"Give me the genius promo plus the mobile plus the last minute plus the preferential one." Hoteliers wonder: is the public rate really the real rate? Or we are facing a problem that he called "Sewer Revenue"
Clearly the scenario of online travel agencies and especially after the pandemic, is distorted in terms of rates. What years ago was something clear, transparent, with few rates and above all with parity, has completely changed.
The same OTAs that years ago persecuted hotels for the famous "parity" are now the ones that openly promote "disparity".
The danger of this is that the hotelier, in his mental model, keeps thinking about the rate he is giving and not consider all discounts applied to that rate.
Nor does it consider that the MOST amount of reservations that arrive through these channels, arrive through these discounts or routes.
What are the discounts, promotions and other things that the OTAs ask us for?
- Program Loyalty: Genius (Booking.com), Rewards (Expedia), Passport (Take off)
- Promotion Mobile: discounts for those who book by cell phone.
- Promotion Last minute: discounts for those who book between 72 or 48 hours before.
- Accelerator Position: the higher the commission, the better the position on screen.
- Preferential: higher commission for being a hotel recommended by the OTA.
Let's do an example, suppose that the rate granted by Hotel “X” to an OTA is USD 100 + Taxes. And that this hotel has activated the discount per program loyalty, by mobile and by Last Minute. And that apart from that, the hotel has a commission from 18% for being preferential in that OTA.
Rate granted: $ 100
Loyalty (10% off) ($ 10)
Mobile (10% off) ($ 10)
Last Minute (10% off) ($ 10)
Gross Rate $ 70
OTA Commission (18%) ($12.6)
Net for Hotel $57.4
All this without taking into account credit card commissions, city tourism fees, and other things.
The care we have to take is that more than 70% of the reserves at least have some of these "tricks". And what what once it knew how to be opaque, now it's public.
That is why it is KEY that hotels stop doing Revenue management thinking about the $100 Rate and start doing revenue management thinking about the $57.4 rate.
Fighting with OTAs to not be in these promotions is similar to fighting with supermarkets for gondola tops or shelf locations. It is a losing battle. If we play, we must adhere to their rules. If we have to dance, we have to dance.
But ... always taking into account what is under the street. We have to stop seeing what it happens in the street (rate of $100) to start making revenue below the “sewer”.
✅ We must control our competitors… below the gutter 🕳
✅ We must by our our Tariff Target .... below the gutter 🕳
✅ We must put together our income budget… below the gutter 🕳
✅ We must understand that direct sale it is the most profitable. 👑
If we don't start to do revenue management below the gutter, what is going to end up going down the gutter is going to be the profitability of the hotel.
Article made by our special guest: Iñaki Gonzalez Arnejo / CEO & Founder @ DOT Hotels.
Iñaki has extensive experience in hospitality, hotel management, revenue and others. He has served as:
Professor of Marketing and Business Strategy at the Universidad Católica de Argentina.
Co-founder of Funziona, a technology start-up aimed at SMEs that did not have their own IT department.
Co-founder of Asesa Hotels, a company dedicated to operating and managing hotels in the Southern Cone for more than 10 years.
Currently CEO and Founder of DOT Hotels, chain oriented to franchise independent hotels.