OTCs Declare War on Lodging Business

This is a reprint from Editor-In-Chief Glenn Haussman with Hotel Interactive

Hey, hotel industry executives. You may not have realized it yet, but the Online Travel Companies (OTCs) have declared war on you. That’s right. It’s time for hotel executives to realize these third-party reservation sites are becoming increasingly emboldened in their desire to command your inventory. And your profit potential.

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Guess what? It’s not their fault. Blame lies squarely at the feet of hotel industry executives that have time and time again allowed OTCs to control the room pricing dialogue with consumers. Now OTCs are feeling unstoppable and are upping the rhetoric to dangerous levels. If the hotel industry does not come to grips with this situation immediately, then expect to see hotel profits keep skidding along the bottom. And there is no one to blame but yourselves.

Companies like Priceline.com are becoming so brazen they’re now openly shaming hotel companies. The same ones that give them rooms inventory. And they’re doing it in prime time on television.

Take this Priceline.com ad, for example: The ad, featuring William “Priceline Negotiator” Shatner, should be taken as a colossal insult to the hotel industry. Yet other than me mouthing off about it, I have not yet heard a single peep from industry insiders. And they should be abuzz about this ad. (watch it here: http://www.youtube.com/watch?v=1U0ohKpz84Y&feature=related)

In it, Shatner tells a front desk clerk that someone has requested a price of $65 for a room. The clerk responds by saying they don’t go lower than $130. Shatner turns to a giant threatening specimen of a man named Big Deal (who looks likes like a cross between the villain Odd Job in some old James Bond films) and Andre the Giant and says, “Persuade him.” Big Deal is draped in a fur coat, has a menacing glance, cracks his knuckles and looks at the front desk clerk with a scowl. He slams his fists on the counter, revealing tattoos inscribed on his hands that read “Dollars and Sense.”

Then he speaks in a decidedly dulcet tone saying, “Is it wise to allow a perishable item to spoil?”

Shatner follows: “Yes, why leave a room empty?”
Big Deal continues: “The additional revenue easily covers operating costs.”

Shatner: “$65 is better than no dollars.”

The cowering clerk accepts the offer, saying: “OK. $65 for tonight.”

It’s a funny, spot-on and clever ad. But the undertone is essentially telling hotel operators, under the guise of a comedic threat, “Hey, you need us to dispose of your empty rooms, so you better play by OUR rules.”

It’s embarrassing to hoteliers that this kind of message could be translated to the general public, who now have better insight into how YOUR business is run.

It’s also absolutely shameful that the hotel industry has allowed the OTCs to become so powerful they can run an ad as brazen as this. Yet all I hear from lodging people is a stunning silence similar to the stone-cold denials I have been hearing for the last ten years as OTCs have perfectly engineered the ascent.

Hoteliers are hopelessly clinging to the spurious notion that these OTC sites are being only used by the occasional traveler, and that their respective rewards programs will continue to capture the most frequent travelers. Well, Hotels.com now has “welcome rewards,” which gives away one free night for every ten nights stayed. And it’s being done with your rooms inventory!

I recently paid $119 for a quasi-full-service hotel in the Gaslamp District of San Diego. And that was a “discounted” media rate. While drinking at the bar, the gentleman next to me said he had Hotels.com all figured out, and he had paid $60 for his room. Man, did I feel like sucker for paying so much for the room! Now I wonder why I even bother using branded sites and industry contacts. It is evident the public is getting punished for using your branded websites when they know how to beat the system.

By every indication it seems as if the OTCs are not going to stop until they wrestle complete control away from you.

Here’s a friendly warning: The OTCs are now mobilizing on their next effort: Getting you to believe they are your friends and partners. Expedia.com has been interviewing public relations firms to potentially hire one to get their message across. They want to make nice with the people that own the rooms they sell. So you better believe this next assault will be one of attempting to win the hearts and minds of hotel industry execs and hotel owners.  It’s about to become extremely subversive, and with the hotel industry already reeling from depressed rates, expect many franchise owners to quickly capitulate. Struggling owners are trying to feed their families and don’t have the time or the concern to deal with the big picture issue described above.

Therefore, it’s up to the people at the top of the lodging food chain to do something about this. Now.

Again, let me reiterate: The OTCs are doing absolutely nothing wrong here. This is capitalism working at its best, and I wish them continued good luck. But the lodging industry must wake up, draw a line in the sand and figure out a way to put the beast back in the cage. 

So the big question is, What are you going to do about it? Take a stand or continue to let OTCs run roughshod over your best interests? It’s time to wise up, or risk losing it all.