Expedia and Marriott announced a new agreement that could have implications for independent boutique hotels. Specific details are confidential and likely to be complex, but some key points have been leaked into the public arena and are worth considering as part of your rate and distribution strategy. Below are some key points:
* Commission levels paid by Marriott hotels to Expedia are the most talked-about item. Several reliable (but anonymous) sources have said that Marriott has negotiated a 12% commission rate, which is substantially less than 20-25% paid by most independent hotels. With a deal this complicated, this is probably a baseline or blended figure, that may vary by property, brand, day of the week, time of year, or reservation type (like last-minute).
* The new combined Marriott has 6,700 properties and 110 million loyalty program members. Below are the top 10 chains in terms of number of rooms:
* Rate parity and rankings may not be affected by this deal. There has been speculation that Marriott hotels might be exempted from punishment for lower rates in direct channels, but early information indicates that this is unchanged. In other words, Marriott hotels would presumably lose visibility just like an independent. It is certainly not good for Expedia to get consistently under-priced by anyone, so only time will tell if there is any change to this.
* The official statement mentions that Expedia technology will be used by Marriott “for an innovative distribution arrangement beyond transient retail bookings...”. This may provide more exposure to Marriott brands in some Expedia channels or more exposure to Marriott loyalty programs, but the exact meaning is unclear.
SO WHAT SHOULD YOU DO?
Getting concessions from a giant like Expedia requires enormous scale, even for Marriott, who came with increased leverage from their huge Starwood acquisition. However, there are still some things you can do, or projects that now become more important:
* You can still try and get better commissions. Especially if you are at 25%, this is worth challenging. It certainly puts you at a disadvantage versus the chains.
* Invest more time and money into new channels that charge less commission, like Airbnb, which charges 2-4%. This can give you more profits in the near term, but also creates less dependency on Expedia.
* If you are still managing OTA channels and bed banks individually, then automate that with Channel Management software that: A) synchronizes rates and availability across all channels, B) enables you to enter more channels, and C) plugs into your PMS, so that all reservation and payment details are entered automatically. There are many tools now available for independent hotels, so this can close the gap a little bit. Doing it manually will leave you at a bigger disadvantage.
* Do Revenue Management (also known as Yield Management) every week. This means pulling together updated figures for Competitor Rates and your Availability, for the next 120 days and adjusting rates up and down for future dates. Few independent hotels do this and it can improve occupancy and ADR, and of course profits.
* Increase investment in direct channels, including Google and TripAdvisor. Investing more time and money in these channels can improve the booking volume coming from each, and Google HPA is growing. With proper management, these channels can bring strong ROI.
* Start building more direct communication channels with guests, and potential guests through Facebook, Twitter, and Instagram - and DO NOT forget about email. Email automation and a solid database of truly Opted-In emails can be one of your best sources for low cost bookings. It takes work to set this up and maintain it, but it can be one of the best ways to build a direct relationship with guests and reduce dependence on third party channels.
* You may also consider a "soft-brand" relationship with a large chain. This allows you to push rates and availability through the chain's distribution software into OTAs and other third parties, so that you can take advantage of their lower commissions and existing software. You can also have your hotel displayed on the chain's direct website and loyalty programs. In many cases, you do not have to use their brand all the time, but only where you want to, so you can maintain your independent brand and experience. You may have to accept some rigid requirements and there are costs, but it can be a valuable trade-off for many hotels.
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Next week's blog will have a very special offer in it, so keep an eye out for that!
Have a great week, and remember, Revenue Is Oxygen!