
How Hotel Reservations Work  - Frisette
http://thecodist.com/article/how_hotel_reservations_work
======
patio11
Hotel yield management is about a decade or so behind the airlines, but
they're catching up, so this is probably going to get a bit harder from the
OTA's/customer's perspectives before it gets easier. (Yield management means
the art/science of room pricing such that you sell out nearly all of your
inventory while maximizing profits. It has gotten radically more sophisticated
over the years -- loyalty programs, for example, are only about 30 years old,
and they virtually transformed the industry. (They're patterned off of airline
mileage programs, which debuted in 1979.)

This is, by the way, one of those boring fields where people who look like
programmers, talk like programmers, and act like programmers take home bonuses
like bank presidents. (Interview question: "To within an order of magnitude,
how much money does it make Marriott if we increase systemwide occupancy rates
by 5 basis points this year?")

~~~
smtm
yield management is the exercise you do when your - the individual hotel's -
distribution system is set up perfectly and humming along. The biggest gains
for hotels happen actually when they set their mind to it that they want to
shift the source of their business away from the OTAs to more direct business:
direct can be the online booking tool on their own hotel website, mails,
repeat customers, phone calls. yes even phone calls, that should be one of the
goals when setting up a mobile hotel website.

To achieve this hotels should invest in a decent website, start blogging with
a voice that they cultivate over time and go for better rankings in the SERPs.
That, plus a humming hotel operation with systems in place to handle the
direct business is the way to go.

This way even smallish properties can run circles arround bigger competitors.
The bigger hotels have a hard time to copy this, as they are not as agile, and
need meetings to figure out a "social media strategy".

Figure I know quite a bit on how to make hotels way more independent of OTAs
as a booking source: this is actually the core of my SaaS offering:
<http://www.igumbi.com> . It is an online pms, revenue/ yield management
system and has a online booking tool for the hotel website. JSONP based and no
sucky flash or iframe.

The most important aspect of the yield management architecture I find to be
the use of nesting. It's a very flexible, value based approach on assigning
fixed capacties to sellable allotments. This robust inventory algorithm,
devised by MIT's Belobaba, is the thing that executes the yiled management
settings. And I totally agree with the use of loyalty programs and direct
chstomer interaction. That's why we also have a mailchimp list integration, so
it becomes virtually a no brainer to keep your mailing list up to date in he
daily business operations

~~~
paulgb
Just a heads up, you and your clients are taking credit card information over
unencrypted HTTP.

Here are two examples of clients that are accepting credit card info over
plain HTTP: <http://vox-hotels.com/> <http://www.sonnseit.at/>

~~~
smtm
Hey thanx for pointing that out. The booking tool is actually tied in via
https and the transmission back to the system happens via https. I need to
pester my clients to set up the cert for their domain. I will also the insert
a another step in the dialogue - to collect that info.

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themckman
This is a pretty good read. I REALLY hate booking both air travel and hotel
rooms as I ALWAYS get the feeling that I'm getting fucked. It always just
feels like I know someone is getting the same room on the same night or the
same flight for cheaper than me. I never feel like I've won, so to speak. When
booking air travel, if I can, I like to book with Southwest just because it
feels better. I may be able to get a cheaper flight with some other airline by
going through Priceline et. al., but I feel dirty and cheated (somehow) doing
it. I just want to deal directly with the person who has the room or the
flight and know that I'm getting a fair price. Is that too much to ask for?

~~~
Evbn
You would rather everyone at your hotel pay the same price, which is higher
than most people at the hotel next door?

~~~
tedunangst
Human nature is incompatible with a rational sense of fairness. Everybody
could start off happy with the price they paid, but upon discovering other
people are also happy, will become unhappy.

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kls
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
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 :)

~~~
jtheory
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
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

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lkrubner
The article does not mention the potential impact of Roomkey:

<http://www.roomkey.com/>

Based on the articles that the CTO of Roomkey has written, I am under the
impression that their technology is very cutting edge:

[http://www.colinsteele.org/post/27929539434/60-000-growth-
in...](http://www.colinsteele.org/post/27929539434/60-000-growth-in-7-months-
using-clojure-and-aws)

[http://www.colinsteele.org/post/23103789647/against-the-
grai...](http://www.colinsteele.org/post/23103789647/against-the-grain-aws-
clojure-startup)

