A Hotel Guide for Avoiding OTA Panic and Rate Parity Games

OTAs are a fact of life in our industry. But there are so many negative feelings about them, constantly being stoked by hotel media, that it becomes difficult for hotels to form calm, cohesive OTA and rate-setting strategies.

OTA-bashing articles surface every few months, no matter what cycle the travel business is in. These articles usually involve screenshots of OTA rates being lower than the hotel’s direct rates, leading to complete disgust and a ton of hate reading. Other times, these feelings of fear and loathing towards OTAs are triggered at conferences by speakers going for some cheap applause.

I would like to ask you to put all that aside, and keep an open mind. Please remember that, as a revenue professional, your goal in life is not to teach the OTAs a lesson. It is to make more revenue! You should try to avoid Maslow’s hammer approach when thinking about your relationship with your distribution partners:

If the only tool you have is a hammer, it is tempting to treat everything as if it were a nail.

Your revenue strategy cannot be focused on proving that the OTAs are an evil empire, and that only your rate parity games will topple them. The goal of pricing is to make sure that you convert all of your hotel investments into revenue.

Now, if you’re ready, please read on to learn about some OTA and pricing strategies that have delivered millions in revenue for owners and operators that have embraced it.

The Rate Parity Games

Rate parity surfaces a couple of times a year. Usually, it is:

  • Declared dead
  • Something that is killing your direct revenue

I am posting a third option for you to consider: Don’t play games.

People are posting articles filled with “screenshots of proof,” as if they have finally located the Chupacabra or Bigfoot. A lower rate published on an OTA versus a hotel website is highlighted as a “gotcha moment” and a complete failure of your parity-based pricing strategy. The “game over” vibes are pretty doom and gloom (even for me). They make me think of Bill Paxton.

Rate parity should not be misrepresented as loading the same rates on all channels… and then immediately going to bed, zero follow up. Dynamic pricing requires a little bit more work than that. Once your rates are loaded, you have to keep an eye on the OTA channels, like Booking and Expedia, and monitor what they are doing with the rate you gave them.

Here are reasons/examples of how and why they might be showing lower rates:

  • Are they running opaque promos?
  • Are they running mobile promos?
  • Are they running merchant model promos?

If the answer is yes, then please match these offers on your website. Instead of canceling your entire participation with them, do your best to implement competitive rates on your direct channels.

In other words, once the rates are uploaded to the OTA, don’t assume your revenue manager is then handcuffed and cannot make any edits! When you notice parity issues, do something about it right away. Some examples:

  • Run your own private promos.
  • Run your own mobile promos.
  • Offer direct value that OTAs cannot match.

If your current booking engine technology vendor does not permit you to take these actions, then find one who does. The answer is not abandoning parity; it is having the smarts to monitor and enforce it on all channels when possible.

Ah, The Good Ol’ Billboard Effect

A big argument against rate parity in pricing is the idea that there is no billboard effect for an independent hotel that is listed on a global OTA. This study was first published back in 2009 by Cornell University, with another follow up written in 2017.

I am not here to debate the billboard effect. If you feel strongly that this does not have any relevance, then please withdraw from the OTA channels and watch your competition overtake you.

It is very easy for direct revenue fanatics to throw the billboard effect under the bus. Do you know why? Most of them are not personally invested in the asset. And if there is one thing that I have learned from working in revenue optimization for 20+ years, it is this:

It is very easy to be a revolutionary with other people’s money.

I will elaborate more on these revolutionaries below. For now, let’s look at some traffic and revenue stats for the top OTAs in the business:

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If you want to opt out of this exposure and revenue stream because a consultant, marketing agency or software provider thinks you can 100% make up for it using their direct revenue software? Then all I can say is… good for you! Abandon all parity and put your lowest rate on your website. Then give it some time and watch your competitors do circles around you. The effect of this strategy is not sudden death but more like diabetes… a slow decline, which means that by the time you discover it, it’s too late.

There Is No Free Lunch!

It’s not just a saying! An actual mathematical theorem highlights a fact that we have all known for a while: There are no shortcuts to success.

Dealing with OTAs may seem painful when you just think of the commissions. However, do we expect them to give us traffic and revenue for free? Commission, while painful, is the cost of doing business. The Princess Bride probably said it best:

OTAs don’t owe you anything. You can try to undercut them and limit your participation to prove a point. But in the end, that decision is going to cost you revenue and loss of market share as an independent hotel. No amount of creative marketing or software can protect you from this outcome.

Guest Ownership Quandary

We can debate all we want, but hotels don’t “own” the guest. Neither do the OTAs or any other form of travel agent. Your hotel guest today is a little smarter than we like to give them credit for.

Since the pandemic, most hotels have seen their direct revenue share grow. In spite of the “death of rate parity,” the overall market share of every hotel that maintains true rate parity has gone up. How is this happening if the guests are mindless, price-driven sheep? This is happening for a simple reason: they are looking for value and not just a few dollars off the rate.

If you want guests to book direct, you have to showcase value in addition to a good rate. Flexible cancellation policies over the past two years drove a huge volume of bookings for direct channels. Hotels answering their phones and actually helping guests also enabled higher rates, plus more direct bookings and increased market share. Have you ever tried to locate someone at an OTA to quickly resolve your booking issues? There is no substitute for direct contact with someone who you are going to be staying with.

Give your guests a little more credit. Instead of “owning” them, offer them value that only you can give them. And please accept that people who are hooked on OTAs will always book there, no matter what. It could be loyalty, points, or just habit. Don’t wage a war to try to convert these guests on your website. It’s the same as trying to get a Marriott loyalist to stay at your independent hotel. Even if you have a superior product, he will pick the breakfast buffet with watered down scrambled eggs every time to maintain his status with the brand.

Playing Revolutionary With Other People’s Money

Direct revenue is a crucial component of your distribution strategy. You have to work to build and grow it whenever possible. Vendors often present direct revenue as a magical, pain-free solution to all your revenue problems. However, there is a limit to your reach and your budget when it comes to marketing your hotel to a global audience. This is particularly relevant to independent hotels that do not have a brand contributing to their revenue base.

I read something ridiculous last year along the lines of “You should withdraw your hotel from all merchant models and promotions.” Someone selling software and services was calling for hotels to withdraw from all the OTAs and then double down on offering mobile discounts on their direct channels.

I have noticed that most of the direct revenue revolutionaries are playing with other people’s money. If they were paying the mortgage, payroll, insurance and fees on a hotel asset from their own bank account, I guarantee you they would be participating in everything 24-7.

You see, I too fancy myself as a hotel revolutionary. However, I am not going to sabotage the asset owners’ finances to prove a point. That is highly unethical and risky behavior with negative consequences.

Your revenue strategy is not a zero-sum game that you play with your distribution partners. Celebrating lack of visibility on OTAs and assuming everything will magically come in “direct” is deeply flawed logic. An independent hotel today cannot afford this level of carelessness when it comes to their distribution strategy.

Conclusion

I wanted to share my thoughts on how your hotel can stop hating and start focusing on improving your revenue and distribution mix. My strategies have delivered millions in top line revenue for assets I have worked with over the years. So please view this article as more than a think piece. This is real cold hard cash we are talking about! And it might even feel good to let go of some of those negative feelings and start viewing the OTAs as partners. Focus on negotiating the best contracts with them, and make them work to your advantage. And take responsibility for maintaining parity by offering rates or added value that make your direct offers more appealing to guests.

RIP BookingSuite: Protecting Your Hotel’s Digital Assets

On November 30th of this year, Booking/Priceline is shutting down its BookingSuite product, likely affecting hundreds of hotels worldwide. In short, they will stop running websites, booking engines, and revenue management software for their hotel clients. Even with the volume of hotels they amassed on their platform, the headache is clearly not worth it to them anymore. Sadly, they timed the shutdown during the toughest year on record for the hotel and travel industry. In addition to dealing with the pandemic, hotels on their platform now need to gather their digital assets and go vendor hunting. That’s not an easy task even in the best of times.

This is not the first or last time a crisis like this has hit our industry. In fact, it’s a lot like the hospitality industry’s version of Groundhog Day (Palm Springs for younger readers). The free/cheap/rentable/leased hotel website trap has sprung and once again hundreds of hotels are trapped. Why is it so hard for us to learn from history? If only someone were writing about digital asset management for hotels, warning us about a likely collapse of their digital assets platform?

BookingSuite’s demise in the middle of a global pandemic is yet another opportunity for hotels to learn that software companies are not their friends. Their core focus is their own balance sheet and profits. Concern for the long-term profitability of your hotel asset lies with you alone. The cheapest option will almost always end up costing you more in the end.

Here are some renewed thoughts on owning, managing and investing in your digital assets and revenue.

Play It for Me One More Time

History repeats itself, sometimes very quickly. Let’s take a quick look back at the BookingSuite origin story.

It starts like all hotel software disaster stories… with an acquisition. Booking.com acquired Buuteeq, a company peddling $150-$500/month websites to hotels and small inns. The platform was designed to churn out cheap, quick websites using templates and as little effort as possible. The operative word was cheap, and it took off in an industry that is always reluctant to make digital investments.

As with any typical hotel tech startup, funding was deployed on heavy sales and marketing, including paid speaking slots at hospitality conferences. “It’s cheap and I don’t have to do any work? Sign me up!” is how the industry responded. Hundreds upon hundreds of hotels jumped on the opportunity to rent their “most profitable channel” for a few hundred dollars a month.

Then one morning, hotels woke up to find that their most profitable channel was now a part of Booking.com (the word’s biggest Online Travel Agency)… you know, the guys they thought they were battling by spending a few hundred dollars on their Buuteeq websites and marketing plans.

At that point everyone came to their senses and started planning how they would manage their own digital assets, right? Nope. Status quo prevailed and people forgot.

A few years later in 2020, the alarm clock beeps at 6am, and I Got You, Babe starts playing on the radio…again. And I am writing yet another article on the importance of owning your digital assets.

Making a Bigger Boat

BookingSuite was run by some of the smartest people in the travel business. The Priceline Inc. empire knows a thing or two about making money. They quickly capitalized on the fact that hotels are always reluctant to spend on digital assets. With a marketing budget and knowledge base infinitely bigger than Buuteeq’s, Booking.com did what it knows to do: scale quickly and make more money! To take things to another level, they were going to need a bigger boat.

So, they expanded the product line by adding a booking engine (aka booking button) and revenue management software (which was made possible by their acquisition of a company named Price Match, based out of Paris). And just like that, a façade of “direct revenue channel presence” could be achieved cheaply. Owners and managers scratched it off their to-do lists and in one swoop migrated everything over.

Next, BookingSuite got rid of those pesky monthly retainers and switched to a straight-up 10% commission model. So get this: A typical hotel on the BookingSuite platform was already paying them a 10-15% commission on inventory sold on Booking.com. Now, in addition to that, the hotels started paying them a 10% commish on every room sold on their own hotel website! A racket so deep, it would make Tony Soprano blush.

I have mentioned this a lot in my previous articles, but I have to say it again so please take note: Booking.com is really, really good at making money. I wish hotels would watch and learn to operate with the same passion for revenue.

Titanic, Meet Iceberg

There were clear warning signs. This iceberg in the open waters was spotted by yours truly back when Booking took over Buuteeq and got into the hotel digital asset game. None of their acquisitions are designed to help hotels make more money. The goal for them has always been to gain insights and maximize their own profits.

Looking back, you can clearly see the warning shot they fired when they shut down online marketing services back in 2017. The smart folks at BookingSuite very quickly figured out that offering online marketing services for hotels was not worth their time. So, in the peak of the travel boom in 2017, they sent an email announcing their OG “difficult decision” of shutting down their SEM (Google AdWords) services.

They wanted to shift focus to activities where they could make money from you without actually doing too much work. Here is the email they sent back in the day.

Three years later, they pulled the plug on the whole BookingSuite program. No surprise.

Another Day, Another Difficult Decision

Fast forward to 2020, when another “difficult decision” email strikes inboxes across the globe. This time they are removing the trifecta of digital services: your hotel website, booking engine and revenue management software. If your hotel website and/or booking engine and/or revenue management system was with BookingSuite…then I think the “decision” part was made by them, but the “difficult” part is 100% your problem now.

