How Hotel Reservations Work
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How Hotel Reservations Work
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Re: How Hotel Reservations Work
#2The article misses the fact that there is a roll over cost associated with room occupancy. So booking all rooms no matter the price can actually cost the property money. One has to factor in electricity use, housekeeping costs and complimentaries (as well as some other more hidden items like prorated taxes) on a per room basis and then tally a minimum rate for profit, 100% occupancy at any rate can actually be less profitable than 80% at a staggered rate with all %80 being profitable.
Re: How Hotel Reservations Work
#3The article misses the fact that there is a roll over cost associated with room occupancy. So booking all rooms no matter the price can actually cost the property money. One has to factor in electricity use, housekeeping costs and complimentaries (as well as some other more hidden items like prorated taxes) on a per room basis and then tally a minimum rate for profit, 100% occupancy at any rate can actually be less p…
Also there's a consumer-perception / branding effect going on with too-cheap pricing too. If I know I can call the local Four Seasons at the last minute and get a room for $75 then I'm going to be much less willing to pay $500 the next time - even if I "know" I got a special deal ("Well can't you make me a special deal again?").
That's where services like HotelTonight make the properties very happy - they fill the rooms at deep discounts but HotelTonight takes the "brand hit", not the hotel itself. The Four Seasons can plausibly say "Well sir we didn't give you the $75 rate - that other service did" even if they full well approved it :)
Re: How Hotel Reservations Work
#4Hotel yield management is about a decade or so behind the airlines, but they're catching up, so this is probably going to get a bit harder from the OTA's/customer's perspectives before it gets easier. (Yield management means the art/science of room pricing such that you sell out nearly all of your inventory while maximizing profits. It has gotten radically more sophisticated over the years -- loyalty programs, for example, are only about 30 years old, and they virtually transformed the industry. (They're patterned off of airline mileage programs, which debuted in 1979.)
This is, by the way, one of those boring fields where people who look like programmers, talk like programmers, and act like programmers take home bonuses like bank presidents. (Interview question: "To within an order of magnitude, how much money does it make Marriott if we increase systemwide occupancy rates by 5 basis points this year?")
Re: How Hotel Reservations Work
#5The article misses the fact that there is a roll over cost associated with room occupancy. So booking all rooms no matter the price can actually cost the property money. One has to factor in electricity use, housekeeping costs and complimentaries (as well as some other more hidden items like prorated taxes) on a per room basis and then tally a minimum rate for profit, 100% occupancy at any rate can actually be less p…
Also there's a consumer-perception / branding effect going on with too-cheap pricing too. If I know I can call the local Four Seasons at the last minute and get a room for $75 then I'm going to be much less willing to pay $500 the next time - even if I "know" I got a special deal ("Well can't you make me a special deal again?"). That's where services like HotelTonight make the properties very happy - they fill the ro…
Its not only Hotel Tonight that does that, even priceline's negotiator, hotwire's hot deals and travelocity's last minute discounts. It wasn't something new that HotelTonight tried, but by creating an app for a narrow vertical 'discount rooms for tonight', they attracted lot of people's attention.
Re: How Hotel Reservations Work
#6The article does not mention the potential impact of Roomkey:
Based on the articles that the CTO of Roomkey has written, I am under the impression that their technology is very cutting edge:
http://www.colinsteele.org/post/27929539434/60-000-growth-in...
http://www.colinsteele.org/post/23103789647/against-the-grai...
It is important to note that the big hotel chains had realized that they had fallen behind, in terms of technology, and they needed to catchup. Unable or unwilling to build the technology themselves, they acquired Roomkey (or rather, they acquired Hotelicopter and renamed it Roomkey).
Re: How Hotel Reservations Work
#7This is a pretty good read. I REALLY hate booking both air travel and hotel rooms as I ALWAYS get the feeling that I'm getting fucked. It always just feels like I know someone is getting the same room on the same night or the same flight for cheaper than me. I never feel like I've won, so to speak. When booking air travel, if I can, I like to book with Southwest just because it feels better. I may be able to get a cheaper flight with some other airline by going through Priceline et. al., but I feel dirty and cheated (somehow) doing it. I just want to deal directly with the person who has the room or the flight and know that I'm getting a fair price. Is that too much to ask for?
Re: How Hotel Reservations Work
#8Hotel yield management is about a decade or so behind the airlines, but they're catching up, so this is probably going to get a bit harder from the OTA's/customer's perspectives before it gets easier. (Yield management means the art/science of room pricing such that you sell out nearly all of your inventory while maximizing profits. It has gotten radically more sophisticated over the years -- loyalty programs, for ex…
Why on earth would you want to sell out all rooms as a goal?
Re: How Hotel Reservations Work
#9This is a pretty good read. I REALLY hate booking both air travel and hotel rooms as I ALWAYS get the feeling that I'm getting fucked. It always just feels like I know someone is getting the same room on the same night or the same flight for cheaper than me. I never feel like I've won, so to speak. When booking air travel, if I can, I like to book with Southwest just because it feels better. I may be able to get a ch…
You would rather everyone at your hotel pay the same price, which is higher than most people at the hotel next door?
Re: How Hotel Reservations Work
#10The article misses the fact that there is a roll over cost associated with room occupancy. So booking all rooms no matter the price can actually cost the property money. One has to factor in electricity use, housekeeping costs and complimentaries (as well as some other more hidden items like prorated taxes) on a per room basis and then tally a minimum rate for profit, 100% occupancy at any rate can actually be less p…
Also there's a consumer-perception / branding effect going on with too-cheap pricing too. If I know I can call the local Four Seasons at the last minute and get a room for $75 then I'm going to be much less willing to pay $500 the next time - even if I "know" I got a special deal ("Well can't you make me a special deal again?"). That's where services like HotelTonight make the properties very happy - they fill the ro…
Four Seasons selling blocks of rooms for pennies on the dollar to HT doesn't hurt their brand? Do you think HT is paying $500 for each of those rooms?