Shame, Shame, Shame on You! Shortsighted Thinking is a Terrible Thing.
By Neil Salerno
Friday, 20th January 2006
Every now and then, I read an article that really gets my blood boiling. Recently, I came across one such article; it implied that there are some hotels and airlines that are discriminating between direct-booked guests versus those coming through a commissioned third-party. If there is even a modicum of truth to this, I can honestly say that now, I've seen and heard it all.

Wasn't it bad enough when the franchises woke-up from their deep sleep a few years ago, to declare war on Internet third-party aggregators with their self-imposed "lowest rate guarantees"? I was amazed at the great number of hotel owners and managers who jumped on that bandwagon. Fortunately, that kind of thinking subsided when hoteliers finally realized that we need third-party business and third-party booking portals are not going away anytime soon.

I guess there are still some hoteliers out there who don't recognize the benefits derived from third-party listings like the GDS and booking portals. They obviously haven't learned that it's a little extreme to actually punish guests because they booked through a commissionable third-party instead of booking direct. Those who do this are very shortsighted.

Good leaders share a natural talent to see and understand the big picture and are not blinded by personal prejudices; and, above all, they avoid making shortsighted decisions. Discrimination based upon net rate or source of business, without consideration of the overall importance of that business, is shortsighted and dumb; pure and simple.

At times like this, I am always reminded of those general managers who feel that a complimentary room guests should be given that bad room next to the elevator; because they are non-revenue guests. This "punish by net rate" mentality is really disconcerting.  If a guest is important enough to get a complimentary room or deep discount, aren't they important enough to get a good room?

Now, we learn that there are managers who believe that those guests booking through a third-party deserve a lesser or more poorly located room because their net rate is lower. When researching this article, I talked to one general manager who actually tossed around the idea to punish third-party generated guests by eliminating their free continental breakfast, while still providing it to direct-booked guests. Can anyone be more shortsighted than that?

I readily admit that commission-free direct booked business is ideal and certainly more profitable. If your hotel can fill-up at the best rates possible, without any help from third-party vendors, good for you. You are indeed very fortunate. But, if you are part of the majority of hotels on planet earth, you should be grateful for every room booked, no matter what the source.

We all know how bad it is to assume anything, but I think it's fair to assume that most hotels today are using revenue management techniques to max-out their room revenue. Revenue management utilizes the business principle of supply and demand to maximize occupancy and average rate. Basically, as occupancy demand increases, rates move upward as well. Create a base of business, even if it has to be based on discounted rooms, and build your RevPar.

Demand is a fickle mistress; here today, gone tomorrow. There was a day, not that long ago, when independent hotels and some franchises suffered from a lack of exposure in the marketplace. Prior to the Internet, giant franchises held most of the cards in the advertising arena and, therefore, got most of the exposure to the public. The Internet makes it possible for everyone to be a contender.

Today, even small properties can compete with their bigger-box franchise competitors through the Internet; at a fraction of the print and media advertising costs in the good ‘ole days. Third-party aggregators offer world-wide exposure to all hotels; but they can't do it for free. Collectively, they spend $millions on pay-per-click, consumer advertising, and generic search technology to expose your hotel to the public. Why would any hotelier resent paying a commission for that?

What other advertising medium would allow a hotel to advertise on consignment and pay as business comes in? Many hotels spend $thousands on print and broadcast media advertising with no promise of any return; a little like shooting craps in a casino. Should a guest, booking as a result of media advertising, be treated any different from a third-party guest?

For those of you who believe that, one day, all your business will book direct, get real and please join us on planet Earth. Developing a good market-mix for your hotel, starts with understanding that guests will use all channels to make reservations. All channel resources need to be developed and nurtured. If you are not fortunate enough to be able to develop a base of business solely through group and corporate transient business, you need third-party partners.

Let's stop this nonsense before some franchise decides it's a good idea. They tried "lowest rate guarantees", now what, "special amenities for direct-booked guests"?

The last I heard was that we still need to "earn" our business. Take those third-party guests, provide great service, and those guests may become direct-booked guests when they return.

To clarify the record, I do not, have not, and will not ever accept any compensation from third-party aggregators for what I say in my articles. I hope it just makes good common sense.


Neil Salerno - Hotel Marketing Coach


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