Years of renting cheap digital assets and software has caught up with the industry, again. Hundreds of hotels are scrambling for support in the middle of the pandemic. Many are left with a zip file of their website, content, and photos (aka, their most profitable channel). If you have been reading my articles for a while, you know that owning your biggest digital asset is something I am very passionate about. Yet even in 2020, hotels are still not knowledgeable: they choose to be in the dark.

Shady agencies touting the gospel of direct revenue are also helping to make sure that the hotels working with them stay trapped in website content management system (CMS) dependency. Most agencies outsource all their work (eg, to India or Colombia), where your hotel website is managed in a digital sweatshop. Of course, you are assigned an overworked “account manager” here in the US who is simply forwarding emails all day to you and dozens of hotels just like you. I actually do not like the smell of cheap, generic strategy in the morning.

As these agencies grow, they super-optimize their offering and everything starts to look the same. This is the biggest reason we have a plague of sameness across the hundreds of design-heavy, content-free hotel websites; the same “book direct and save” Google Ads; the same social media posts; the same 50% off email newsletters. Yes, those drone videos, hyperbolic adjectives in content, and cliché photography all come from the same place.

Why would you choose to be an independent hotel if you want to use cookie cutter digital assets and strategy? Hotel brands have already achieved this level of mass production. Big brand hotels have dedicated vendors for conformity, from websites to toilet paper. Why masquerade as an independent hotel when everything you do is in the style of a brand hotel? Maybe it’s time to make a switch to digital independence.

A Brief Guide to Avoiding Worst Case Scenarios

You can prevent yourself from experiencing a vendor-induced disaster. You don’t have to let the next big industry acquisition destroy your digital assets. Here is a list of things you can protect today:

  1. Domain: This is the cheapest and simplest digital asset to always have registered in your name. Maintain ownership via a dedicated email address, phone number and address. Also, don’t be cheap; renew domains for 10+ years whenever you can. Having rescued several domains for hotels during acquisitions, I am here to tell you: do not take domain ownership lightly. I have seen/experienced some awful scenarios… I might write a horror series about it one day.
  2. Website: Never rent a website. That super low monthly fee or installment is going to come back one day and bite you. A proprietary content management system that is exclusive to your design or marketing agency is another red flag. And before you get caught up in the sales pitch, remember: If you are not using an open source platform like WordPress, you are going to eventually regret that decision. Don’t end up like Sisyphus, cursed to start from scratch time and time again. 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. Just let them know you prefer to own your digital assets. If they protest…find another agency.
  3. Revenue Management Software: Many RMS systems claim to be built on magical, AI-powered, Machine Learning software. I don’t expect you build one for yourself using open source software. So, short of getting a team of engineers and data scientists, how can you protect yourself? The answer lies in something you provide to the RMS system every day so it can do its job: Data. No matter how established you think your vendor is, remember that they are one acquisition away from disappearing on you. As a small hotel, you can back up all your data using a simple service like Office 365. Larger management companies must invest in something more complicated and back up everything on Amazon Web Services, Microsoft Azure or Google Cloud. RMS systems cannot do anything without your data, but please don’t rely on them to keep it safe for you. Your vendor might love you today, but do you think it will last forever? As Outkast aptly pointed out back in 2000:

    “I hope we feel like this forever
    Forever, forever, ever, forever, ever?”

  4. Hotel Booking Engine: As with the RMS, I’m not expecting you to hire a team of developers and code writers to make you an online shopping cart. This is a service you will have to buy. But you still need to look after your data. The most useful data export from a booking engine or shopping cart is your e-commerce conversion data. This info ties directly into analytics data from your other crucial digital asset, your website. Do not leave your historical data in the hands of a hotel marketing agency/vendor. I have been a Google Analytics evangelist 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, for old people like me). Open a Google Analytics account that is owned by you and is 100% integrated into your booking engine to retain all of your e-commerce conversion data. That is your gold mine to hold onto when someone decides to pull the plug on you. Software is great; data is greater. If your vendor pulls the rug out from under your feet, you may fall hard… but you can retain your data and some dignity before you start with a new vendor.
  5. Marketing Campaigns: You’ve probably figured out what I’m going to say already: make sure you own your hotel marketing campaign. Paid search marketing is a powerful tool, but you must own the relationship with Google via your own corporate, hotel, or personal credit card. Set up a generic Gmail address that you control and make sure your vendor builds out the campaign for you using that address. Then, if your vendor ever makes the difficult decision to stop working with you, you can walk away with your own campaigns, which you have been paying for for years.

A Few Good Agencies

Yes, there are still a few good agencies and software vendors that are passionate about what they do. They are not looking to grow fast so they can sell themselves to a conglomerate. They are run by owners who are directly involved in working with you, and they are willing to help you own, run and manage effective websites built on open source platforms. These are the people who have cut back their retainers during the pandemic while continuing to support their clients at the same level of service. If you do decide to leave them at any stage, it is not a disaster. They won’t leave you with nothing but a zip file. If they are in it for the long haul, they are more interested in maintaining their integrity and reputation.

Now more than ever, marketing and digital innovation will be ushered in by smaller, smarter and leaner teams. Innovation requires hard work hard and commitment. The few good ones are hard to find, so do your research and ask questions. Clue: The larger they are, the more likely they are to cash out at the first opportunity to sell their business.

Conclusion

The bad habit of renting digital assets has already cost the hotel and lodging sector a lot of time and revenue. Restarting from scratch is a hard option, especially when it comes to your hotel’s digital presence. Your digital assets deserve the same respect as your physical assets. The alternative is to repeatedly to pay the heavy price of losing revenue and momentum every time you bounce from one low-cost vendor to another. This latest disaster for hotels might be caused by Booking.com, but hotels that chose to rent their digital assets have 100% responsibility here. When you sign up for something that is too good to be true, don’t be surprised when it doesn’t work out in the long run. My goal here is to highlight a simple fact, over and over and over: Please invest in owning your digital assets and marketing campaigns. Then work with the right people and watch your revenue grow. Vendors will come and go, but your momentum and your profits should always stay with you.

Pandemic Pricing Principles for Hotels

Pandemic Pricing For Hotels

This is my second pandemic-themed article, following the last magnum opus on Hotel Marketing and Revenue Management in the Time of Pandemic. I was definitely hoping for things to be better by now. I still have a lot of optimism. However, for now, the hospitality and travel industry must continue to undergo a massive overhaul in how we think about and operate almost every single department. Owners, employees, brands and investors will continue to take a direct hit from an event that we thought was only possible in disaster movies. But there are things we can do to mitigate our losses.

Pricing needs your attention today, almost as much as everything else you are doing to get your hotel asset ready to reopen and operate safely. Although I’ve never seen a situation exactly like this one, I know how to observe market trends and adjust accordingly. I have very clear ideas on how to weather this disruption and be positioned for success in the future.

Inspired by Biggie’s commandments, I have written you a pandemic pricing manual of sorts. You know, ‘a step by step booklet, to get your hotel revenue game on track, not your profits pushed back’. Ok, I will stop trying to rhyme! Let’s dive into some of my pandemic pricing principals.

Avoid the Speculation Olympics

Opinions can be made to look like facts when you add professional looking graphs and charts, plus a healthy dose of PR. I am not talking about information on the virus… I am talking about the new sport many industry experts love to participate in: Travel Recovery Speculation.

The 2020 Tokyo Summer Olympics might have been postponed, but the 2020 Hotel Recovery Speculation Olympics are going strong. I have received and declined my fair share of invites to get on a virtual meeting to speculate about recovery timelines. How can we speculate when everything is so fluid?

Historical data from past disasters does not help much, as we have never experienced anything like this situation before. Companies selling data and software are obviously panicking. Why would a hotel pay for irrelevant historical and/or forecasting data? This pandemic is nothing like 9-11 or the 2008 global financial crisis. You can amuse yourself by overlaying recovery graphs and timelines from past disasters and then trying to make a prediction. Just don’t base your strategy on that. Forcing unrelated data to fit your narrative is about as effective as tasseography.

Can’t fight the urge to speculate? How about we speculate on these issues instead:

  • The pandemic has brutally exposed payroll inefficiencies in revenue management and marketing departments across both independent and brand hotels. How many CROs, SVPs, VPs, Directors and Managers does it really take to pick the right rates for your hotel/portfolio?
  • Is your marketing team actually producing any marketing or are they just juggling vendors? What services are you still paying for, and why?
  • Can your revenue team call rates without usable historical data, purely based on market conditions?
  • Does your revenue team need to be on property anymore?

Get to a white board and start coming up with ideas on how to run your hotel leaner than ever before. Let your imagination run wild! This is a much better use of your time.

Dynamic Pricing or Bust

Seasonal and historical rate charts are now DOA. The same applies to any rates you might have historically quoted for groups and meetings. That piece of business is not coming back for a little while. As one of my good industry friends in NYC said to me the other day, in a strong NY accent of course:

“Groups and Meetings business? In this economy!? Fuggedaboutit!”

Dad jokes aside, the sudden demise of travel demand on a global scale is an opportunity for you to switch to dynamic pricing if you were not already doing so. Here are some things to consider when setting rates in the current market:

  • Survival Needs: How much revenue does your asset need to survive? The keyword here is survive. Don’t forget to account for any  changes in fixed costs, debt, payroll, insurance, interest payments, etc. It’s hard to believe, but there are still owners who do not know the actual cost of an unsold room at their hotel. Setting survival goals is step one in pricing yourself out of this disaster.
  • Competitor Pricing: With the global hotel market in flux, you need a new approach to researching the competition. You can still look at their rates, but you don’t know what your competitors’ survival needs are. If you are seeing strange pricing around you, you don’t have to follow their lead. Love your hotel product, but check yourself before pricing yourself out of the market.
  • Supply and Demand: Most major travel destinations are flooded with supply and have little demand. The development pipeline for new hotels in the US was pretty robust when the year started. Are any new hotels opening in your market soon? If so, they are going to be competing for your market share using a fresher product. Are any hotels temporarily shutting down? You can price adjust to capture demand that is not being met by others.
  • External Factors: These are X factors that can quickly change everything for your asset and location. Examples include state regulations, border closures, airline capacity restrictions, vaccine updates, job market changes, unemployment numbers, etc. In short, they are things outside your control that directly impact your demand and your rates. Pricing dynamically forces you to monitor these factors when setting rates, giving you an edge over your competition. There is no magical AI-powered revenue management software that can calculate X-factor values and help you price. Get ready to put in the hours and grab that extra cup of coffee (or tea), as you are going to need it.

Dynamic pricing is a very old school approach. It is not a new concept or just a marketing tagline that can be used to sell software or services. Until the price tag was invented in the 1870s, pricing for almost everything was completely dynamic. If you don’t know… now you know.

Revenues vs Feelings

Here is a very important lesson I learned while working for the top hotel private equity fund in the world:

You cannot deposit your feelings into a bank account. Banks only accept cash.

The Bank of Feelings is an imaginary entity that exists in our head. Focusing on actual revenue numbers instead of feelings has had a tremendous positive effect on my career. Numbers and reality are your friends when it comes to pricing decisions. Don’t let your ego and self-worth get entangled with your pricing strategy.

Here are two pricing ideologies that the pandemic is rendering obsolete:

1. A lower rate is going to attract a certain type of ‘unsavory’ guest to my establishment.

Reality check: The pandemic has cost the US 20.6 million jobs since mid-March, resulting in an unemployment rate of 14.7%. These are numbers we have not seen since the Great Depression (source: Pew, US.DOL). There is a very good chance that the same people who paid a high rate at your hotel in January 2020 are now under- or unemployed. Are the same people now unsavory because they have fallen off a cliff and are working their way back up? Why would you not reach out to get them back at a lower rate for now? It’s the same people, just with a smaller wallet.

Everyone is looking for a deal right now and being cautious with their money. This is even more relevant for independent/boutique hotels that spent millions ‘building a brand and a following.’ Give people a chance to experience your product for the first time or as a returning guest, and accept some money to help you pay your bills. That’s how global recovery starts…one dollar at a time.

