How interesting to read the recent news from the Hotel Data Conference hosted recently by STR and Hotel News Now. During a panel discussion about distribution, Rebecca Bucnis, EVP and chief commercial officer of Kalibri Labs, said top-line hotel companies paid about 18% in customer acquisition on average in 2015.
Hoteliers on the panel estimated they pay much more than that. Doug Browne, president of Peabody Hotels & Resorts, fondly recalled the days when travel agent commissions were only 10% to 15%. I can recall my own GM’s complaining that even this was too high. Panelist Bharat Patel, chairman and CEO of Sun Development & Management Corporation, said, “the whole landscape has been analyzed as to what the cost is today and where it is going, and that is 25% or even 30%.
“As the world has become more digital, commission and costs have gone up,” he said.
Then Melissa Maher, SVP of global partner group at Expedia, claimed Patel’s “overall cost has been reduced by 25%,” referencing Expedia’s research on commission levels. “We have been able to bring our compensation down, and we are listening to our hotel partners. And (Doug Browne’s) has gone down as well.”
Wow, a 25% drop and the top-line hotel brands are still paying 18%? That is supposed to be a good deal?
When you think about it, we have online travel agencies getting close to 1 out of every 5 top-line dollars from the transient market for simply taking the reservation and passing it along to the hotel. Of course, other than taking and passing along the booking, the OTAs do lots of their own marketing, including spending huge sums on paid search, but this is no favor to hoteliers either. It just drives up the hotel’s costs of its own paid searches. Apparently OTAs sometimes bid against hotels that are not even listed on their sites. One hotelier in California recently filed a lawsuit against Expedia for allegedly luring customers with online deals for hotels they don’t list there nor on their other sites.
Ironically, many of these OTA reservations still arrive at the hotel via email or even fax, and the hotel has to pay labor costs for the booking to be entered. Even hotels that have seamless connectivity require someone to look over these bookings. What’s more, when you read those 1-star and 2-star reviews at TripAdvisor, you will find that a disproportionate number of unsatisfied guests have booked via OTAs.
Of course this is old news, and hoteliers and asset managers have been increasingly aware of this, with the latest attempt being to offer lower “fenced” rates to members of their loyalty programs. Yet at least one chain has already broken rank and is offering its loyalty rates on the OTA sites.
There is one very simple solution that all hotels can use to greatly reduce their OTA commissions and to encourage direct bookings, regardless of brand affiliation or property classification: That is to simply answer the reservations calls you are receiving every day. While the number of direct phone calls you are receiving might vary, every hotel has this opportunity.
Hotels affiliated with major brands, those that host primarily short stays from frequent return guests and those that have a large base of group and conference business might have fewer calls than others, but the phones are still ringing. Hotels that are independent, host longer stays, are more heavily weighted toward leisure guests and offer nonstandardized lodging will receive more calls each day. Essentially, the higher the rate, the longer the stay, and the more important the purpose of travel, the more likely the guest is to call directly.
So properly fielding direct phone calls should be a priority for every hotelier. Now, let’s think about how the phones are currently answered.
At many branded properties, all calls are sent immediately off-site to brand call centers. Depending on the brand, the cost for this could be a flat rate up to $7 or $9 or a percentage. Based on the test calls we do on our training workshops every week, major brands are falling short on both sales and also service and hospitality skills. So not only will there be a fee to send the calls off-site, but chances are the conversion is going to be lower and the service is going to be poorer. In fact, I have previously written about how the OTA call centers outsell and out-service hotel brands.
While there is a good argument to be made that it is better to send a call off-site when the front-desk colleague is facing a long line of guests on arrival, there’s also another alternative: ask for a phone number and offer a call back.
At independent hotels, many calls are sent off-site to call centers as well. Some send only overflow and after-hours calls, while others send all of their calls off-site to third-party call centers. Some of these centers charge as much as 12%, and when I mystery shop most of them they are definitely in order-taking mode, although I have to add that they seem to do much better than the CROs of major brands.
Certainly there are a few private, third-party call centers that do an excellent job and that charge far less than 12% commission.
Yet even if you have the world’s best call center and the most alluring, up-to-date website, there are always going to be those who ask to speak to someone directly at the hotel. This includes those who are concerned about comments they read in online guest reviews on social media posts, customers who are overwhelmed by the number of choices they have seen online, people who perceive they are going to get the best deals by calling directly—and these days—those who have searched on a mobile device but found it easier to click-to-call vs. booking online.
Here are some tips for decreasing acquisition costs by converting more property-direct bookings:
- Train those who field reservation inquiries on the importance of capturing more direct bookings. Help them understand that today’s callers have already shopped online. Train them to engage callers by asking: “As I’m checking rates, are there any questions I can answer for you about our amenities and services?”
- If you are a branded property, take as many calls in-house as you can to cut down on transaction costs and to maximize conversion. Revisit the auto-attendant greeting on your phone system and offer callers the option to hold for in-house reservations vs. off-site. When callers specifically ask for on-site reservations, do not send them to CRO.
- If you do not have a reservations staffer, train the front desk to offer callbacks when they are busy. Provide these employees with a small incentive. You will be amazed by how many direct bookings a front-desk agent can close for an incentive of $1 per booking.
- If you are working with an independent call center, make sure you have hired one of the best out there that trains its staff on an updated, conversational, caller-focused sales process vs. old-school scripting. Do not over-pay 12% commission rates.
- Post your phone number prominently on your website with messaging that encourages calls such as: “For the best rates, call us directly at the hotel right now.”
Doug Kennedy is President of the Kennedy Training Network, Inc. a leading provider of customized training programs and telephone mystery shopping services for the lodging and hospitality industry. Doug continues to be a fixture on the industry’s conference circuit for hotel companies, brands and associations, as he been for over two decades. Since 1996, Doug’s monthly hotel industry training articles have been published worldwide, making him one of the most widely read hotel industry training writers. Visit KTN at www.kennedytrainingnetwork.com or email him directly.
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