It is important to note that the big hotel chains had realized that they had
fallen behind, in terms of technology, and they needed to catchup. Unable or
unwilling to build the technology themselves, they acquired Roomkey (or
rather, they acquired Hotelicopter and renamed it Roomkey).

~~~
calbear81
The biggest downside to a system like RoomKey's is that they only carry rates
directly bookable through the hotel. This makes sense from a consumer
perspective because you get some benefits from booking directly such as 1) pay
at hotel option vs. prepay 2) earn your loyalty points 3) priority when
receiving upgrades since the hotel didn't have to pay a commission to an OTA.

On the downside, you have to believe in the "best rate guarantee" and at our
startup we simply don't see that playing out. When we go out and search rates
across all of the OTAs and secondary channels (distributors, wholesalers,
etc.), we find a significant amount of price disparity in the market so those
who don't shop multiple sources will invariably pay more for their hotel room.

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jordn
I realise this isn't quite your area but I'd really love to know how far in
practice hotel managers take the idea that "a room with guests paying anything
is better than an empty room". Do they typically offer significant discounts
to bring in last minute guests? How does this works in practice?

I suspect there's a whole lot more to it and it's probably quite a delicate
balance between capacity maximisation and less tangible qualities like the
brand reputation and what effect any visibility of discounts can have on
normal full-price paying customers.

I believe this is (supposedly) the idea behind hotwire. That the hotels want
to fill their beds by offering them at a discount but don't want their regular
customers to take advantage of it - so they disguise their identity. Anyone
know any more? (or why it doesn't seem much cheaper than other OTAs that name
the hotels?)

Thanks for the insights!

~~~
hondje
You nailed most of it. For a chain, the GMs boss is going to be looking at two
things: revenue per available room, and average daily rate. These metrics
control the rate, within the constraints of the brand standards (so for
example a mid tier place like a Holiday Inn isn't going to charge less than a
Choice property like a Sleep Inn because the brand managers don't want the
brand diluted)

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bsimpson
Sounds like this would be a great market for a company like Hipmunk, Adioso,
or Square to develop an app targeted at indie hotels.

If I'm Hipmunk and I'm running into the sort of issues described in this post
(people w/o computers using fax machines to manage reservations and making me
look bad when I misquote a customer because of it), I build a best of breed
tablet app that electronically keeps track of all the complexity the little
guys use paper for. It syncs with my cloud so I always have the most current
information, and it integrates with my competitors too to make sure that no
hotel has any reason to keep me from having the most current information.

Then, I start a rollout program where I'll send your hotel a free tablet /w
the app preinstalled in exchange for $500 worth of booking credits at your
location. I target the hotels in the most popular areas that currently give me
the least accurate data.

~~~
JacobAldridge
Remember that the context for many of the hoteliers you're talking about (old
paper systems) is very different to the solution you're proposing (easier
electronic systems and more profit).

Many of these hoteliers are running a lifestyle, not financial or business,
context. Invest in new systems (and learning new systems)? Not worth the
hassle. I even stayed with one hotel (7 rooms) - their problem with OTAs was
being sent too many customers. They rarely wanted to be full, and they also
hated 1 occupancy nights.

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MrQuincle
It would be nice to know which systems just hand over your creditcard
information to the hotel owner (plus even the 3-number validation number),
such as booking.com, and which do not, such as hostelbookers.com.

~~~
hondje
Booking.com is the biggest that does, all the Big OATs don't pass on your
info.

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peripitea
400k hotels * 200 rooms/hotel average = 80M hotel rooms in the U.S. That's one
for every ~4 people in the U.S. That seems way too high... even if these rooms
are only filled 25% of the time (which the article indicates is way below the
70% these businesses desire), that would mean the average American would be
using a hotel room one out of every 16 days (and that assumes that people
don't share rooms). Am I missing something, or are these stats wrong?

~~~
dredmorbius
I think the article is substantially overestimating the average hotel size.
I'd bet it's much closer to 10-20 rooms than 200. You're forgetting a huge
number of smaller roadside / rural establishments.

For San Francisco (a large tourist-oriented city with many larger hotels),
there are 215 hotels, offering 33,642 rooms (source:
<http://www.sanfrancisco.travel/research/>) or an average of 156 rooms per
hotel. Given that smaller cities and rural resort areas will tend to have
smaller facilities, I see the rooms/hotel being markedly lower.

SF's population-to-rooms ratio is 24:1, or rooms for about 4% of the
population (and that's in a city with huge tourist and business travel
traffic).

That would give you a high-end of 8 million rooms, or enough for about 5% of
the population (assuming double occupancy, 2.5% for single).

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djb_hackernews
You think hotels are hard? We are building software for small local tour
providers to help them manage their availability and get their tours online
next to hotels and flights.

It sounds like we are doing the right things in terms of implementation
(providing api endpoints for bulk data and more fine grained api endpoints for
real time availability) and ideally providing a new revenue stream to OTAs and
others who are interested in a not yet cut throat margin business.

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im_dario
I'm sysadmin of one full reservation system (400+ hotels around the world) and
I can say this an accurate read.

We are integrated with 20+ OTA in different ways, although 90% are pull
systems, they call us for data, with the Open Travel Alliance protocol (OTA
again), and it is a complex system (which it is not bad).

Maybe I can answer doubts you have :)