2. If I lower my rates now, it will take years to build up my ADR/rate again.

Reality check: Thanks to the pandemic, this is simply not true anymore. This year, the world economy fell apart. In addition, people are still severely restricted as to where they can travel. Your dynamic pricing adjustments should reflect that reality. When the pent-up demand returns, simply pull up your rates up in tandem. Remember, airlines have never hesitated to heavily fluctuate rates based on market demand. Why can’t hotels do it too? Stop using rate recovery charts from past disasters and chart your own path for recovery.

A notable exception to everything I mentioned above is the type of property I like to call a “trophy asset.” These owners don’t care about reality or numbers. They demand a high ADR number so they can brag about it over a round of golf. For everyone else, please follow my simple rule:

“Catch revenue, not feelings.”
– Vikram Singh, 2020

Make a Call

As a hotel owner/investor/manager, this is the time to ask yourself a very simple question: Is your goal to help your asset recover from this pandemic and make money? If you answered yes, then the key is not to overanalyze to the point of decision paralysis. Please make a call and play the market. It is better to make a mistake than stay paralyzed in fear of the rates not working.

Wandering in the middle of the road (picking a rate “in the middle” of what you’re seeing in your market), assuming that demand will just land in your lap, is a bad idea for pricing and life in general. Mr. Miyagi taught us this very important lesson in the Karate Kid all the way back in 1984. Words to live by when pricing in the pandemic:

“Walk right side, safe. Walk left side, safe. Walk middle … sooner or later you get squish like grape.”

– Mr. Miyagi, Karate Kid (1984)

When historical metrics are no longer applicable, you have to pick a direction based on your product, location and basic survival needs. If you make an incorrect call, don’t panic! It takes just a few clicks to make adjustments and you get right back on your pricing horse. Making a call right or left is better than blindly following the market in the middle. Don’t get squished!

Pricing Enlightenment

What is more annoying than seeing “unprecedented times” and “the new normal” in our daily emails and conversations? For me, it is people pretending to be instant experts in pandemic pricing. Working with hotels during a previous disaster (9-11, Global Financial Crisis, etc.) does not automatically qualify you to solve this one.

This is my first (and hopefully last) Global Pandemic. Even after decades in the revenue/marketing game, I have had to rework and relearn a lot! You simply cannot skip the hard work and jump straight into a clairvoyant state, which I like to call “Pricing Enlightenment.”

Pricing Enlightenment:
When you pick rates based on your feelings, without considering current market conditions.

I’ve talked with many hotel owners who are convinced that their asset can fetch a higher rate than current reality suggests. On the flip side are the low ballers who refuse to yield their rates upward, even when the business picks up. Being dynamic with rates is the right path forward, but it does involve work and commitment.

Don’t Promo the Pandemic

Please resist the temptation to reduce your entire pandemic recovery strategy to a discount code! Promo-ing the pandemic is one of the worst long-term strategic mistakes you can make. Flash sales and massive discounting reads “we have officially run out of ideas” for an asset/brand. This strategy revolves around the magical thinking that a massive rate promo will create new demand in your market.

Demand generation is about aligning your marketing and sales efforts. Instead of a a fire sale promo code, offer a really good reopening-fall-winter rate for your asset. Focus on the value of your product instead of giving 50% off to anyone clicking on an email. Instead of discount/promo codes, offer fair rates. No games. Just full transparency about the fact that you really appreciate their business.

Almost every week since the pandemic started, I have received a “40% to 50% off best available rate” email from a hotel or brand. Not to bring up my friends at Melia Hotels again, but they have been hitting me with a discount deal every two weeks! I received a 50% flash sale email (see below) just as I was writing this post! I heard the opening theme from Curb Your Enthusiasm playing in my head. Reminder: This is after I wrote a massive Hotel CRM Guide inspired by one full year of emails from them.

If discounting your rates by 40-50% created market demand during a pandemic, hotels would all be sitting at 80-90% occupancy right now. Instead, you need to showcase your product value. What are you offering? Is it the right price? How are you better than your competition? Ask these simple questions before clicking Send on your campaigns. In short, market share cannot be captured with lazy marketing anymore. You will have to work harder and smarter than everyone else out there.

Stop OTA Warfare

In my last article, I quoted myself as saying: “Recovery will happen from ALL channels.” It only took about a week for another anti-OTA thought piece to appear, followed by another.

Sometimes it feels like we are living in a simulation. With hotel occupancy worldwide sitting at historic low % points, what does a battle cry against OTAs achieve for hotels at this point? Expedia came out with a $275 million partner recovery program. Around $250 million of that will be in the form of marketing credits, followed by a temporary reduction in commission for lodging partners. Some experts spun this as a bad idea. I saw a slew of articles along the lines of “OMG it’s just like 9-11” being recirculated by industry press.

It baffles me when anyone uses 9-11 to scare you about recovery from the pandemic. Why would you decide not to work with a global hotel distribution powerhouse while your asset is sitting at under 10% or 20% occupancy? Booking and Expedia are suffering too and have been hit with with massive layoffs. Meanwhile, if they are sending you some business…what’s the problem? Nothing is free, including direct revenue everyone loves to talk about.

I have observed that it is very easy to be a hardcore “book direct” revolutionary with other people’s money and investment. The fact remains that owners, employees and investors need revenue from any and all sources right now. I have been extremely fortunate to be working with owners who understand this and are allowing their assets to recover instead of grandstanding about parity and commissions. Other people are leaving money on the table. Which works for me – I take that money and deposit it into my clients’ bank accounts.

Conclusion

Nothing lasts forever, with the notable exception of Wu Tang. You can read 100 articles a day about recovery and about 100 more about the end of the world. But instead of going on an emotional roller coaster, I recommend that you focus on what’s left of 2020 and then start looking at your 2021-22 revenue strategy.

I recommend a 100% back to basics approach for best results. The immediate goal should be staying alive and healthy (for both you and the asset). It is an excellent time to collaborate with all channels to make some revenue. There are no perfect answers, but you have to take action. Using historical pricing or just following others in your market is not an option. It’s okay to make a mistake and then recalibrate. But you have to roll up your sleeves and jump in right away. Whatever you do… don’t throw away your shot!

Hotel Marketing and Revenue Management in the Time of Pandemic

Hotel Revenue Management the time of pandemic

As I write my first article during a global pandemic, my title inspiration comes from the Columbian literary superstar, Gabriel García Márquez. COVID-19 has rapidly decimated the industry I have worked in for over 20 years. There have been hardships before, but this one seems darker and more insidious than anything we have seen before. Nobody knows exactly what lies ahead, but the current reality is that thousands of our hospitality industry colleagues – many in my own personal network – have lost their livelihood or taken huge cutbacks in compensation and benefits.

March was a month filled with bad news that was staggered by geo-location, as my client base lies across varied geographies and asset types. The last of the hotel assets in my portfolio closed down on April 1. As most business comes to a grinding halt with everyone in quarantine, it has become a time for deep reflection and reconnection. I have had the chance to speak with many of my industry friends who are reeling from the effects.

With the world in quarantine, I have been surprised to see many hospitality vendors already posting their “recovery and marketing guides,” as if this is a just another minor hiccup and we are weeks/months away from business as usual. It is simply irresponsible to package a pandemic into a how-to guide. One of my close friends, industry legend Martin Soler, coined a term for this: vendsplaining.*

Vendsplaining (noun): When a hotel marketing/software vendor takes a complex problem – with specific implications for each individual client – and reduces it to a simplified “issue” that their one-size-fits-all proprietary guide or tool can solve. 

That term quickly inspired me to come up with my own term: vendcast.**

Vendcast (noun): A webcast sponsored by one or more hotel marketing vendors that addresses problems faced by hotels by offering regional or generalized strategies and tools.

* I have obtained Martin’s permission to use this word at every given opportunity.

**At the time of writing this, there are about seven vendcasts in progress, in which the vendors are vendsplaining how to beat the pandemic with a perfect plan/guide.

There is a ton of speculation on recovery timelines. I will not be doing that in this article, in case that is what you were looking for. But the one thing everyone can agree on is that a fundamental shift is inevitable in the way we operate hotels, restaurants, and airlines and plan our travel. This article is a summation of my thoughts on how things can and should change. Many of these thoughts arose from time I spent on calls with travel industry friends, ranging from Jedi masters, asset managers, investors, clients, and…vendors who don’t vendsplain (yes, they do exist!). I am focusing on the two areas of the travel business in which I have been professionally engaged for two decades: Revenue Optimization and Marketing.

There Will Be Blood

First things first. Nobody is coming out of this unscathed. From a remote four-room inn to the 650-room big box brand hotel across from the convention center in a major city, every property will be affected. I have seen articles from some so-called experts calling this “a swing of the pendulum.” That’s incorrect, as this is more a swing of the axe. No matter what the recovery timetable ends up being in the end…people and corporations across the globe are recognizing inefficiencies in how they conducted business before the global shutdown.

Here are some of the major travel industry players taking a direct hit:

In summary, there is no AI-powered pricing software, content strategy, or digital marketing ad campaign that can help hotels recover revenue quickly. Acceptance of loss has to be the first step in what looks to be a slow recovery. Anyone offering a swift hack to get everything back to business as usual should be avoided, like the coronavirus itself.

Hotel Revenue Management: What’s Next?

Some revenue optimization basics are always prudent, but all strategies need be tailored to your location, as well as regional and global financial trends. Pricing is crucial but your product still has to deliver corresponding value. Amenities like breakfast, upgrades, etc. will be more relevant than ever. So letʻs not forget the basics: your databases, room types, distribution mix, and most of all your offering all impact your profitability. What I have outlined below are some broader changes that may be coming into play over the next several months and years.

The Ides of March

2019, which now seems like so many years ago, was a good year for most hotels worldwide. To quote Dickens: “It was the best of times, it was the worst of times.” Why? Because the RevPar growth was already slowing down following the recovery from our last financial meltdown in 2008.

The warning signs pointing toward the end of boom cycle for travel were already there. In addition to it being an election year in the US, recession was already on the lips of many finance world soothsayers, warning us of imminent decline at the end of a growth cycle.

Asset managers, owners and operators worldwide were chasing ADR growth for 2019, as it was the only way to increase profits. But that was easier said than done. Why?

  • New demand in the market was nicely met by all the new hotels going online. This made it harder for the established hotels to pull in big ADR numbers.
  • Rate of inflation was higher than the ADR growth, which in simple terms means “it got more expensive to run a hotel.” Rising costs can eat into your profits real quick, and that is where the majority of hotels were losing money. Payroll expenses kept going up.

The general forecast for 2020 from top industry sources like STR and Phocuswright was never super rosy to begin with. A major correction in rates was already under way before the pandemic in markets like Seattle, Houston, Boston, etc. Markets were dealing with their own issues. Case in point: San Francisco was reeling from negative press, interactive street poop maps, and loss of major conventions (Oracle Open World) due to high ADR’s and “poor street conditions.”

We have a tendency to look back at the “good old days.” I want to make sure we stay cognizant of the fact that signs of the slowdown were everywhere…we were at the end of the 10-year growth cycle. But nobody expected 2020 to fall off the cliff like it did.

When people eventually start traveling again, the comeback will be slow and painful for a lot of hotels. As a revenue optimization professional, I foresee some long hours ahead on the road to recovery. As I look into the future, talk with my colleagues and make notes on my trusted whiteboard, here are some things I can see changing for our industry.

Goodbye, Non-Refundable Rates

You read that right. I think it is time to say goodbye to this incredibly tempting rate type, which the industry embraced during the good times. As a guest, nothing is more annoying than realizing after a change of plans (for a variety of valid reasons) that you booked a great deal at a hotel you are not going to visit anymore. Airlines are the kings of non-refundable fares; like everything else in revenue management that trickles down from airlines to hotels, we embraced it and made it a part of our industry. Check out the horrible press that Airbnb received for their complicated and confusing refund policies.

It is time for both independent and brand hotels to step away from this rate type and let people book with confidence. Taking people hostage with terms and conditions seems out of place in the world we are about to inherit. Recovery starts with flexibility and, yes, you can quote me:

“Recovery starts with flexibility.”

