Mission, You said your franchise had a loyalty points program. How did points stays get “handled”? I assume the franchise reimburses the franchise in some fashion. Was there any similar handling of points booking customers?
The franchise had flat reimbursement if the hotel was not sold out that night. Usually the reimbursement was one of three price levels based on, “Demand season,” which was totally arbitrary and decided by the franchisor. These price levels were also ridiculously cheap, in any instance.
The only exception would be a 100% sell out, in which event, the hotel would be compensated 90% of the ADR (average daily rate) for each free night guest that night. The good news is that it was very easy to fake 100% if you were even close. You would just put rooms in as hotel-comped rooms that weren’t actually occupied, you’d put a room or two out of order in the system, etc. And then, if anyone did come in, you’d just check out one of the comp rooms and put them in that...or leave the comp room if it was a person you could rent to, “Out of the computer.”***
As far as the guests staying on points, we treated them well. We REALLY don’t want any complaints going to the franchise that would actually stick, and those definitely would. The only thing was that points guests could not have any of the king suites or jacuzzi rooms, but they could book anything else. That aside, we’d try to make them happy.
The only thing with them that sometimes sucked is that some of them were much more likely to complain anyway. The reason was twofold:
1. They would use their points with us because it took fewer points to stay with us than the higher chains in the group...but they usually stayed at the higher chains in the group. So, they might call the franchisor (after already staying, of course) and complain about the hotel, in general. Most complaints, however, would be about amenities or continental breakfast items that the higher chains were required to have that we were not required to have.
In essence, they’re using their points on a lower hotel grade, but are somehow expecting the same experience as at their usual chain. I’ve never accused most people of being intelligent.
2. There was a time that we were the ONLY hotel of any chains in that franchise for forty miles in any direction. That sucked. We’d have seven or eight free nights stays, at that point, until the franchise gave us a certain number of days a year that we could limit it to two such rooms in a night. I think twenty days per year, or something.
***Not always the case. At one time, it was just the flat reimbursement...but I forget how long ago they changed it to the 90% if sold out thing.
TPW's and Why I Hate Them
I hate the TPW's because they make a bunch of money for doing basically nothing. There's no real added benefit to them and they have nothing to do with the actual product that the guest is being offered. They pretty much just sit back and make risk-free money.
Another thing that I don't like about them is that they basically extort the hotels for a premium percentage in order to have preferential listing on their websites. What that means is, when the default list for an area/town search comes up, your hotel appears at the top unless the guest hits, "Order by price," "Order by distance," or whatnot. Sometimes, the first recommended hotel will be miles away from the guest's intended destination, if that is the only hotel to pay for the priority listing.
They'll also threaten to remove you from their listings if they don't like your reviews, or sometimes, if they feel like the prices are too high for the chain of hotel you are...which completely ignores supply/demand of a given market. For example, during the natural gas boom, did we have one of the highest ADR's in the country for the chain? Yes. But, we were also 80% occupied, on average, so why wouldn't we have the highest prices compared to some roadside hotel in the middle of nowhere sitting at 25-40% occupancy year round? There was once a three-month period where Sundays were the only days that were not a 100% sellout.
So, then they'll call asking us if we could do something about the rates. Laughable. I would look and see that they brought us five reservations in the last thirty days and say, "No, and feel free to take us off of your website any time you want to. I'm not asking you to do it, but you can go ahead and do it anytime you like."
Even their websites don't have original material all the time. They've never been to the hotel, for one thing. Usually they just lift all of the pictures and descriptions from OUR website. I remember one of the TPW's (I forget which) asked if we would provide more updated pictures. I said, "No, but you can pay a photographer to come and take pictures here anytime you like. Otherwise, I think the franchisor wants new pictures in about two years, so you can wait until then."
Anyway, they are useless and provide no added value. They also think they have some right to ever even ask the property to do anything, without being the entity that gets to eat the costs associated with doing what they want done.
That's why I said Hotels.com was at least reasonable. Aside from wanting an extra percentage for preferential listing, (no thank you) they never asked us for anything.
Franchisors are a necessary evil, mainly because you need the flag. The flag just refers to a recognizable hotel name and sign.
From a guest standpoint, franchisors are also good because of rewards and because you can book all kinds of different areas all in one place.
Furthermore, franchisors usually ensure some degree of uniform standards in a given hotel chain, though some do that better than others and it depends on the chain in question. Even certain franchisors will have more consistent requirements for one chain, but not so much for another chain.
