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How Hotel Reservations Work

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Re: How Hotel Reservations Work

#11

Post by tesseract »

Evbn wrote: post #8
patio11 wrote: post #4

Hotel 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?

There's an implicit "for the best price each room could possibly bring" attached to that goal. The reasoning is basically that the cost of a hotel room (construction, upkeep, etc) is not affected too much by whether it is occupied or not. (In that way it's very similar to a seat on an airliner.) So considering your costs as a hotel operator are nearly fixed, you're quite obviously better off selling 50 rooms at $200 and then 50 more rooms at $100, than if you had kept the price at $200 and only been able to sell the first 50 rooms. Of course in the real world the pricing strategies are a lot more complicated than that and depend on having good models for how many people are willing to pay what price, and when.

Re: How Hotel Reservations Work

#12

Post by tedunangst »

Evbn wrote: post #9
themckman wrote: post #7

This 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?

Human nature is incompatible with a rational sense of fairness. Everybody could start off happy with the price they paid, but upon discovering other people are also happy, will become unhappy.

Re: How Hotel Reservations Work

#13

Post by CamperBob2 »

Evbn wrote: post #8
patio11 wrote: post #4

Hotel 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?

I must be missing something here. How does an empty room make any money?

Re: How Hotel Reservations Work

#14

Post by kodablah »

CamperBob2 wrote: post #13
Evbn wrote: post #8

Earlier quoted context omitted.

Why on earth would you want to sell out all rooms as a goal?

I must be missing something here. How does an empty room make any money?

In many occupancy-based price optimization algorithms (at least in the multi-family sector where I previously worked), it is not optimal to maintain 100% occupancy. It doesn't allow much flexibility. I've seen recommendations for apartments around 95% to cope with fee changing, turn over maintenance etc. I'm sure hotels are in a similar situation (but have even lower percentage due to guest volatility).

Re: How Hotel Reservations Work

#15

Post by jtheory »

nlh wrote: post #3
kls wrote: post #2

The 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…

The trade-off is supposed to be that you can't always get a last-minute room at the Four Seasons when you book it for "tonight" -- sometimes they'll be sufficiently full that they won't have sold that block to HotelTonight, and instead of having a plush room right across the street from where you'll be working early the next morning, you'll need to settle for a "motel" right on the highway, 10 miles away.

I'm not sure how these things end up playing out (and if HotelTonight shows data that maps how often selected hotels actually have rooms available, that might undercut the hotels' stance a bit), but I know I wouldn't want to rely on it; even planning in advance, in my experience it's not terribly rare that hotels are booked up if you don't call early enough (and it's an in-demand area).

Edit: ah, yup -- that's HT's pitch to the hotels. From the section for "hotel partners": The key to targeting these unique and valuable guests is the IMPULSE DEAL, a rate so you good you only use it when you absolutely need to move rooms at the last second. Since you don’t have that need everyday, our display changes everyday, meaning guests can never predict when your hotel will be offered.

Re: How Hotel Reservations Work

#16

Post by ChuckMcM »

patio11 wrote: post #4

Hotel 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…

I've spent a lot of time researching the economics of information and one of the interesting things that popped out of that was when I looked at yield management, as a research topic, I realized that that is what information markets would look like when mature.

Re: How Hotel Reservations Work

#17

Post by smtm »

patio11 wrote: post #4

Hotel 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…

yield management is the exercise you do when your - the individual hotel's - distribution system is set up perfectly and humming along. The biggest gains for hotels happen actually when they set their mind to it that they want to shift the source of their business away from the OTAs to more direct business: direct can be the online booking tool on their own hotel website, mails, repeat customers, phone calls. yes even phone calls, that should be one of the goals when setting up a mobile hotel website.

To achieve this hotels should invest in a decent website, start blogging with a voice that they cultivate over time and go for better rankings in the SERPs. That, plus a humming hotel operation with systems in place to handle the direct business is the way to go.

This way even smallish properties can run circles arround bigger competitors. The bigger hotels have a hard time to copy this, as they are not as agile, and need meetings to figure out a "social media strategy".

Figure I know quite a bit on how to make hotels way more independent of OTAs as a booking source: this is actually the core of my SaaS offering: http://www.igumbi.com . It is an online pms, revenue/ yield management system and has a online booking tool for the hotel website. JSONP based and no sucky flash or iframe.

The most important aspect of the yield management architecture I find to be the use of nesting. It's a very flexible, value based approach on assigning fixed capacties to sellable allotments. This robust inventory algorithm, devised by MIT's Belobaba, is the thing that executes the yiled management settings. And I totally agree with the use of loyalty programs and direct chstomer interaction. That's why we also have a mailchimp list integration, so it becomes virtually a no brainer to keep your mailing list up to date in he daily business operations

Re: How Hotel Reservations Work

#18

Post by Im_Mr_Manager »

themckman wrote: post #7

This 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…

When booking flights (and probably hotels) use incognito mode. I was booking a flight direct with united.com the other day - found the flight at ~$400 and was entering information. Got sidetracked and the booking session timed out so I started again. New price for the exact same thing: ~$700. Incognito mode (or just clearing cookies as I've heard of this happening but never saw it myself) and it was back to the old price.

So just watch out when booking direct as well.

Re: How Hotel Reservations Work

#19

Post by tantalor »

patio11 wrote: post #4

Hotel 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…

Is that interview question supposed to be for programmers or account managers? Is there a difference?

I can't imagine how answering that question correctly indicates a good candidate for software engineer.

Re: How Hotel Reservations Work

#20

Post by patio11 »

tantalor wrote: post #19
patio11 wrote: post #4

Hotel 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…

Is that interview question supposed to be for programmers or account managers? Is there a difference? I can't imagine how answering that question correctly indicates a good candidate for software engineer.

It's a joke, patterned off the famous "Estimate how many golf balls fit in a schoolbus" interview questions that are just windows into how candidates would think about such things. (They're terrible questions for engineers. Don't ask them.)

The dual purpose of the joke is that, if you played it straight, you'd probably come up with a number in or near the millions, which I am suggesting is a reasonably achievable result from comparatively trivial optimization work applied at scale. (That's sort of a thing for me.)

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