– Vikram Singh

We simply cannot take people’s wallets hostage anymore. A crisis like this presents the perfect opportunity to embrace flexibility and use it to build “brand loyalty,” something we all love to talk about but very few know how to transform into revenue.

Ending Direct Revenue Mania

This point will soon be published as its own lengthy article. It was slated to be my next topic before the outbreak. However, here is a very basic TLDR summary:

Over the past few years, there has been a certain fanaticism about Direct Revenue. Software and marketing vendors have made it their tag line. It has been cast as the holiest and purest of all revenue channels. The term “most profitable channel” has been used ad nauseam. I strongly believe that we need to make a slight correction here. Maybe chill out with the direct hyperbole, maybe do some meditation and yoga to relax?

The recovery, when it happens, will be one of the worst times to get picky about distribution costs and wage wars on your distribution partners. We already know that a massive correction is about to happen to hotels and their distribution mixes. Direct channel is and always will be important, nobody is arguing that but it is not free money. There is cost associated with it and it has its limitations when it comes to generating the volume of revenue it takes to make a profit.

Vendors with “I Love Direct” and “Direct or Die” facial tattoos will need to get off their high horses and walk a few miles to cool off. Let’s go back to the 80’s when Frankie say relax. Remember,  direct revenue is not free money. The industry needs to come to terms with the costs that are associated with all channels. We cannot afford to tilt at windmills anymore. (It’s also a great time to read/reread El Ingenioso Hidalgo Don Quixote de la Mancha.) Obsession over an idea, no matter how noble, never ends well. You can quote me on this:

“Recovery will happen from all channels.”

– Vikram Singh

The Distribution Remix

Keeping in mind the unique recovery challenges associated with this pandemic, let’s take a brief look into the future. Groups and accounts associated with large meetings and conventions will likely take the longest time to come back. Corporate travel, which is traditionally the first one to bounce back, will also take more time based on the massive number of furloughs and layoffs. Hiring back always takes longer than taking an axe to the workforce.

Local drive markets will see the first signs of recovery. Eventually, the world will slowly but surely return to air travel, eager to meet family, friends and colleagues, and having forgotten about dirty airplanes, liquid bans, squalid airports, and the joys of TSA screenings. Maybe they will even cram themselves like sardines into basic economy fares to travel the globe. However, for the US market, incentivized in-state traffic will usher in the recovery, followed later by national and then international traffic.

For all your revenue management initiatives, remember that there has never been a more important time to be nice to your neighbors. I want you to read this with the Mister Rogers intro theme playing in your head.

The End of Resort Fees

I don’t think any two words have invoked a more venomous reaction from hotel guests over the last two decades than “Resort Fees” (aka: Urban Fees, Facility Fees, Destination Fees, Resort Charge, etc). A fee by any other name would be equally notorious. Critics of the fee have called it the “most deceptive and unfair pricing practice in the hotel industry.” It allows hotels to advertise a low rate and then ask for more money at check-in, even if the guest is not interested in using the amenities it supposedly covers. Even as a hotel revenue professional, it sounds pretty bad when I type it here. It’s basically drip pricing for hotels.

The resort fees trend started in the US (mid-1990’s) and has generated tremendous hate. How much hate are we talking here? I am glad you asked. So much that, as of this writing, 47 Attorneys General have opened an investigation into it. The most dramatic example was when Marriott Hotels was issued a subpoena by the Washington DC Attorney General for their non-cooperation.

In a most bizarre, almost surreal period in the travel business, the two top OTA’s are doing their part to “tackle resort fees” while major brands stay silent.

Expedia: They offer higher rankings to hotels not charging resort fees. Their official statement reads: “We know hotel-collected mandatory fees can be confusing to consumers, and we expect, among otherwise equivalent hotels, these changes will result in higher visibility on our sites for hotels not charging these fees.” In short, if you charge resort fees, Expedia will lower your rankings on their booking site and show guests a warning that you charge resort fees. Wow!.*

*In Owen Wilson’s voice. Please enjoy a 2-minute, 35-second compilation of him saying “wow”. You’re welcome.

Booking: It’s no surprise that in classic Booking.com fashion, they want a piece of the resort fees pie. They are including resort fees when calculating their commission. Official statement: “Hopefully, this will help continue to push the entire industry toward more transparency and fewer ‘surprises’ for customers.” 911, I would like to report a murderous sweet burn. If you can’t best them, make some money off of them in the name of transparency. Hey, nobody has ever accused Booking of not being great at making money. The fact that they used the word transparency is the ultimate atomic burn on our industry. Do kids still say atomic burn? Probably not, but you guys get the gist of it.

Post-pandemic recovery will be a great time for hotels (both brand and independent) to move away from drip pricing and give the guest confidence when they are booking their next trip. Big hotel brands like Marriott, Hyatt, Hilton and IHG have a tremendous opportunity right now take the lead on this. After all the complaints and articles about “evil OTA’s” stealing their customers, how can major brands let them lead the charge on transparent pricing? Are we awake, or is this a dream inside a dream inside another dream? Can someone please start playing Edith Piaf and give me an inception kick?

Brands need to show that they really care about their customers beyond sending everyone in their database a COVID-19 email, or posting videos of their CEO in tears, or yelling at them to “BOOK DIRECT” via expensive well-paid celebrities. An opportunity to take the lead has landed on the laps of the most powerful decision-makers in the hospitality industry. Please, let’s do the right thing.

Hotel Marketing: What’s Next?

As with revenue management, winds of change have been blowing in the marketing landscape for a while. All hotel websites look the same, everyone has a drone video, hotel ads look the same, all are inviting us to book direct and save, most mobile booking experience sucks, all have a best rate guarantee and, finally, all hotels are offering 20%- 40% off their best available rates in their email blasts.

A complete shutdown of non-essential travel is also the hard-reset button for hotel and travel marketing teams worldwide. This is the right time to start thinking about how you plan to be different when things get back online. Over the years, I have told hotels to:

Build Better Websites
Get Better Booking Engines
Stop Spending on “SEO”
Start Spending on Ads That Work
Stop Wasting Money on TripAdvisor
Send Better Emails
Have Better Hotel Events
Upgrade Their Success Metrics
Start Writing Better Content
Start Owning Digital Assets
Do Not Rent/Lease Websites

That’s enough content to publish a small book. Maybe I will one of these days. Until then, I encourage you to reread some the long-form content I have posted and get yourself mentally prepared for the changes ahead.

Here are a few other items I have been getting a lot of questions about.

You Can’t Growth Hack a Pandemic

The final stage of grief is acceptance. Let’s start there. A wide range of COVID-19 recovery strategy guides have already been published without any concrete “open for business” dates from the world’s governments. Based on the content produced so far, I can see that the mindset is still around how marketing is going to save the day. Example: Discount Gary Vee wannabes are busy posting “growth hacking” content that is completely detached from reality. This mindset might have partially worked after some of the other declines hotels have experienced in the past …but this is going to be different. As I write this, 16 million people in the US have lost their jobs. 

The unemployment rate in the US is predicted to hit 15%, which is the highest number since the Second World War. It is irresponsible to spin a marketing guide sitting here in the month of April. Recovery will be hard and extremely hands-on. There is no road to a quick bounce-back, but there will be an eventual bounce-back. It is more important than ever not to oversimplify recovery. Observe and report. Recovery will start locally and expand out from there.

Right now, it’s better to start with some things that are long overdue for an overhaul.

Move Beyond Vendor Management

For most hotels, this a moment of real change. People with the word ‘marketing’ in their job title will have to start doing actual marketing work. There is simply no money left to pay employees for emailing/harassing vendors and then spending useless hours in marketing meetings. There are some very talented people out of work; your recovery will be based on the caliber of people you choose.

There is hope for those whose entire career has been vendor management…they just have to learn how to do actual work. The shutdown is a great time to expand your skills beyond doing marketing calls and playing email jockey.

Hands-on agencies will survive as they are doing the work for owners who are busy running the property. On the flip side, agencies collecting monthly fees from hotels that were sitting at 20% to 30% occupancy even before the pandemic hit… will simply not make it. The luxury of paying agencies thousands of dollars every month to change a few words and photos on your website and run a few Google Ads are over. Specially when you have “marketing and e-commerce” in your job title these expenses cannot be justified anymore. You either do marketing or get out the way of ownership to work with someone who does.

Stop Spending on “SEO”

I outlined how the Hotel SEO Bubble burst back in 2013. If it is still going to appear in your agency invoices as a line item when you re-open…then Houston, we have a big problem. Google is great, but it is not your friend and owes you nothing. Google is here to sell ads and make money. If you keep your website healthy, lightning fast, and usable on mobile, and keep your Google my business listing current, then you will be fine.

Content, site speed and mobile usability reign supreme. Chasing rankings in 2020 and touting organic search results is the ultimate hipster move. Riding a unicycle in a bike race is cool but you will never win. It’s a great time to ask yourself what you are paying for and how you can migrate that cash over to something useful, like paid ads or content production.

Pause Paid Advertising for Now

When your hotel is closed, it is ok to pause your ads. Yes, this 100% includes brand name campaigns in Google and all metasearch campaigns. Agencies/vendors that are telling you that “cost per click” in the market is low should use use their time in quarantine to learn demand and supply 101. Please email them this list of classes to take.

Nobody is booking travel right now, and therefore the cost is low. This should not be packaged as a great opportunity to capture some future pie in the sky business. If there are no surfers in the ocean, then it is very likely that there are no good waves to be ridden or that a shark alert has been issued. When in doubt, don’t go out. (And just like that, I get to use a reference from my home in Hawaii.)

Don’t panic and fall for the whole engagement sales pitch. Take a deep breath. Is your website still running well? Google Business Listing updated? Good, now wait until we get an open for business date. Please don’t wave ads in people’s faces while they are locked down. It is annoying and in no way an inspiration for them to book travel.

Cash is tight, so please take care of your employees first. They will be crucial when the recovery starts. Google and others will take your money anytime…it’s like their favorite thing to do, every day. Also, if you are still clinging to TripAdvisor ads, it’s ok to let go now and reallocate your budgets.

Relax With Social Media

The road to social media is paved with disaster. It’s ok to tone it down and take a health break from it. There is nothing you need say on Twitter/Facebook/Instagram that is crucial to the recovery. I wrote in detail about influencers in my last post. This is the perfect opportunity to consciously uncouple from influencers and focus on taking care of your employees, neighbors, and communities. (I saw an article that highlighted “charitable acts as great hotel branding opportunities”. I rolled my eyes so far that they were stuck behind my head for a while.)

Please don’t succumb to the hubris that you need to entertain people on your hotel social media accounts while they are getting laid off and face an uncertain future. Leave that to Netflix/Amazon/Hulu, etc. ICYMI Here are some things that already have caused a terrible backlash on social:

In short: Avoid the urge to post at this time. When things open again, you can get back to posting “healing and inspirational photos” in no time. Just because you have a microphone does not mean you have to say something all the time.

Take It Easy With Email & CRM

I think everyone and their brother has already sent out a COVID-19 email. A company I brought a paper clip from in 1999 recently emailed me about their concern for my well-being. Every single hotel brand, including the one I stayed with once in 1995 (25 years ago), sent me an email. Idea: Instead of blasting your entire database you are better off putting your message on your home page and reserving email to communicate with people who have booked a stay with you.

Oh, remember the hotel group that sent me 60+ promo emails in a year? Guess what? They never stopped and were pushing a 45% Relax On Shores Of Cancun vacation to me in Hawaii late into the lockdown in the middle of March. You simply cannot make this stuff up!

 

Time to Retire Retargeting

I am going to keep this short and sweet. Retargeting was never cool and has always been annoying to your guests. It was nothing more than a violation of privacy that they let slide in the name of convenience. I had been planning to write something more detailed to make my point. But sometimes things just land in your lap and you close the case. A single image can deliver more power than a thousand words. In my case, make it 3000 words (my average article).

Banner ads for hotels and travel companies have been showing up in articles about mass graves and medical supply shortages! One in particular as hit me hard as I was reading about how doctors in Italy had stopped counting dead bodies. Lo and behold, there was an ad for a hotel brand with a BOOK NOW call to action. Again, you cannot make this stuff up:

Let’s take this opportunity to stop paying for retargeting. This is a marketing idea whose time has passed. Say your goodbyes.