In my experience staying at places, Holiday Inn Express and Best Western tend to be two of the most consistent chains when it comes to the stuff that's actually important. I will also say that Fairfield by Marriott and Suburban by Choice Hotels (mainly for extended stays) are very consistent.
By a mile, Quality Inn by Choice Hotels are the least consistent chain anywhere. I don't know what the hell is going on with their inspections; the only thing I can assume is that Choice Hotels International has forgotten that they are in charge of the Quality Inns. I've seen a few that could be Comfort Inns, easily, and a few others that would be the worst Rodeway Inns in the country...if they were even somehow considered suitable for that.
Anyway, the benefits to the guests are convenience and consistency, but make no mistake that both the guests and the hotels are paying for those things. Let me give you a rate breakdown on a AAA member stay booked through a TPW.
Rack Rate: $80
AAA Discount 10% ($8.00)
New Rate: $72
TPW Booking Fee (20%) ($14.40)
Effective Rate for Hotel: $57.60
Any Room 7%--of the $72--until stay exceeds seven days, if applicable): $5.04
Online Channel Fee---Even though it wasn't their channel--5%: $3.60
Franchise Rewards Fee---2.5% (Any guest with Rewards Number put in) $1.80
NEW Effective Rate for Hotel: $47.16
Think about that: Before any other costs, the hotel is starting off only getting 65.5% of the already discounted AAA rate. It's less than even that relative to the Rack Rate, but of course there is a AAA discount. That's standard.
However, it's not like this is the only franchise fee. You still have the annual flat franchise fee that you have to pay. Also, imagine that the franchise decides (arbitrarily) to change the logo for your chain, now you have to do this:
-Pay for new billboards
-Pay for new outdoor signage (Very Expensive!)
-Pay to change the highway signs (which can only be done when you renew that contract...which really irritates the franchise though we have no control)
-Buy amenities with the new logo
-Buy towels where the tag has the new logo if you have logo towels (I was not stupid enough to get logo'd tags)
-Go to Staples and make all new hotel services books with the new logo.
-Buy new throw rugs with the new logo (These are required as minimum one for the lobby and one for the elevator floor)
-Change any, "Hard," logos in the hotel---but again, we weren't stupid enough to have anything with hard logos.
-Change all indoor signage
-Get NEW pictures for online that reflect the logo change
And, all of these are very inflated prices. For one thing, there were ONLY four vendors that we were even allowed to purchase some amenities/attire from. The second thing is that we had to use one of their approved photographers for the photos, so that's high-four low-five figures just to get the new pictures taken.
All told, the logo change directly cost us about $25,000 by the time we did everything to ensure full compliance, which you had to, or they would first fine you and then fine you more and delist you from the website. They threatened to delist us over the highway road signs, until I finally prevailed upon them that the company who does them is ONLY willing to change them once per year--when you renew that contract.
Okay, so you have a guest booking TPW who pays $72.00 plus tax and the hotel gets an effective rate of $47.16 before you consider any other cost at all. Some hotels (mostly those owned by huge companies) are happy just to cruise along on auto-pilot and not put thought into anything, but I tried to put thought into everything.
So, what happens if you call me and book directly?
$64.99 + Tax.
And then, I only have to pay 9.5% to the franchise if they are a rewards member. This results in an effective rate for the hotel that rounds up to $58.82.
Therefore, the guest spends $7.01 less and we get an effective rate that is more than $10 greater than we would have had otherwise.
The problem is that the hotel and the franchisor have a quiet war with one another over these things. For example, they might do a promotion by which a guest can stay three nights within a certain period and will automatically get enough points to get a free night-----the catch being they have to book online. Isn't that cute? The franchise offers a, "Promotion," while making more money from the hotel in the process, because now people are more inclined to book online. Remember, the actual free rooms cost them next to nothing, unless the hotel is 100% sold out.
Worse than that, we were one of the chains where you could use the points, but stays at our chain did not apply to this promotion. IOW, this promotion did nothing but cause more people to book online (hurts our bottom line) and more people to use the free nights with us, which they had more of--which also hurts our bottom line.
And, of course, people THOUGHT that stays at our hotel DID apply...and then decide it's the hotel's fault that they don't. Therefore, the guests who book online complain endlessly to us over something that we didn't control in the first place.
It actually got so bad, that at one point, I would CALL every single guest who booked online to make sure that they understood that their booking did not apply to the promotion. They usually did not know that and cancelled the reservation.
Of course, people still griped about the cheaper rate:
GUEST: How much is a rate for x date?
