Thursday, July 26, 2007

Why not Hotels.com and others

Occasionally a guest will ask me why they were not able to find The Inn or book The Inn on Hotels.com or some similar site. The answer is quite simple. The vast majority of booking sites charge a minimum of 30% commission on the rooms they book. THIRTY PERCENT. Travel Agents only charge 10%.

How can a hotel survive by giving 30% of their Gross Income away? They can't. Our profit margins are just not designed that way.

Or are they? Obviously the hotels using these services are not going out of business. So how do they do it? I don't know exactly, but let me make some educated guesses.

The first hotels to sign up for these services probably did quite nicely. Especially if they were in a highly competitive market and they had no other way to distinguish themselves from their competitors. These booking sites drove ample new business to their doors. Business that they would not have gotten through any other means. Cool! So what happened when their competitor next door started using these new booking sites. The original hotel's share went down, but they were already committed to this new model so they held the course. As more and more hotels joined the fray, everyone's profit margin started to plummet.

As I said earlier, profit margins for a hotel are not designed for a 30% rake off the top. But now everyone was knee-deep in this new system. What would give? In a strong hotel market the answer was quite simple. Now that everyone was in the same boat, it was time to raise rates. If the public was so determined to book hotels in this way, let them pay for it. Everything will even out, the booking sites can have their 30% and we can get our profit margin back.

However, in a weak or even moderate hotel market that may not be an option. The only option these hotels have is to cut costs. The first cost to go is usually preventative maintenance, then staff services, then capital improvements. Though the price doesn't go down, the overall experience for the guest does.

Fortunately the Napa Valley has not yet fallen into this trap. I would much rather spend my time thinking up new, cool things I can do for my guests, what new improvements they will like, what added staffing I can put in to make things run smoother, than trying to figure out where to cut something so the guests won't notice, who to lay off or how to get by two more years with some falling apart air-conditioner or some such.

What do you think? Is booking on Hotels.com that much more fun than picking up a phone and talking to a nice helpful, real person that will help you pick the best room for your needs (oops, did I kinda backload that question with the answer I want you to give me)?

4 comments:

Rodrigo said...
This comment has been removed by a blog administrator.
Big Night Fan said...

Jim, I think you should continue to AVOID the online discount game/"best room rate" mentality. We don't come to the Inn cause we saved 30%. We're coming ANYWAY because it's an awesome place to stay and the staff treats us so well. Something tells me your word-of-mouth is working just fine anyway.

Anonymous said...

Jim and all--congrats on the blog.
Lou P.

Anonymous said...

Everytime I have stayed at a hotel through hotels.com it was a dive.