Conclusion: Skilled Teams Will Lead the Recovery

If you are still reading this, I saved the best for last, just for you. Let’s start with an excerpt from one of the greatest stories ever told:

“I wish it need not have happened in my time,” said Frodo.
“So do I,” said Gandalf, “and so do all who live to see such times. But that is not for them to decide. All we have to decide is what to do with the time that is given us.”

– J.R.R. Tolkien, The Fellowship of the Ring

The recovery will happen. Speculating on its timeline is a waste of time. I refuse to speculate when there is still so much work to be done in our industry.

We have a massive challenge ahead of us, no question. Recovery efforts will be further complicated by the limited resources we will be left with after the shutdown. One resource that is going to be more crucial than ever is good people. Your success will depend on who you choose work with when we get back to business. The silos of revenue, marketing, and operations need to come tumbling down. From their rubble will rise the superhero recovery teams (minus the capes and spandex of course). The gap between the A-team players and everyone else is going to get bigger. Smaller, smarter and nimbler teams will shine.

Right now, we hold steady, think about the future, and wait for the safe time to start again. And remember: quarantine is temporary, but Wu-Tang is forever!

The Ultimate Guide to TripAdvisor for Hotels

When TripAdvisor was founded in February 2000 in a small office above Kostas Pizza on 315 Chestnut Street in Needham, Massachusetts, I don’t think anyone could have predicted the amount of time and energy it would consume, and the strong emotions it would conjure.

Since I started my blog in 2013, I have consistently fielded questions about TripAdvisor. Looking back at the sheer volume of time I spent answering these complex emails, I think it’s time to for me aggregate my knowledge, experience and advice in one place. Here are some of the most frequently asked questions, along with my responses.

 

Is my competition  trying to take my hotel down on TripAdvisor?

Short Answer: Yes, it’s possible.

Long Answer: I get asked about this a lot by hoteliers around the world. “You are not being paranoid” is how I start most replies. There are some hotel owners/operators who turn to the dark side when it comes to TripAdvisor. Instead of improving their own product and service, they trash their competition. These are the folks that the youth today refer to as the haters.

The hospitality industry has always had its fair share of bad apples. Anytime you claim something is powered by algorithms, there will be a group of players ready to game the system. In a time when so much power is bestowed upon TripAdvisor, a lot of time people feel desperate to win. Desperation should lead to hard work…but often leads instead to a “win by any means” mentality. How many hotels walk on the dark side by writing/sponsoring their own glowing reviews and/or posting negative ones for their competitors will never truly be known.

Offenders are not just mom and pop operations. Let’s not forget Peter Hook*, a senior executive at Accor Hotels who took it upon himself to write awesome reviews for his own hotels while posting negative ones for competing brands. He got caught when the TripAdvisor Facebook app linked his anonymous username “Travare” to his Facebook account — after he had posted 106 reviews in 43 cities!

This incident happened all the way back in 2013… so how have things changed? Elementary, Watson. The bad guys have gotten much smarter.

*Self-fulfilling prophecy: He described himself in his Twitter bio as the “Director of Propaganda” for Accor hotels in Asia-Pacific.

 

Can you game the TripAdvisor “algorithm”?

Short answer: Yes.

Long answer: It has been done, and has led to some epic fails for TripAdvisor.

  1. Bellgrove Hotel, Glasgow. In 2013, this “hotel heaven,” a hostel for the homeless, made it onto the list of TripAdvisor’s 100 best places to stay, thanks to the efforts of pranksters who posted numerous five-star reviews.
  2. La Scaletta, Italy. Italians know their food, fashion and automobiles. Apparently they also know how to expose the flawed “algorithms” of the largest review site in the world. Read how a non-existent restaurant made it to the #1 spot. I gotta give it to the Italians on this one…the phone number for the restaurant was that of the city’s police station! Prendere in giro! The final burn: In December 2014, the Italian Antitrust Authority fined TripAdvisor €500,000, complaining that the site had failed to adopt controls to stop false reviews while promoting its content as “authentic and genuine.”
  3. The Shed at Dulwich, South London. All the British food jokes aside, London now has a ton of exciting chefs and restaurants competing for dominance in a growing food and beverage scene. Enter freelance writer Oobah Butler. His fake restaurant in South London became “London’s Top Rated Restaurant” on TripAdvisor. And this was all happening in 2017, not that long ago.
  4. The Riu Imperial Marhaba, Tunisia. This story is really tragic. Thirty-eight people were shot at this hotel, and it had closed its operations. Yet TripAdvisor included it on its coveted “2016 Traveler’s Choice Award” list. Makes you wonder, when do you become too big to do basic research when making your award lists?

 

PSA: Don’t put your life in the hands of a review site.

Let’s take a brief moment to address something terrifying about TripAdvisor: Profits will always be more important than people.

For me, the darkest side of TripAdvisor’s unchecked power and accountability was exposed in 2017 by The Milwaukee Journal, which uncovered how reports of rape and assault at some all-inclusive resorts in Mexico were deleted from their site. These two publicly posted excerpts really highlight the problem:

Exhibit A:

Milwaukee Journal: Why were these warnings deleted?

TripAdvisor: They were “determined to be inappropriate by the TripAdvisor community,” or removed by staff because they were “off-topic” or contained language or subject matter that was not “family friendly.”
 
The Milwaukee Journal Sentinel asked to see the posts that were removed. The company refused.

Exhibit B:

When there were murmurs that the US Federal Trade Commission would be getting involved, TripAdvisor put out an official response via The Verge and Engadget. Here is an excerpt:

“We are not aware of an inquiry by the Federal Trade Commission nor have they contacted us. TripAdvisor is a global user-generated content platform that enables travelers to post positive and negative reviews and forum content about their experiences. We receive 290 pieces of content a minute and need to ensure that information posted on our site adheres to our content guidelines to ensure the integrity of these posts. We stand by our publishing guidelines and how they are applied.”

What I heard:

  1. The FTC is not coming after us, we are funded and have tons of cash for lawyers, so all is good with us.
  2. We get 290 pieces of content/minute for free. You really think we should be expected to hire enough people to go through it?
  3. We stand by our “publishing guidelines”… too bad about your death, robbery and sexual assault.
  4. Now if you’ll excuse us, we will go back to selling ads to hotels and restaurants.

The fact of the matter is, when you book a room at a hotel and make the decision solely based on the “world’s largest review site,” you are sometimes taking your life into your own hands. Remember, just as with Facebook: it’s a free site and they owe you absolutely nothing.

 

Do you use TripAdvisor to research personal travel?

People on my blog ask me a ton of personal questions. Should I feel like a celebrity? Short answer: No.

Whether or not I personally use TripAdvisor is a common question. Yes, I do. But, like anyone who does research on TripAdvisor, I’ve had to learn how to analyze what I’m seeing. I almost feel like Sherlock Holmes when I am reading a hotel or restaurant’s TripAdvisor page, looking for clues and using astute observation to determine what’s really going on.

I do not have a degree in psychology or behavioral sciences, but I have to say that I am a Quantico-level fake hotel review spotter. The sheer number of hours I have spent on TripAdvisor has given me almost perfect clarity. I feel like Neo in The Matrix…making the bullets slow all the way down. (Here is a link for some of you young readers.) The fact is that anyone (with a little practice) can spot the low-quality reviews posted by competitors, tricksters and desperate owners.

Here is my typical process, in case you want to sharpen your own methods:

  1. Look Beyond the Algorithm. I check to see how heavily the hotel is investing in TripAdvisor advertising. The amount money a hotel is spending on TripAdvisor advertising equates to how much time, energy and money is NOT getting spent on things that matter. Example: I can see when a hotel general manager’s bonus has been tied into their TripAdvisor rankings. That means the GM is spending a ton of time online, instead of in the hotel lobby talking to guests. As a user, you need to realize that TripAdvisor stars and rankings are guidelines, not commandments. To find real value, you have to dig deeper than the surface and play with the price and location filters. As with any set of data, you have to segment to win.
  2. Are They Trying Too Hard? I look out for hotels that press too hard for you to leave reviews online, offer special prices in exchange for reviews, etc. When a hotel steps into desperation mode, you know a lot of time and energy is going into collecting the volume of reviews and not the quality of the product itself. I have seen it all…from hotels offering to “complete” the review for me, to them sending me 10 emails requesting a review, to placing TripAdvisor review cards in the W/C. Remember folks: Desperation is never attractive.
  3. ‘Everything Is Awesome.’ Oh, great… I now have that song from the Lego movie stuck in my head! For those who don’t know, here is a gift that is sure to take over your day (and night!). These hotels are easy to spot because everything there is awesome. It is impossible to run a hotel that is all things to all people. When I see a barrage of awesome reviews non-stop over a short period of time, it pretty much signals that there is something going on that deserves more scrutiny.
  4. Go Direct. What do I do when I have a question/doubt? Email the hotel. It’s easy. Click on the contact page and reach out to a real human who might be able to answer questions, make recommendations, etc. Believe it or not, it works 99% of the time! If you do not have a positive experience doing this, you will know what’s behind the curtain of the TripAdvisor reviews and rankings.
  5. Diversify. TripAdvisor is not the only review site out there. Don’t forget the little search engine that is out to take everyone’s lunch. Google’s hotel reviews are a good source for quick concise content. Before I dive into TripAdvisor and start psychoanalyzing their “trusted” reviews, while getting hit with terrible banner ads and being yelled at to “book the best deal I will ever see in my whole damn life”… I locate the hotel on Google and see if there are some usable reviews. Let’s not forget there are a ton of professional travelers that post some truly amazing long-form hotel reviews. Here is a link to one of my favorite hotel review sites. They are not the “biggest review site,” but they are definitely covering a decent spread of small and large hotels in long story form with clear photos.
  6. Log Off. Last but not the least. Friends don’t let friends browse TripAdvisor while logged into their account! Right now is a pretty bad time for privacy. Let’s not divulge more information about ourselves to a multibillion dollar corporation! You don’t need them to serve you more “targeted” banner ads that you ignore, while they are heavily pushing hotels to buy these useless ads. TripAdvisor’s “Just For You” recommendations is not a feature designed to make your life better…it’s an avenue to sell more ads.

 

PSA #2: TripAdvisor’s homepage tagline evolution tells a story.

There is no hiding the fact that American companies love their taglines. TripAdvisor went after the whole trust thing hard for the longest time, until trade law finally caught up with them.

2006: “Get the Truth. Then Go.”
2010: “World’s most trusted travel advice”
2011: (April) “Over 45 million trusted traveler reviews & opinions”
2011: (September) TripAdvisor is banned from claiming that their reviews are “trustworthy” and must remove the following phrases from their website, courtesy of British Advertising Standards Authority:

  • “Read real reviews from real travelers”
  • “Reviews you can trust”
  • “More than 50 million honest travel reviews and opinions from travelers around the world”

2013: “The World’s Largest Travel Site” (The word “trust” is completely gone.)

2018: “The world’s largest travel site. Know better. Book better. Go better.”

Are TripAdvisor’s sponsored placements and ads a good idea?

Note: This is probably the most common question I get.

Short answer: No

Long Answer: Don’t pay to drive traffic to OTAs. They definitely don’t need your help making more money. If you need “brand exposure,” invest in your service and product instead. Investing in impressions and click-based ads on a platform that is not connected exclusively to your website and booking engine defies logic. Unless you are P&G/Unilever/General Electric with money to burn…spending money on banner impressions is a huge waste of your marketing dollars.*

“Logic is the beginning of wisdom … not the end.”

— Commander Spock, USS Enterprise

How about you invest in these 5 things instead:

  1. Make a better hotel website.
  2. Invest in better hotel content and photos.
  3. Get a better hotel booking engine.
  4. Improve your product value.
  5. Invest on Google, and drive direct traffic.

Bonus tip # 6: Subscribe to my blog. It’s free!

*I refuse to debate folks who love to talk about how much traffic VOLUME they get from TripAdvisor, or how well their campaigns are currently performing. I get it, you read things on the internet. I will someday run ads for the hotels I am working with ONLY when I can link the ads directly to the hotel’s website from TripAdvisor. You know, like the cool option I have with Google? If I am spending on ads, I want to exclusively close them on my most profitable channel. Thank you.