MISSION: Hmm...looks like a Wednesday, you said two adults, two beds? Sure. I can do $64.99 before tax as long as you don't have any pets.
(For some reason, people would pretend to interpret, "Plus tax," as "Including tax," to try to rip the hotel off---so I usually said, "Before tax," over the phone)
GUEST: What's the Triple-A Rate?
MISSION146: The Triple A rate is actually more than that. Direct calling is the lowest rate possible. The rate is just $64.99, before tax.
GUEST: So, no Triple-A discount?
MISSION146: There is, but our standard rate is $80. Your rate will be $72 before tax if you book with the Triple-A discount online. I'm already offering a lower rate than that, so my rate is better.
GUEST: You HAVE to offer a Triple-A discount.
MISSION146: I do, but that would make the room MORE expensive than the offer I am already giving you. Triple-A applies to the standard rate, which is $80, before tax. If you would like the Triple-A rate of $72 before tax as opposed to my offer of $64.99, I'll gladly give it to you.
I have one last funny anecdote as relates AAA.
Apparently, AAA was getting upset because so many hotels were not verifying the AAA Member number before allowing the guests to have the AAA discount. That was completely true, by the way, though I don't know if it still is. We didn't care if you had AAA or not, if you asked for the discount, then you got it. (In most cases, because it's more than I'd have charged anyway.)
People would come in...and keep in mind I might have quoted them $79.99 + tax compared to a rack rate of $100:
WALK-IN GUEST: Hello, how much are your rates for tonight please? I have Triple-A.
MISSION: Triple-A? Sure. Looks like an even $90 before taxes.
So, thinking that Triple-A is this great thing to have just cost them an extra $10.01 as opposed to just asking for the rate. But, some people think having Triple-A makes them important. They also would receive the worst room of the desired type that I had available.
Anyway, so AAA starts demanding that the hotel actually verify the AAA membership number and put it in the computer. This is basically the equivalent of carding a 70 year old person on a walker when he tries to buy smokes. We (the hotel) don't even care if they had Triple-A.
So, everyone is demanding this. The franchisor was demanding it. TPW's were demanding it. Etc.
So, do you know what we did?
We cancelled their reservations in the computer, put them in as a walk-in and then gave them the AAA rate as if it was the rate we had quoted!!!
In the meantime, AAA notices that all of those savings numbers they like to tout are plummeting...franchisors and TPWs are noticing a drop in online reservations being fulfilled....word can spread pretty quickly in the hotel industry when someone comes up with a good idea that benefits everyone, I guess, because it turns out that a HUGE number of hotels would just cancel the reservations and put it in as a walk-in.
About three months later, we were told not to stress about verifying the AAA number anymore. Just, "Seeing the card," (which we also never asked to see) would be fine.
Great stuff here. I find these third party booking sites to be really weird. They all came around in the 90s and 00s and seemed to serve a purpose then, no reason for them to still be around. They offer no value above what the hotel themselves can offer, yet take a cut.
That's exactly right. 100% true.
When it comes to the medium-large chains, the only price competition that exists at the TPW's is amongst themselves. Most differences in price that you see (between the TPW's) generally just mean that some of them are willing to accept a smaller cut from the hotel than others. If my rack rate is $80 and gets booked at a 20% TPW, then the hotel gets $64, end of story. That doesn't mean that they can't offer the room to the guest at $70 (rack rate) but they can't take 20% if they do that.
The least the hotel is permitted to make is 80% of the rack rate, unless there's a discount like AAA, senior, military, Government, etc....in which case, 80% of the rate after the discount.
Thanks for the compliment, by the way!
At the risk of looking like an idiot…
Mission mentions ‘TPW’ dozens of times without ever stating what that’s an abbreviation for. I kinda get he’s talking about services like Priceline, etc. but what’s TPW?
actually, you made a really good point there
I don't mean to criticize Mission
but all kinds of abbreviations are flooding message boards
I'd be willing to bet that half of the people reading these abbreviations don't know what they mean and don't bother to ask
just so much easier to remain in the dark
In case anyone wondered, Government/Military would be the only discount off of rack rate that would be better than what I would instantly quote on a direct booking.
I would have guessed corporate/business rates would have been the lowest (assuming your property offered/honored them).
I think the one takeaway from this thread should be:
Hotels (large and small) actually prefer guests to book directly with them. Use this knowledge to your advantage.
Thanks to Mission for posting all this detailed information and the Wiz for starting the discussion.
He wants to insert himself and say "you dummies...step over here and you both can get it for $65" 😄