can experience the pain of revenue loss as a penalty for leaving.

It’s an Epic Race Down to the Bottom

Forest Key, one of the founders of Buuteeq, said in an interview in 2011 (that you can read here), and I quote: “Our biggest competition today is the legacy relationships that the hotels may have with a web design agency. These agencies tend to be very small, often individual proprietors, and provide custom design and development services to the hotel, usually charging $60-150 USD per hour.” He clearly identified the one thing that hits home with a lot of decision-makers in the hotel and lodging business: They view online marketing as an expense. Something that needs to be controlled and kept in check.

Many hotels and consultants happily jumped on the Buuteeq bandwagon due to their price point, with zero thought given to digital asset ownership. Since this interview three years ago, Buuteeq created an aggressive sales team and offered rock bottom prices that no agency could match. The result: Hotels were steered away from open source platforms they would have owned in favor of an inexpensive closed system they rented.

Even brands like Choice Hotels  jumped on the Buuteeq bandwagon. Buuteeq custom-designed an integration to the Choice Hotels’s CRS (central reservation system) that they branded as  “Digital Direct Program” which is now available to 5,000 Choice brand hotels. What can I say? It’s a classic story of “brand meets new low-cost vendor,no real questions asked, brand falls in love. the end”

Choice Hotel’s intention here was probably to  help the hotel owners generate more direct revenue. Instead, their “Digital Direct Program” did not give any thought whatsoever to digital asset ownership. It’s classic sort term thinking that kicks in when hotel brands go technology shopping. Choice Hotels could have directly invested in open source for their franchisees, but it chose not to because the harder thing to do and the right thing to do are usually the same thing. Instead, now their franchisees can have a “website ready in less than a week” for $99/month, but the will never really own that website. Additionally, those hotels who opted into the program now have their most profitable channel (their websites +analytics +online marketing) owned by Priceline.com’s newly acquired subsidiary. Let’s not forget, Priceline already sells several of these very same hotel rooms on  their own website, of course for a commission to the same owners.

So, we come to the real question. If hotel owners are getting (renting) their most profitable channel (their website) from Buuteeq for $100/month, which is basically the cost of one Starbucks latte a day…do you think they really care about or understand the value of direct revenue? The answer is no, just in case you are wondering.

Furthermore, how many hours do you think the agency spends on improving their clients’ $100 – $500 websites every month? (And how many hotel clients ask this question?)

I am a huge fan of efficiency and new technology, but it’s this race down to the bottom that bothers me. The acceptable level of spending on a hotel’s most profitable channel is getting lower every day, which, I might remind you, is the very opposite of what the OTA’s are doing themselves!

Remember this: It will always matter who maintains and owns your digital assets, no matter what sales people tell you. If you have any doubt, look at what their own company is doing, not what they’re saying.

Conclusion

Online marketing vendors have always been bought and sold. Buuteeq is one of the many hotel marketing vendors that have recently been acquired. Priceline, unlike most of the hotel brands, has always invested in the right digital assets and their results speak for themselves. It’s only a matter of time that Priceline will spin Buuteeq into a highly profitable moneymaker for them rather than let them run as an independent platform for hotels.

Hotels should take a cue and  stop viewing their digital assets as rentable commodities. They must stop viewing their website and online marketing as expenses, and start recognizing that their digital assets and marketing are investments in their future. Nothing will change unless hotels and brands embrace open source technology, own their digital assets, and stop outsourcing their strategic thinking to the lowest bidder. Vendors come and go; your online presence needs to be consistent and lasting.