What do you think of the good ol’ TripAdvisor business listing?

Short Answer: This prehistoric marketing tactic by which you spend money for a link, which is declining in volume every year, deserves to be in a marketing museum.

Long Answer: I am old enough to remember when TripAdvisor launched their infamous Business Listing for hotels. I am also old enough to remember when you could get some pretty interesting results on Google from listing in online business directories. Wow, this took me all the way back to the late 90’s, early 00’s!

Fast forward to 2018. TripAdvisor still successfully charges a lot of money for placing a link to your hotel website. I must hand it to their marketing machine for showcasing the yuge value of this link. The word “convenience” gets thrown around a lot. How helpless are hotel guests that they cannot open another tab in their browser and just Google the hotel that has piqued their interest on TripAdvisor?

Here is the kicker. Over the past several years, the volume of traffic from a TripAdvisor business listing has dropped across the board for all hotels that I have worked with. The success of the new TripConnect CPC and InstantBook products has something to do with this. Why sell you a click for just a flat fee? Why not make a % commission on top of it by converting those clicks. The whole convenience argument starts to fall apart when you realize that anyone booking travel in this day and age has at least 5-10 tabs open on their browser.

So I cannot understand why hotels continue to pay for a simple link to their website from a page on a third party site. Possible answers:

  • Convenience. You really think someone smart enough to read online reviews cannot open a new tab in their browser and Google you? Spending thousands of dollars every year to save your guest a click?
  • Fear. There is heavy speculation that your TripAdvisor rankings ‘allegedly’ might decline when you stop advertising with them. Lawyers, pay attention that I am using the word “allegedly.”
  • Habit. There is the “we have always done this and it’s now a part of our annual budget” reasoning. An average hotel in NYC is probably paying 10K to 15K for a link. Now imagine they took that cash and spent it on better coffee for guests in their lobby. Or how about renting puppies to hang out with the guests on weekends? Imagine the possibilities!

 

How do I deal with business listing hyperinflation?

Short Answer: Just say no.

Long Answer: Only in the hotel business can you have the audacity to ask for more money (2018 vs 2017) for a link to YOUR own website from a page where YOUR guests have contributed all the content. But wait, there’s more! You are getting fewer clicks than before. It feels like an episode on Black Mirror.

But this is actually happening. TripAdvisor has raised the price of their business listing for every hotel I have worked with in 2018 (that’s over 70 hotels). This is happening even when the total number of referral clicks from TripAdvisor has gone down for ALL properties when comparing 2018 with 2017 YTD. But, guess what? You can keep your old rates if you start buying TripAdvisor sponsored listings! Alrighty then.

Can you imagine a hotel asking for a higher rate, while sharply reducing the value of their hotel product compared with the previous year? People would lose their minds and go right to….oh snaps!….TripAdvisor to post a barrage of negative reviews.

Sometimes it really feels  like that hotels are stuck in the sunken place. Get out!

 

Do I have to promote my new hotel with TripAdvisor Sponsored Ads?

Short answer: No.

Long Answer: Here is a simple two-question test you can use to find the answer for yourself.

Question 1. Is the ego of the owner/operator tied to TripAdvisor rankings?

Then yes, you will have to run banner ads on TripAdvisor, get little or no reporting in return, and listen to someone talk about Billboard Effect in your marketing meetings. Everyone will be pleased and there will be high fives all around.

Question 2. Is the owner/operator a professional who wants to generate net operating income while offering a good product?

Then no, there are better options for promoting a new hotel. You need to perfect your product first and then grow organically. Organic growth is much more permanent than plastering the internet with banner ads that nobody cares for. In addition, you need to target guests at several different points in the buying cycle. There are many other channels where you can list your hotel and get exposure, just to get a baseline on your newly opened product. There is even this little billion-dollar hotel booking site out of Amsterdam and another one in Bellevue than can help you get exposure without annoying people with sponsored listings. (Alert: these sites also offer banner ads, so watch out for that!)

Are your revenue and TripAdvisor rankings related?

Short answer: Yes.

Long answer: There is no denying that your revenue is going to take a hit if you lose your rankings. But please understand that it is not the end of the world. To make a profit, you must diversify. Google, Expedia and Booking all have reviews too; don’t put all your review eggs in one basket. Recovery from a TripAdvisor meltdown is possible, but your pricing, marketing and product quality need to be in full alignment. Please do not tie your distribution to a review website.  That way, when the TripAdvisor “algorithm” is not your favor, the odds might still be in your favor.

Pro tip: Do not tie your personal sanity to TripAdvisor. Stay focused on the real world and engage with your guests in real time. The saddest thing I’ve seen in relation to TripAdvisor was at a trade show.  A hotel owner was in tears pleading with TripAdvisor staff, saying that his negative reviews were affecting his marriage. Don’t be that guy; don’t give so much emotional power to a review website!

 

Conclusion

TripAdvisor is a social media network that uses free content to make money. Your hotel is a physical brick and mortar business in the real world that people can experience by booking a stay. Before you know it, someone will acquire TripAdvisor; then the new owners will figure out more ways to increase their bottom line. You cannot obsess over it, or automatically spend your hard-earned revenue on buying advertising without thinking it through. You are not in high school anymore. In the long term, it really does not matter what people say about you. Run a good hotel, work hard, be kind to your guests, and it’s inevitable that you will make money.

Is Your Hotel Booking Engine Destroying Your Profitability?

Almost every other day, I see a headline about the latest trend that is going to have a massive impact on hotels and travel. Some might even be worth exploring. However, the fact remains that if your hotel booking engine is hard to use, none of the trends will have any impact on your net operating income and profits.

Having worked in hotels most of my adult life, and having traveled extensively, I have vast experience booking rooms every way possible: using phones, travel agents (yes, I am that old), OTAs, and directly from apps. The one consistent problem I find on hotel websites is a disregard for the basic usability principles that form the foundation of an online shopping experience.

Let’s review the Top Ten hits when it comes to bad booking experiences.

1. The One-Hit (One-Screen) Wonder

Let me take you all the way back to 2004. Booking engines were still in their infancy. That was the year the one-screen wonder was born. It was introduced to independent hotels as the greatest thing since the Beatles arrived in America. The catch? It was a usability disaster.

In this type of booking engine, guests were expected to review room photos and descriptions, and select dates, room types, and rates, ALL on one screen!

Hotel Booking Engine

I tirelessly campaigned against this technology back then, but the public relations machine worked harder and had a much broader reach. Their message – “Did you know our one-screen technology allows consumers to make a hotel reservation in one click?” – proved irresistible to many hoteliers. They installed this software on hundreds of independent hotel websites worldwide; each install was followed by a press release full of praise.

In 2010, I came face to face with this monster. While stuck at Chicago’s ORD airport, I tried booking a last-minute room. But the one-screen booking process took so long, I did not have time to complete my reservation before boarding the flight. The hotel got my booking from my Expedia account. They paid a commission because they had invested in the wrong technology. You can imagine how many other bookings were abandoned on their website and booked through online travel agent (OTA) websites.

Of course, the one-screen booking engine was eventually discontinued. But not soon enough. The real economic impact can never be accurately measured. Don’t forget: while bad tech was being sold to hotels using gimmicks and press releases, Booking.com and Expedia were making it easier and easier for guests to book a room at your hotel via their own websites.

2. Way Too Many Questions

When a guest finally decides to book a room at your hotel, why delay the purchase by asking so many questions? I am on your booking engine, with my credit card/online wallet ready…so why not take the booking as quickly and easily as possible? Remember…there’s a good chance I’m at an airport, in the back seat of a taxi, on my limited lunch hour, etc.

This is one of the core issues I have with almost all of the mainstream independent hotel booking engines. The number of required fields makes the experience a little too much like an interrogation by a government agency.

As recently as 2014, I encountered one of the biggest hotel booking engine horrors of my life. I analyzed an asset and discovered that their booking engine had 43 questions before checkout! Later the same year, I saw this booking engine provider at a hotel tech conference and found out that 1500+ hotels and inns were using that system! I had to leave the exhibition hall and sit outside for a while to recover from the shock.

Hotel Booking Engine

Generally speaking, you need to severely limit the required fields on your booking checkout page. Require only what you absolutely MUST HAVE from your guest before giving them a reservation confirmation.

“Way too many questions, you must think I trust you.”

– Future (Jumpman)

Next: why use a teeny tiny asterisk for a required field, which then turns into a big red warning when it’s not filled out? Clearly indicate required items at checkout; don’t make guests go back and repeat steps.

Finally: in 2018, do we need a mandatory title field? Do you really need to know if I am a Mr, Mrs, Miss, Dr, HRH, Lord, Earl, Duke, Baron, or Knight? It’s awkward and even offensive. People of every gender, class, and profession pay with the same kind of money.

Wait, one last thing..

I present you with an asterisk to nowhere that cracks me up every time.

3. Land of Confusion

The optimal layout for the checkout process has been mastered by all the major OTAs, like Booking, Expedia and Airbnb. All the hotel technology providers need to do is follow the blueprint. The multi-million dollar investment in UX (user experience design) and usability testing has already been done for us! But instead of following these best practices, many booking engines continue to confuse the guests… resulting in a direct hit to your revenue and profits. Some of these checkout screens remind me of the 1986 Land of Confusion video by Genesis: way too much happening for anyone to understand what it means on their first try.

Check out this disastrous layout with my notes:

Hotel Booking Engine

What is happening here:

  1. Useless hotel rate code jargon is likely to confuse your guests.
  2. Default setting shows more than one room, even when one room is selected in the date/rate calendar.
  3. Odd placement of the “Continue” button in the middle of the layout makes your guest think too hard.
  4. Listing amenities during the checkout process is distracting and gets in the way. This info belongs on the rooms page.
  5. Four-step checkout? No, thank you.

4. Failure to Launch

According to research from Baymard Institute, around 70% of all shopping carts get abandoned. Slow and non-responsive carts are abandoned right away. The general consensus is that if you cannot efficiently collect my payment, you do not respect my time. That’s why slow-loading booking engines can seriously wreck your direct revenue.

The screen shot below is from a boutique hotel brand’s booking engine. This is what a typical user on high-speed internet was seeing when trying to book a room in NYC. Loading, if it happened at all, was taking over a minute (tested from multiple locations and internet providers).

Hotel Booking Engine

Guess what? This group filed for bankruptcy in 2009 due to massive losses in revenue. I am not a detective, but it’s elementary that a non-functioning booking engine might have hastened their demise.

Here is another example from a luxury hotel brand based in Asia, which has some of the highest ADR rooms in Hong Kong. Every non-responsive session is probably costing them a ton. Luckily for them, they are publicly listed and backed by heavy institutional investors. It’s easy to be lazy with other people’s money.

Hotel Booking Engine

What happens when your booking engine does not load quickly enough? Here are some possible outcomes:

a) The same booking comes in via OTA minus a 15-20% commission.

b) The guest books another hotel.

c) The guest decides to give up on their trip and stay at home (voted least likely outcome by revenue and digital experts worldwide).

A and B negatively impact your revenue, and option C is highly unlikely. One other possible outcome is that the guest calls your hotel reservations line…but kids these days don’t talk much on phones. So that outcome becomes less likely all the time.

5. Just Plain Broken

Every now and then I see a hotel asset that is completely failing online. In a time when the majority of bookings are happening online, you have to have a booking engine that works! Here is one that actually showed a System Error right on the checkout screen:

hotel booking engine

This booking engine worked great in some Western US states, but not so much on the East coast or London. It worked in Barcelona, but not Dubai. You get my drift? A shopping cart working part-time is just plain broken. It’s crucial to test, test, test, and repeat when it comes to your booking engine. An error message that literally spells out “system error” in red will decimate your brand, guest loyalty, direct revenue, and online marketing efforts.

6. Back in Black

Black is my favorite color. It’s good for a lot of things, but not as a background for a hotel booking engine. The top retailers of room nights around the globe (Expedia, Booking, and Airbnb) all use a white background for their ecommerce transactions. When it comes to website conversions, usability is the only thing that matters. In a desire to match the “look and feel” of their website, some hotels are using a dark background for their booking engine, making it really hard for everyone to use.

