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Early ETP adopters are happy with results
May 13 2013

For property-level hoteliers, Expedia’s new program that allows guests to book on Expedia but pay at the hotel is leading to increased business and higher ADRs.

Highlights
  • The program allows hoteliers to learn more about the guests before they arrive.
  • Hoteliers say ETP is boosting ADR because they’re reporting wholesale rates over net rates.
  • However, reporting wholesale rates over net rates also leads to higher franchise fees.
By Jason Q. Freed
News Editor
jfreed@HotelNewsNow.com

REPORT FROM THE U.S.—Early hoteliers participating in Expedia’s “hotel collect” platform—where guests reserve a room on Expedia but don’t pay until they check into the hotel—are reporting positive experiences.

The program, introduced in July of last year, is officially called Expedia Traveler Preference because guests can choose whether to pay up front on Expedia or when they get to the hotel. The program was criticized early on by hotel owners and asset managers because of the potential to increase costs for hotel owners by way of additional training and credit-card processing fees.

But revenue managers on the ground level say the benefits of the program outweigh any additional costs it might bring.

Andrea Stigliano, reservations manager at The Lancaster Hotel, a historic hotel in downtown Houston, praised the program for allowing her associates to learn more about the guests before they arrive. Prior to hotel collect, Expedia—through its direct-connect platform—would typically give The Lancaster a name of the guest expected to arrive.

When a guest chooses the “hotel collect” model, which more than half of them are doing today, Stigliano said, Expedia delivers more information about the guest, such as contact information.

“It does help you to get to know the guest better because more of their information comes through,” she said. “It gives us a chance to prepare for them before they get here. Especially here at a small hotel, we treat our guests like family and that’s one way we can stand out.”

Stigliano said The Lancaster, a 93-room, family-owned and operated property, sees third parties as partners, especially Expedia.

“That’s a major brand out there that people do trust,” she said about Expedia. “They have helped us bring up our revenue and, with this new program, our (average daily rate).

“Guests that would have never heard of us before see us on Expedia,” she continued. “They go on Expedia, see our picture and our good rates and then they book with us.”

Stuart Harless, director of revenue and reservations at Personality Hotels in San Francisco, said Expedia Travel Preference is boosting ADR at the six-hotel portfolio because he’s reporting the wholesale rate over the net rate.

“In March, it was a particularly weird March for San Francisco. Everyone was dropping rates and competing for the same dollar,” Harless said. “In that month the Hotel Diva increased its ADR almost $4 with the guest direct-pay program.

“I predict going into our summer season it might increase ADR (by) $7,” he continued. “Is it a little bit more work on my end, the extra 10 minutes it’s taking me to process those commissions and all that? Yes, and they know that. But it’s a win-win for me.”

Brands on board
Online travel agencies are typically more lucrative for independent hotels because independents often do not have the power of a big brand’s marketing and distribution system. So how are branded hotels reacting to the new program?

Drew Salapka, director of revenue management for Hotel Equities, which manages 38 hotels that are almost all branded with the largest franchisors, said he’s on board with the program because it’s about giving the guest what they want.

Drew Salapka
Hotel Equities

 

“If I had my druthers, I’d prefer that it stay the other way and Expedia assume that responsibility (of processing the guests’ payment),” he said. “But we’re living in a world where we need to please the guest.”

Salapka said all of Hotel Equities’ 16 Marriott International select-service properties have rolled out the ETP program. Most of the company’s Hampton Inns are in the rollout process, he said.

He said he views Expedia as a strong partner and that there’s “a place for them in our industry.”

“Everyone points to the fact that you’ve got to pay these commissions and I understand that,” Salapka said. “But you pay commission to everyone. As long as (the inventory) is managed effectively and you have a good relationship with your market managers … people get bitter when they don’t have the inventory management set up right and they end up getting inundated with OTA bookings.”

Salapka also said his hotels that participate in the program are seeing better placement on Expedia.

“It’s one of those things, again, where if you have inventory that you need to sell ideally you’d like to sell it on Marriott.com,” he said. “But there are a distinct set of customers out there that don’t go to those channels. We’re doing what we can to get them direct, but we have to be out there and compete in that market, and if we don’t go along with these changes, we can’t.

“Obviously if it was up to us, we don’t want to pay more credit-card fees, but we have to compete with our market to get that business,” Salapka continued. “Look at the evolution of continental breakfast; guests used to be fine with coffee and a bagel, which cost us 75 cents. Now breakfast costs us $3 to $4. As it evolves, guests want more options. Anytime a guest wants more options, we get less money.”

Downsides exist
Hoteliers identified several potential downsides to ETP. The main complaints come from owners who incur rising credit-card fees and, because of the way rates are reported to brands, increased franchise fees based on net revenue rather than wholesale revenue.

At the property level, early adopters have seen additional cancellations and have had to spend time training front-desk personnel on how to identify whether the guest has paid Expedia before arriving or not.

“I spent time talking to managers last week and they said the toughest part was training the front desk to understand which one it is (hotel collect or Expedia collect),” Salapka said. “But that’s just training we have to do at the front desk.”

At the Lancaster, Stigliano said rollout went “very smoothly.”

“None of our agents had any trouble,” she said. “We thought it was actually easier because when the guests came in they just charged the card. It’s easier for us and for the guest.”

Salapka said there has been confusion already from guests who thought they paid in advance but in fact had not. Since the program is new, Salapka said, many guests think they’ve always paid up front through Expedia and don’t understand what is different now.

“Again, that’s just a part of the guest understanding what they’re buying,” he said. “Our brands do a wonderful job really designing the training for us. We just download that training material. It has mock walk-throughs that tell you if the Expedia guest is confused about this, this is how you address it.”

So far, none of Salapka’s hotels have experienced such a high number of cancellations that it’s left them in a bind.

Expedia’s Amy Severson, senior director of industry relations, admitted the model has led to an increase in canceled business from Expedia.

However, she said the cancellation rate is no higher than the standard cancellation rate for guests who book directly and don’t pay until the date of arrival.

Moving forward
There are 25,000 hotels signed up for ETP at present, including properties from brands such as Hilton Worldwide, Marriott, Meliá Hotels International, Iberostar Hotels & Resorts, La Quinta Inns & Suites, as well as many independent hotels.

About half of those hotels—or about 12,500—are up and running, meaning guests can choose either payment option on Expedia.

Severson said Expedia and Hilton have agreed upon a rollout plan for ETP but that no hotels are live yet. “You will see the first Hilton hotels with ETP very soon,” she said.

Wyndham Hotel Group is in negotiations with Expedia, as are a number of other brands.

“We continue to work with Expedia as a valued partner to explore opportunities to drive meaningful business to our owners. This includes discussions around the Expedia Traveler Preference model so that we fully understand the benefits to all parties,” Flo Lugli, executive VP of marketing for Wyndham, said in a statement. “We want to help ensure that the Expedia relationship continues to drive value to our franchisees and consumers.”

The process of getting hotels signed up isn’t taking any longer than expected, Severson said.

“With any of our larger agreements and negotiations, those are just long negotiations in general,” she said.  “No longer than they would have been otherwise.”

Severson said partner hotels that have rolled out the program are “overall happy with it.” On average, in the early goings, she said about 50% of guests are choosing hotel collect, while 50% still choose Expedia collect.

“We worked very hard to go slow and make sure they’re comfortable with it,” she said. “We’re seeing a really nice balance of Expedia collect and hotel collect.”

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