According to an article in today’s Wall Street Journal the total pay package for Dara Khosrowshahi, the CEO for Expedia is $93.6 million, this is nearly ten times his compensation just two years ago and makes him the highest paid CEO in the S&P 500.
Granted much of the compensation is due to stock options tied to Expedia’s stock price, but it still adds up to an astronomical sum.
The bottom line is Expedia is making tremendous profits. In fact the stock price jumped 8% last Friday when last quarter’s better-than-expected profits were announced.
So now that the online travel behemoth seems to be on a profit binge here are several questions for hoteliers:
- How happy are you paying 20 " 25% commissions to the OTAs?
- Are you planning on increasing the commissions paid to Expedia by participating in its Accelerator program?
- What CRM programs are you using to increase direct bookings?
- How effective have those CRM programs been?
Nearly a year ago we published “The New Hotel Mantra " “Drive Profitable Direct Bookings” which outlines six strategies hotels can use to drive more profitable direct bookings.
A good place to start is to determine just how much revenue your hotel is leaking to the OTAs. To this end Hospitality Marketing Blog published an OTA Cost Calculater back in January 2011. You can use it to determine just how much revenue your hotel is paying the OTAs.
You may be surprised at just how much revenue the OTAs are costing your hotel. Research from Phocuswright and h2c indicates that 58% of all online revenue for independent US hotels comes from OTAs. That shoots up to 74% for independent European hotels.
Is it time your hotel to break its addiction to OTAs?
What do you think?
www.madiganpratt.com
Readers' Comment:
OTA’s do drive a lot of business to hotels worldwide, but at 20-25% commissions, hotels are paying high rates, to have business driven to their hotels. If you are part of a brand, that has their own reservations system, build your hotels referrals from that source, you are paying fees for that too. What happened to the 10% commissions we use to pay Travel Agents back then, and they were happy with that. Hotels have to keep their rates competitive in the market place, and for the most part, most of us are or should I say, dependent on OTA’s for their market share of the business coming to town. I’m not saying that we should shun OTA’s, lets fact it, your travel partners are here to stay, you are not forced to join their team, but, there are other ways to promote business for your hotel, and not be dependent for most of your business from your OTA partners. If you are part of a brand, you can surely utilize their tools to promote business, not to mention your own marketing/business plan, that is designed to drive business to your hotel, and your sales team, working the the travel partners, and other social networks that can make a big difference in giving your hotel, a solid market exposure, and first choice, for consumers who visit your respective locations.
Work with them to bring those commissions down, like everything else, commissions have to be worked in to your hotel rate structure, as does you operating expenses, and yes, that bottom line too. Bottom line, in this very competitive business, as hospitality is, we have to be connected to all the sources that can drive business to our hotels, we are the ones who can control this, and what we pay, there’s no free lunch, there never was, but operating in the 21st. century, does bring a lot of challenges to the operator, we have to operate smarter, and be competitive, utilizing all the tools that are available to us, if we expect to succeed over the long haul..
As far as the $100 Million CEO, he built this company over time, to be one of the largest Travel conglomerate’s that has made a very positive impact, for the hotel industry. Sure, $100 Million may sound outrageous but, his board may feel that he is worth every penny of this compensation, he and his team have the resources and business savvy, that has helped our industry grow and prosper, and the future looks bright for the moment, that will always include the OTA’s and all travel partners, as part of our success story!
All the best in hospitality
John R. Vicente CHA/3D