In the example below, selecting dates on a black calendar is really difficult…difficult enough for your guests to give up without completing the transaction. When you highlight dates, nothing happens to show you have done it. There is also a LOT of wasted space, where the booking engine could have displayed useful information. Is this blank space, or is something not showing up against the background? Either way, I’m inclined to run over to Expedia.com and take care of this booking quickly, in a more familiar layout.

Hotel Booking Engine

Solution: Please read this before designing your website and save yourself from design and usability disasters.

7. The Discount Horror

Showing your guests a popup that offers savings of “25% or more” when they are already INSIDE your booking engine and have already SELECTED the room they want is a really bad idea. Stop getting in your own way! This reminds me of a scene in When a Stranger Calls, a1979 American horror classic. When I saw this I exclaimed, “The discount popups are coming from inside the booking engine!!” It’s quiet ironic that this engine markets itself itself as a champion of conversions and direct bookings!

Hotel Booking Engine

8. Blast From the Past

In 2018, there are hotels that still have not integrated a booking engine into their website. If a date search on your website’s home page calendar triggers a pop -up window… please stop doing everything else and get it fixed.

Hotel Booking Engine

9. Too Much Information

Nobody likes folks who overshare. Why would you share your entire year’s business with me when I am just trying to book a room? Are you saving me more searches? Do you want me to change my vacation plan based on your availability? You don’t think I can find another place to stay in your town? Are you starting to see my point? Thank you and stop this.

Hotel Booking Engine

10. Do You Even Mobile?

Everything I have listed above gets compounded 100X when things move to a small screen. I could load up one hundred screenshots here, but the example below truly captures the struggle hotels have when it comes to mobile revenue and conversions. This hotel has done the unimaginable…served me THREE popups (including one survey and one special offer) when ALL I ever wanted to do was give them my money! This, folks, is the bad mobile booking experience to rule them all.

mobile booking engine

In mobile, you have to do testing. You cannot entirely outsource the responsibility to make sure your booking engine works properly on all the major screens your guests are using. You have to dive into your analytics and then follow up in the real world. One way is to go to your local phone store; time yourself and a bunch of your closest friends to see how long it takes to book a room at your hotel for some random dates. Brace yourself for the outcome!

The hotel brand in the example above has over 300 hotels in 40 countries worldwide. You’d think they would have friends to alert them…but guests never do. If you cannot sell them rooms on a mobile device, there are some spectacular mobile booking options available on the Expedia/Booking network that they will end up using.

Bonus Tip:

The single most amazing mobile experience offered in the travel business is the functionality of the HotelTonight app. If you have not tested it yet, please download the app to see mobile ecommerce done right. Anyone who can take the app experience to the mobile web will be the world’s top hotel mobile booking engine.

Oh, and my 2014 article still stands…do not sell $7 rooms on HotelTonight.

Conclusion

Offer protection, kill doubt. In a world of online scams and identity theft, you must make sure that you present guests with a secure and reassuring booking engine. A shady looking booking engine is certain to fail.

Make it easy. Most guests will abandon a booking engine that is hard to use while asking for too much personal information. Please note that booking engines and surveys are two very different things. Nobody should ever feel interrogated on your hotel booking engine.

There are many places where things can go wrong on your website. But none is more important than your booking engine. It is the core of your direct revenue strategy and deserves your undivided attention.

BookingSuite: A Lesson in Direct Revenue Strategy

direct revenue strategy

Throughout my career in revenue optimization for the hospitality and travel industry, I have always stressed the importance of owning your digital assets. This means having control of your domain, your marketing campaign’s analytics and history, and especially your website. As a strong supporter of open source technology, I have stepped in every time a marketing vendor (“expert”) started trashing new and innovative options for hotels. Of course, vendors will always favor their outdated proprietary systems over new technology. They have made a huge investment and have to keep selling. But being tied to old technology is never going to give your hotel an edge in the online marketplace.

WordPress is a perfect example. As a flexible, secure, and user-friendly website platform, it has been displacing proprietary content management systems worldwide. Threatened, some hotel marketing agencies starting publishing propaganda about WordPress; they said it was “unsafe” and did not include essential “marketing features.” In response, I have steadfastly encouraged hotels to embrace open source and steer clear of fear-mongering by agencies trying to push their agendas. Of course the agencies want you hooked on their website platforms. It provides them with the security of you not leaving them. Know that when you do leave, you will be left with nothing but a zip file containing the remains of your most profitable channel and a “we are sad to see you leave” email. Good luck!

Case in Point: BookingSuite

In 2014, I wrote a detailed article on Priceline’s Acquisition of Buuteeq, in which I again outlined the importance of owning your digital assets. Buuteeq was run by smart people who tapped into the reluctance of hotels to invest in their own direct revenue strategy. They offered to relieve hotels of the headache of owning and maintaining their digital assets, starting at just $99/month! They did a great job of marketing themselves and were able to successfully scale their own business by offering websites and marketing packages to hotels for a low monthly fee. At a crucial time when direct marketing investment was already a massive challenge for hotels, this approach was not doing the hotel industry any favors.

After the Priceline acquisition, I tried to make the strongest possible case for not renting your website and your marketing strategy from the largest online travel agency in the world. Priceline Inc. has its own agenda for growth. If you were to look at their stock performance and revenue breakdown, you would see that they do not make money building websites or running your marketing campaigns. They make money when people use their suite of OTA websites to book a room. Surprise! They prioritize their own direct revenue channel over yours.

Unfortunately, the illusory free lunch is too tempting for a lot of industry folks. BookingSuite (Buuteeq’s new identity under Booking.com) did more than just retain Buuteeq’s hundreds of hotel and B&B clients. They heavily leveraged the reluctance of hotels to spend time and money on marketing and signed up more hotels than ever. This seems to be a fatal flaw for hotels. They have made a habit of outsourcing 100% of their marketing to the vendor with the lowest bid. Then they get to check the box labeled “direct revenue strategy.” Death by checklist? Check.

Folks, We Have a Hard Stop

Earlier this week, BookingSuite announced that it will no longer be offering Search Engine Marketing services to hotels using their website platform. Below is the official email that was sent out to hotels using their system:

bookingsuite

They could not have summarized it better:

“SEM is an important component of your digital marketing strategy.”

You know what else is an important component of your digital marketing strategy? Your website. The thing that so many hotels are currently renting from BookingSuite. If they can drop SEM …how much sleep they would lose over the few dollars you pay them every month to rent a website? That $99 to $999/month website does not sound like such a hot deal now, does it?

Here is some Shakespeare for added effect:

“As flies to wanton boys are we to the gods. They kill us for their sport.”

― William Shakespeare, King Lear

Your website, booking engine, digital marketing efforts, and revenue management strategy are the pillars of your direct revenue. Viewing them as cost centers instead of investments in your future is the root problem underlying disadvantageous marketing decisions for hotels of all sizes. This cost vs investment approach (looking at departmental budgets instead of overall growth and revenue) is causing hotels to act against their own self-interest; it makes you pick the wrong vendors for wrong reasons.

Not to get all Nostradamus on you, but I would like to quote myself from all the way back in 2014:

“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.”

This Is the Checklist You Need

The fact remains that the majority of hotels and inns worldwide are renting their digital assets; and this is hurting their long-term direct revenue potential. When you make all your marketing decisions on the basis of lowest possible cost, your long-term profitability will suffer.

If you’re ready to take control, here’s a five-step checklist to get you back on track.

  1. Website. Pick any designer/website vendor in the world… but build and power your website using WordPress as your CMS. It is always the right time to start running and managing your most profitable digital channel using open source technology.
  2. Search Engine Optimization. Google is all about website speed, health, usability, and useful content. There are no secret algorithms that any agency has in place to tackle this. You can read in detail here how search engine optimization has changed for the hotel and travel industry over the years. Staying with a vendor because they are good at SEO and “keyword rankings” is like investing in the stock market using a psychic as your portfolio advisor.
  3. Pay Per Click. Here is some detail on why PPC is one of your most powerful marketing tools. Pick any vendor you like as long as you use your own credit card to pay Google directly and own your AdWords account. Yes, you should own your AdWords campaign so that you maintain control of your history and retain the quality score built over years of spending and testing. That way, when your vendor wants to peace out on you (example: what BookingSuite is doing now), it won’t be a big deal. You will have to find a new vendor; but you will not have to start from scratch again.
  4. Social Media. Make sure the ownership of all of your social media accounts stays with you. Use your email address, and not a vendor’s. This includes Facebook and all other social media marketing campaigns that you are currently running.
  5. Analytics. Stick with Google Analytics. Here is a detailed article on staying away from expensive solutions designed with agencies in mind. When working with Google Analytics, always set it up with a Gmail address that you own. You might have several vendors working on your account with access to the same data. But they shouldn’t control the account. Avoid the headache hotels experience every day when the vendor who owns their analytics account decides to walk away, taking years of website data with them.

Here is a detailed guide on managing all your digital assets. Successful hotel and travel marketing departments own and continually build on their marketing and digital assets. Just like you would not build a hotel on land that you do not own (or lease for a long time), your online assets should not be built in someone else’s proprietary digital environment. Of course, you will always need someone to help you maintain your hotel/home. But you don’t have to give someone the deed to the house in exchange for making sure the plumbing is working. *mic drop*

Conclusion

People I have worked with over the years know that I do not believe in declaring “wars”; I believe in making revenue. The hyperbole in the marketplace around the “war on OTAs” is impractical and annoying. Using this article to launch a tirade against BookingSuite is a complete waste of time. You cannot blame others for your poor decisions. Also, please remember that Priceline Inc. and Expedia Inc. are not going anywhere anytime soon. So, buck up, Champ.

My goal here is to highlight that now is (still) the perfect time to invest in owning and maintaining your digital assets and marketing campaigns. Marketing agencies and vendors will eventually get acquired or lose interest. Nobody can control or predict when that will happen to your marketing agency. I could not have predicted the exact date when Buuteeq (the helpful agency who wanted to take all your work and worries away at a super low price) would sell out to the world’s largest OTA…. or the date when they would later shut down the SEM services that were not making them enough money. What I can do and always will do is to recommend that you own and invest in your own digital assets and marketing. Remember: your profitability needs to outlast your current marketing agency. Stay woke.

The Free Website Trap: Lessons From Priceline’s Rebranding of Buuteeq

The Free Website Trap: Lessons From Priceline’s Rebranding of Buuteeq

Last year, Priceline.com made a splash when it acquired Buuteeq, a digital marketing and website “cloud-based system” for independent hotels, for what looks like $98 million.

My detailed analysis of that purchase made a lot of headlines, and also missed a lot of headlines when some of the top hotel news websites did not carry my article. (Buuteeq was a big advertiser for them.)

Last week, Priceline announced that it would no longer let Buuteeq operate as an independent brand, and that they now offer free websites in exchange for a 10% commission on every dollar generated on those sites. Here is my analysis of what this means for the lodging industry.

Goodbye, Buuteeq.

The first thing I observed is how quickly Priceline moved away from letting Buuteeq “continue to operate as an independent business within The Priceline Group.” I was highly skeptical about them being allowed to operate independently when I first wrote about the acquisition in August 2014 (read my conclusion section here). Thousands of independent hotels and B&Bs using the Buuteeq platform were given a “nothing is going to change” story by the founders.

Here is an excerpt from an email that one of the founders of Buuteeq (Brian Saab) sent to a bed and breakfast client:

“We remain an independent brand (one of the prime reasons we considered the merger with Priceline Group) and we continue to run business as usual. That said, I am thrilled to be able to rub shoulders with other brands in the group; we’re already getting great advice on how to improve conversion for hoteliers (who wouldn’t want to get best practices from the likes of Priceline, Kayak, and Booking)!”

How cute! But we all know by now that nobody acquires a small company to make things better for their existing clients. They buy assets to benefit the larger group, which in this case is Priceline Inc. The interests of thousands of small and independent hotels is not the primary objective of Priceline. Their own revenue is their prime objective (as you should expect). Have you seen their amazing stock price lately? And yes, I still use Yahoo Finance.

