10 Mistakes Hotels Make and Lose Money
Hotel Consultancy Firm, Hotel Rescue is on a mission to optimise profits for hotel and accommodation businesses
From increasing occupancy, driving online visibility and conversions to implementing profitable pricing, we work with Boutique Hotels, Motels, B&B’s and Serviced Apartments to make this happen.
Where Hotels Go Wrong
And this video is about “ten of the most common mistakes that hotels make when they work with travel agents that end up with hotels losing a lot of money.”
Mistake number one, working with only a few of online travel agents. When you’re running a hotel, depending on the market you are working in, there’s probably between fifty, up to even two hundred different online travel agents that are currently sending customers to your destinations that you may be working with. However, based on my experience, I have noticed that hotels not usually take advantage of these possibilities.
Only hotels which are not really performing well that are already desperate to get more and more customers are working with as many online travel agents as possible.
However, you need to remember that, if you’re not doing relatively well with your own customers, you can’t expect too many of good results by working with online travel agents. On the other hand, hotels which are already doing well are feeling pretty comfortable and thinking that they need to work only with a couple of online travel agents just to fill out those empty rooms that are currently up to be sold in their inventory.
However, both approaches are not truly the best ones. what I would like you to remember is that working with online travel agents and getting more online bookings is not only about increasing the number of bookings you are receiving. Working with online travel agents is most importantly about diversifying your risk. Imagine such a situation: the market is going amazing, your hotel is almost every day full. You’re getting customers from phone calls, you’re getting customers from your own websites and you’re also getting customers from online travel agents.
Now, suddenly the situation changes maybe the economy goes down, maybe the hospitality market is experiencing a slowdown. Tell me, which scenario is more plausible? In a situation where you are struggling more than you used to when every customer is really valuable for you.
Do you think that an online travel agency will come to you and say, “Because you are struggling, right now, you won’t need to pay us twenty percent commission or fifty percent commission of every booking which we are providing you with? From now on, you will pay me five percent because we want to help you in your current market situation”?
Common Hotel Mistakes
Or maybe scenario number, when travel agency, online travel agency is aware of the fact that right now, the aspect of getting customers is not as easy as it used to be and they’re going to take advantage of that particular fact and they will increase that commission knowing that you are struggling to get those customers anyway. I think we both would agree that this second scenario is more plausible. This is why you should work with as many online travel agencies as possible.
That doesn’t mean you always have to get bookings from them. It’s just good to have them in your area of influence and you can reach out to them when it’s needed. when more challenging times comes and the travel agent comes to you and wants to negotiate a commission, wants even lower rates from you and wants you to pay even a higher commission, if you’re working also with other additional alternative travel agents, now is the time that you need them more because you have a stronger negotiating position with someone that is trying to take advantage of your weaken situation in the market.
Mistake number two, judging if the partnership with online travel agency A is more attractive than a partnership with online travel agency B based only the on the commission level that they want you to pay. Let’s quickly have an exercise. imagine that travel agency A wants you to pay them ten percent for every booking they are sending you; travel agency B wants you to pay them twenty percent of every booking they’re sending to you, which of these deals is better for you?
Well, based on my experience most of the hotel managers I work with would say the travel agency B that charges me less commission. that may be the case, but many times doesn’t need to because the level of commission that you have to pay to the travel agency for every customer you’re getting is only one thing that you have to take into consideration when deciding if a deal is good for you or not.
If you’re working currently with many different online travel agencies and you pay them different levels of commission, let’s do this. Let’s check in your history of bookings and let’s find out how many of bookings from travel agency A, B, C or D, or any other that you’re working with, how many of them gave you no shows?
How many of them have customers that pay on arrival? How many of them pay in local currency? How many of them pay in hard currency like dollars or Euros? Which customers spent more on the restaurant or mini bar? On additional services of the hotels? What is the average spending per customer? What is the average number of nights per bookings?
Only if you take all of those and also many other facts into consideration, that is when you can really make a decision and an educated judgment about which deal is really better for you. if you do that, you may find out that the travel agency B that you thought was so expensive is actually allowing you to make more money because every time there’s a booking there was almost never a no-show; because every time there’s a booking, you get the money up front; because every time there’s a booking, customer doesn’t pay for one night but he stays for a week or two and maybe also buys some additional services like airport transfer and maybe spend way more money on the room service or on the restaurant in your hotel.
Mistake number three, giving the best available rate to one of these online travel agencies you are working with. Let’s stop here for a second. What is really a partnership between a hotel and an online travel agency?
For many reasons, it’s a little bit like a trade-off. A travel agent will always want from you the lowest rate but at the same time, he will always want from you the highest commission.
The more money he makes the less money you make, in many cases. Maybe I’m simplifying a little bit but this type of partnership resembles a little bit of a trade, doesn’t it? So when you’re working for example, with five different online travel agencies and one of them comes to you and says “give me the best available rate because only if you give me a better rate, I can give you more customers,” what does this really mean?
I need to give you my lowest rate so you can get more customers and take them from other online travel agencies? if there is a specific number of customers you can get in total from those five online travel agencies and you give one of them the best available rate, what you’re going to end up with is that almost the same number of customers would just come to you from that one travel agent, which remember, you gave the lowest available rate to, which means you’re going to make the smallest amount of money. Why does this happen like this?
You have to remember that we’re talking about online bookings. The possibility for a customer to compare rates between different online travel agencies is just a couple of mouse clicks away. You have more and more travel websites like TripAdvisor, like Kayak.com, like Skyscanner.com, like Google where you can compare the price of your hotel between different online travel agencies.
If you give one of them the lowest rate, you’re going to end up getting most customers from that particular travel agent, but they’re not coming from a vacuum, they’re just coming from other travel agents’ websites. When you are giving the best available rate to only one of the travel agents, you’re not really helping him get you more bookings, you’re helping him competing with his competition with other online travel agents at your cost. What is the best solution here?
Give all of the travel agents the same rate and let them compete with each other. many times, I get a question, “well, why do you want me to give them the same rate if some of them are trying to make me less, some of them are charging me more commission?” Well, that brings us to the point I’ve mentioned before is that you shouldn’t judge that attractiveness of a partnership deal with an online travel agency only based on commission. once you do that exercise I ask you to, you will realize how many times travel agencies that are charging you higher commission are actually allowing you make more money than the ones that are charging you less commission.
If you find this video interesting subscribe to our YouTube channel because there will be more and also visit our website www.hoteloga.com to see what kind of services and other value we provide to our partners and what else we can do together.
“The key for us was that it was a relatively low investment cost when compared to the potential upside we were looking to achieve. The program has certainly paid for itself and some, and really, we’ve only just begun!”
“I’ve been operating this motel for the past 35 years and I’ve seen the industry rapidly change of late, and Michael has helped me adapt and change my business so I can remain competitive”