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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 proper

by kls 14y ago

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 profitable than 80% at a staggered rate with all %80 being profitable.

nlh 14y ago
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 :)
- xoail 14y ago
  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.
  - coditor 14y ago
    The problem with HT is that it can't do enough volume to actually build a profitable business. It's primary customer is someone bigger to buy them out.
- Evbn 14y ago
  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?
- jtheory 14y ago
  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.
  - hondje 14y ago
    That is a big draw. Most revenue comes through loyalty programs and most properties are terrified if they give to much to OTAs their numbers will drop and they'll be fired. Plus, people who book online are usually price sensitive and indifferent to the actual service and amenities - their loyalty comes from price not past experience. To make matters worse, companies like expedia/hotels.com have HORRENDOUS customer service which makes better brands even more hesitant to help them out, because its trouble they can't control. The vast majority of GMs are promoted from within, which means working class and under educated. They're not going to take chances because jobs are hard to find and not one of them wants to go back to housekeeping etc
mattmanser 14y ago
I thought this too at first, but my sister used to work in hotels, this is by and large wrong. Almost any price is better than none. Especially if you're out in the sticks and they'll buy dinner. Think about it a little more. Electricity & heat will mostly be on anyway. Complementaries are bought in massive bulk and are almost worthless. They'd have the same number of staff on if the hotel was 80% or 100% anyway. Depending on the size of the hotel maybe you might have to hire one more minimum wage worker. Hiring the room for a fairly nominal amount would cover all those costs. Upsell them one product, such as a meal, and you've got profit. You have to remember the majority of the costs are fixed when calculating the cost per guest in a hotel.

by kls 14y ago

nlh 14y ago

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 :)

xoail 14y ago
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.
- coditor 14y ago
  The problem with HT is that it can't do enough volume to actually build a profitable business. It's primary customer is someone bigger to buy them out.
Evbn 14y ago
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?
jtheory 14y ago
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.
- hondje 14y ago
  That is a big draw. Most revenue comes through loyalty programs and most properties are terrified if they give to much to OTAs their numbers will drop and they'll be fired. Plus, people who book online are usually price sensitive and indifferent to the actual service and amenities - their loyalty comes from price not past experience. To make matters worse, companies like expedia/hotels.com have HORRENDOUS customer service which makes better brands even more hesitant to help them out, because its trouble they can't control. The vast majority of GMs are promoted from within, which means working class and under educated. They're not going to take chances because jobs are hard to find and not one of them wants to go back to housekeeping etc

mattmanser 14y ago

I thought this too at first, but my sister used to work in hotels, this is by and large wrong. Almost any price is better than none. Especially if you're out in the sticks and they'll buy dinner. Think about it a little more. Electricity & heat will mostly be on anyway. Complementaries are bought in massive bulk and are almost worthless. They'd have the same number of staff on if the hotel was 80% or 100% anyway. Depending on the size of the hotel maybe you might have to hire one more minimum wage worker. Hiring the room for a fairly nominal amount would cover all those costs. Upsell them one product, such as a meal, and you've got profit. You have to remember the majority of the costs are fixed when calculating the cost per guest in a hotel.