The hotels who built their entire online presence on the Buuteeq platform – instead of owning their own digital assets – now have even less control over what happens to their own website and marketing. Priceline Inc. will tweak, update and change the new entity as they deem fit.

You must keep in mind that Buuteeq was acquired because it was working. It was built by smart people: former Microsoft executives Forest Key, Adam Brownstein and Brian Saab. They raised the capital, built the platform, and implemented aggresive sales teams that closed thousands of hotels and inns. They even convinced established hotel brands like Choice Hotels to join them. They flourished by playing on one of the lodging industry’s major deficiencies: the fact that people in hospitality do not want to spend time or money on direct marketing/ building a website/ getting a decent shopping cart.

This hands-off, price-shopping hotel culture was the key to their success, even when it’s common knowledge among lodging operators that their website is their single most profitable channel. The same key will unlock BookingSuite’s success. They’re just taking it to the next level. What can I say? It’s as surreal as a Salvador Dali painting.

Hello, BookingSuite.

For quite some time now, I have been seeing the BookingSuite link taking the place of “Hotel Marketing by Buuteeq” on independent websites. How did I know that the Buuteeq brand would be “sunsetted” by Priceline? Because there is so much more money to be made by taking a % of bookings versus peddling “digital marketing platforms” for a flat monthly fee. Where is the fun revenue in that?

You see, if a hotel on the Buuteeq platform decided to spend money directly on Google via PPC (which is their greatest marketing tool!), the hotel itself would profit from PPC success. This of course, is not what Buuteeq/Booking Suite would like to see. They would prefer to cash in on any marketing success you experience.

So, back in August 2014, less than 24 hours after the Priceline takeover, the old Buuteeq pricing chart disappeared. Since nothing can be truly deleted from the internet, here is a retro screenshot showing what Buuteeq was charging:

buuteeq pricing

 

Now let’s estimate what Priceline will make by charging 10% commission on every room booked on your BookingSuite–powered free website:

[table id=5 /]

The chart above clearly shows that even a small inn booking $10,000 in revenue is worth more than the flat-fee “Ultra” client, which only made them $1000 in monthly revenue, and out of which payroll, project management, etc. had to be paid. With the new pricing model, even a hotel booking as little as $5000/month is probably more profitable than offering monthly plans and pricing tiers. Remember, Priceline is not about giving choices to hotels and lodging providers. It’s about giving choices to your guests, and making a ton of cash doing it.

On the other hand, you could make yourself a comparable website that you own for around $1000, or one month’s commission. Even if you splurge on a custom site for 5-10K, you’ll be coming out ahead way before the year is up.

Now with BookingSuite, Priceline is going to do something they are exceptionally good at: make more money for themselves from selling your hotel/inn/bed and breakfast. Not only do they want to make money by selling your rooms on their Booking.com and partner websites for a 20% commission; they also want to make 10% on every room you sell from your own website. Cool trick, eh? They are about to make it rain revenue.

Free Websites? It’s a Trap!

Who can forget that moment in Star Wars: Return of the Jedi when Admiral Gial Ackbar realized what was going on.

“It’s a trap.”

Yes, free websites are a trap indeed. The old adage “there is no such thing as a free lunch” needs to be revisited by anyone in the hospitality business who is considering getting a “free” website. Yes, BookingSuite is a “free” website, but it comes with a very big price. The price is 10% of every single dollar you book on that website.

I am not against paying an OTA (Online Travel Agent) a commission for revenue they deliver to my hotel, when they incurred the marketing cost of bringing that guest to me. I don’t even mind them converting a guest who is hooked on their brand. The thing to consider here is that, when using BookingSuite, you are going to share 10% of every dollar booked on the website, even the revenue that you made because of your own:

  • direct marketing
  • reputation & press
  • referrals
  • word of mouth

Here is a wonderful thought. Instead of paying a flat 10% commission to BookingSuite, spend it here instead:

  1. Spend directly with Google. Buy something as simple and effective as your brand name keyword searches.
  2. Pay a photographer. Photos make or break a website. Better photos = better revenue (update them on all your channels!).
  3. Put more/better content on your website. Convert visitors on your website by giving them better information about your location/destination.
  4. Do some testing. Try out social and meta advertising platforms with minimum budgets and see what works best for you.
  5. Get a print ad. LOL, j/k. Print is dead. Just added this here to make sure you are still reading.

The “We Do Not Have Website & Marketing Budget” Myth

Ok, this one is one of the most irrational arguments against building your own website and brand presence. Even in their Wall Street Journal announcement, Priceline highlighted that:

“BookingSuite is aimed at independent and boutique hotels without the deep pockets.”

This has to stop. Buying a website and investing in direct marketing is not like buying diamonds or an island or a luxury yacht. Not only are websites inexpensive, but as a lodging operator you simply cannot decide to skip direct marketing. As for booking engines, there has never been more choice than today. I think a new booking engine might even get launched by the time you finish reading this article.

Here is what a hotel website will cost you if you would like to get one today:

  1. Download WordPress: $0. Download is free, but you have to know a little tech. Don’t worry, you can do it with a very small amount of online research. (See…no free lunch!)
  2. Get hosting: $10–$15/month. Try: Bluehost, Host Gator.
  3. Pick a design theme: $0–$80. There are many pre-designed templates to choose from if you’re on a budget. Look at Elegant Themes, WooThemes.
  4. Stitch the site together: $600. Add logo, content, photos, etc. You’d be surprised at how much you can do yourself. But if you’d rather not, developers are available for $20–$60/hour. They can make your site in 8-10 hours, at a cost of approx $600.
  5. Start running ads on Google: $500/month. Open a Google Adwords account ($0). Get support to write an ad for your brand name searches, and set a budget that is right for your market ($200–$800/month).

So the question you have to ask yourself is: who is this hotel with deep pockets? In the age of WordPress, can you really not afford your own website? Can’t afford and being lazy are not the same thing.

The article in Wall Street Journal also mentioned that BookingSuite already has 2,800 lodging partners signed up and another 3,600 joining soon. Amazing, to read that so many people are willing to share revenue for the lifetime of their website rather than make a direct investment of their own time and a little bit of money.

Lodging operators who have no money to get a website should probably look for a new line of business. Only, no business today can really survive without the web. And no business can survive without direct revenue and innovation. Just ask music industry executives, or Blackberry (RIP).

Conclusion

Is there hope for hospitality? Yes! Actually it’s a simple 2-step program:

  1. Always own your digital assets.
  2. Be wary of free lunches. There is no free lunch in this life. You will pay for it one way or another.

If you’re ready to take the brave leap into being responsible for your own website and marketing, I’m right here for you. Email me. I’m always ready to talk with you or help you with a project. You just need to take the first step.

Let’s Keep It Real: The Truth About Hotel Meta Search

Hotel marketing types love trends. Every day there is the same old story about a new thing that changes everything. It’s always a thing that, if the hotels would only start doing it, or hire an agency to do it, or subscribe to a tool that would do it… the heavens would open and it would rain revenue.

I’m sure everyone remembers (if they are not still living in) the Social Media Monetization Era. Now, the new craze is Hotel Meta Search. Unfortunately, over the past few years, its virtues have been overstated, to say the least. Yes, it’s a channel worth trying. But no, it’s not a magical weapon that will transform your online revenue and put the OTAs out of business. (Magical weapons do exist, but only in online role pay games or Peter Jackson trilogies.)

If you want to get in on hotel meta search, first you need to understand it. Don’t get your information from the vendor who’s trying to sell it to you. Here’s the truth about hotel meta search, and how you should use it. I’ll start by debunking some sales-fueled propaganda.

It’s Not Ground-Breaking Hotel Technology

Connecting your booking engine to Google Hotel Finder or TripAdvisor is not, in any way, shape or form, “ground-breaking technology.” OTAs have been doing this for years, and making plenty of money. The new development is this: Some hotel marketing agencies have developed an interface between advertising platforms (Google Hotel Finder, TripAdvisor, etc.) and a hotel’s IBE/CRS (Internet Booking Engine/Central Reservation System); and now they want a nice return on their investment. By making meta search sound like an interstellar technological breakthrough, they hope to get hotels to sign up en masse and pay them a monthly fee.

Remember, Google’s cost per click (CPC) based advertising − AdWords − has been around since the year 2000! Hotel meta search is just another way for providers to collect advertising revenue. Simple.

It Will Not Destroy Online Travel Agents (OTAs)

The agencies who are trying to sell you on hotel meta search generally focus on one of these three themes, each of which is backed by lengthy articles:

  1. Meta search is “shifting share from OTAs.”
  2. Meta search is “leveling the playing field for hotels.”
  3. Meta search is “going to destroy OTAs.”

Reality Check: My long-time friend, partner, and online travel marketing superstar said it best:

“The only thing that will ever destroy an OTA is another OTA.” − Ronnie Soud

Take a minute and let it set in. There you go…easy now. Let’s move on to some facts about hotel meta search and OTAs:

  1. Some of the biggest hotel meta search engines are currently or previously owned by an OTA. TripAdvisor used to be owned by Expedia; Trivago is now owned by Expedia; Kayak is now owned by Priceline. The CPC or CPA revenue odds are ever in their favor.
  2. Hotel meta search is targeting a specific stage of the travel funnel; it does not control the entire travel purchase cycle. OTAs are doing much more than meta search. They are doing a brilliant job of targeting every phase of the cycle. From destination research to final purchase, they cover all the bases.
  3. At the end of the day, it’s still battle of the clicks. When you are running a Google Hotel Price Ad, so are the OTAs. And as always, they are packing some serious firepower (ie, money). Hotel search engine marketing history (circa 2000-2010) clearly shows us how well OTAs can work those click-based advertising platforms.

I’m not saying that hotels have no chance, and should just give up. It’s ok to get in the game. This is a new channel in which to buy advertising, and you should try it. But keep it real: No hotel marketing agency is going to be “defeating” the OTA’s with their magical MetaSearch Gateway… ever.

It’s Not a Return-on-Investment Slot Machine

I have previously written about the disasters of ROI-based marketing. Hotel meta search marks the return of hyper-inflated (and to a real marketing professional, sickening) 800% to 2,500% ROI promises. All you have to do is get a monthly “middleware” connection, allocate a small budget, and then revenue will be pouring in. Yes, hotels marketing agencies are now marketing meta search the same way they did search engine marketing. This kind of hype gives rise to things like the Hotel SEO Bubble.

It’s really dangerous to fall for dazzlingly high ROI gimmicks. Meta search is not a loose slot machine. Exaggerated ROI numbers should always be a red flag and not an enticement. In fact, for every new marketing buzz, I have four words: law of diminishing returns.

As for the Encyclopedia Britannica link above, yes I am that old.

It Should Be Part of Your Bigger Revenue Picture

Make it a point to advertise directly with the hotel meta search engines whenever possible. Avoid retainer-style agency services. And, as a general principle, avoid automated bid management software, just as smart advertisers do with good old search engine marketing.

You need to focus on the bigger revenue picture and make sure your hotel meta search investment is supported by the following essential activities:

  1. Create Content: Update and experiment with your website and booking engine content.
  2. Take New Photos: When was the last time you did a property photo shoot?
  3. Revisit Pay Per Click: Tighten up your pay per click strategy. Are you optimized/spending enough?
  4. Do a Bubble Check: Check to ensure that you are not caught up in the frenzy. Assess how meta search is performing, and put your money where it really matters.
  5. Fix Your Booking Engine: Focus on sharpening your booking engine conversions. All your hotel meta click traffic will go there to convert. If visitors cannot book a room efficiently, at the right rate, then what is the point of all this?

Conclusion

The hotel meta search engines are doing what they do best: helping guests with price shopping and selling click-based ads. They will not make the full value proposition to your guests. You have do that for yourself . So, what are you doing to provide real value to the travel shopper, and ultimately to your guest?

Hotel marketing tools are useful, but they are never going to replace innovation at your hotel. The creation of value should rule everything you do − not only in your marketing efforts, but in your hiring decisions, pricing strategies, front desk policies, etc, etc. Embrace hotel meta search as one more tool you can use to reach potential guests. But then, make sure you are giving them something truly valuable: not just a good price, but the best experience they can get for that price.

 

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.