Like Room Key? It’s been done already, and it’s a failure.
Room Key was launched by a consortium of hotel chains who wanted to light off a collective response to, and re-capture guest referrals from, online travel agencies like Expedia and Travelocity.
Only one teeny-weeny problem: the OTAs were already filling the demand for hotel room bookings via online travel agencies. Customers wanted to compare rates, and hotel features, at their destination side by side, and the online travel agencies were enabling that, and had first mover advantage, and the customers didn’t need Room Key in order to do it.
Room Key was launched by a consortium of hotel chains who wanted to light off a collective response to, and re-capture guest referrals from, online travel agencies like Expedia and Travelocity.
Only one teeny-weeny problem: the OTAs were already filling the demand for hotel room bookings via online travel agencies. Customers wanted to compare rates, and hotel features, at their destination side by side, and the online travel agencies were enabling that, and had first mover advantage, and the customers didn’t need Room Key in order to do it.
And since Room Key had nothing to offer that wasn’t already available on the OTA sites, the customers didn’t see any particular need to switch over to it and start booking their rooms on Room Key from now on.
The only thing Room Key ever achieved, for a time, was to have all participating chains open the Room Key site every time a customer visited the hotel chain site. That way, if you were a Comfort Suites franchisee and a customer wanted to book a room at your property through the Choice Hotels site, the Room Key screen would open, he’d see the listings for all the hotels in your area, and the Holiday Inn Express would have a chance to take your customer — thanks to the very people to whom you pay about 12% of your total revenue in franchise costs, and hope that in return you can maybe count on them to help you compete successfully against the Holiday Inn Express.
But like way too much of what hotel chains who sell franchises do, Room Key was not intended to benefit the franchisee, it was intended to give the chain a chance of survival as a franchise organization. Online travel agencies are eating away at business that used to be booked directly to the hotel chain, and this threatens to take from the hotel chains the ability to capture and direct referrals to the local franchisee.
This is an existential threat to the chains’ continuing ability to sell franchises, and collect fees and royalties on them — which is the business that ‘hotel chains’ that sell franchises are really in. I can sell you a pretty sign with my brand on it, and promise you lots of referrals through my website and 800 number, and tell you inspiring stories about how people so love my brand that they’ll stop for the night when they see your sign with my brand on it, and get you to sign on the dotted line and comply with my Mickey Mouse rules and pay me ten percent, more or less, of your total revenue; but if I can’t deliver the guests to your hotel, my ‘franchise’ is worthless. The chains’ only hope is that mortgage lenders who finance new hotel construction or acquisition will be naive enough to continue requiring a franchise as a condition of the mortgage loan, without noticing that many franchises are big operating overhead items that aren’t delivering customers or really helping the hotel in any way.
But when dollars and cents are at stake, bankers can only be expected to stay naive for just so long . . .
So each of the chains would rather take a chance on losing the customer to a competitor if that’s the price of assurance that they’d have a teeny-weeny chance of recapturing OTA customers, and if that succeeds, a share of Room Key referrals — like OTA customers owe the chains to use Room Key because it’s owned directly by the chains. (Room Key offers “discounts”? Yes, if you have the loyalty card for the chain with whom you’re booking the room . . .) They’re pulling straws. They’re desperate.
But the customers don’t owe the chains to use Room Key. (By the way, when was the last time you used it? Did you even know it existed? Okay, there’s how well another one like it will work.) That’s the reason that there are online travel agencies — too many customers just don’t want to be held captive by a chain. Otherwise, they’d just book directly with the chain, and there wouldn’t be any online travel agencies.
Nice try, chains. Maybe you can think of something else.
Originally appeared on Quora.
The only thing Room Key ever achieved, for a time, was to have all participating chains open the Room Key site every time a customer visited the hotel chain site. That way, if you were a Comfort Suites franchisee and a customer wanted to book a room at your property through the Choice Hotels site, the Room Key screen would open, he’d see the listings for all the hotels in your area, and the Holiday Inn Express would have a chance to take your customer — thanks to the very people to whom you pay about 12% of your total revenue in franchise costs, and hope that in return you can maybe count on them to help you compete successfully against the Holiday Inn Express.
But like way too much of what hotel chains who sell franchises do, Room Key was not intended to benefit the franchisee, it was intended to give the chain a chance of survival as a franchise organization. Online travel agencies are eating away at business that used to be booked directly to the hotel chain, and this threatens to take from the hotel chains the ability to capture and direct referrals to the local franchisee.
This is an existential threat to the chains’ continuing ability to sell franchises, and collect fees and royalties on them — which is the business that ‘hotel chains’ that sell franchises are really in. I can sell you a pretty sign with my brand on it, and promise you lots of referrals through my website and 800 number, and tell you inspiring stories about how people so love my brand that they’ll stop for the night when they see your sign with my brand on it, and get you to sign on the dotted line and comply with my Mickey Mouse rules and pay me ten percent, more or less, of your total revenue; but if I can’t deliver the guests to your hotel, my ‘franchise’ is worthless. The chains’ only hope is that mortgage lenders who finance new hotel construction or acquisition will be naive enough to continue requiring a franchise as a condition of the mortgage loan, without noticing that many franchises are big operating overhead items that aren’t delivering customers or really helping the hotel in any way.
But when dollars and cents are at stake, bankers can only be expected to stay naive for just so long . . .
So each of the chains would rather take a chance on losing the customer to a competitor if that’s the price of assurance that they’d have a teeny-weeny chance of recapturing OTA customers, and if that succeeds, a share of Room Key referrals — like OTA customers owe the chains to use Room Key because it’s owned directly by the chains. (Room Key offers “discounts”? Yes, if you have the loyalty card for the chain with whom you’re booking the room . . .) They’re pulling straws. They’re desperate.
But the customers don’t owe the chains to use Room Key. (By the way, when was the last time you used it? Did you even know it existed? Okay, there’s how well another one like it will work.) That’s the reason that there are online travel agencies — too many customers just don’t want to be held captive by a chain. Otherwise, they’d just book directly with the chain, and there wouldn’t be any online travel agencies.
Nice try, chains. Maybe you can think of something else.
Originally appeared on Quora.
Why hotel company complaints over OTAs are thin and ineffectual (Hotel Management magazine). This also explains why the chains will never have a booking portal that will work -- chain loyalty and comparison shopping are two different buying models, and they're polar opposites. A customer who chooses one necessarily rejects the other..
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