I’m going to reveal something today that I probably shouldn’t.
I’m going to reveal the nitty gritty details behind how third-party hotel booking sites (such as Expedia, Travelocity, and Orbitz, to name a few) manage the prices that they do, how the process actually works between the hotel and the third party, what room rate the hotel actually receives, and how you can get a better deal!
Should I talk about this? Probably not. Of course, everyone knows that the rate 3rd-parties pay hotels is significantly less than what they charge customers – I’m just putting actual number to it, and teaching you how to beat it!
Keep in mind, I am talking about third-party discount sites. There are 3rd-party websites that charge exorbitant rates, and that hotels do not give discounts to. However, I am referring to last-minute and (seemingly) cheap rates on booking sites.
How the transaction works:
Atraveler will book a stay through a 3rd-party website. When they do so, they physically pay that website with their credit card, not the hotel. The website then turns around and calls the hotel the traveler booked a room at. They (in most cases ) give the hotel their business credit card (called a “ghost card” that is good for one single charge of a specific amount) and the guest’s details to make the reservation on their behalf. These booking sites have a pre-negotiated “hidden” third-party rate. And yes, it’s significantly lower than the bar rate :-)
This is why when you book through a 3rd-party site and try to call the hotel to get your receipt they cannot provide it for you. Instead, you have to call the website you booked through because you actually paid the website, not the hotel. The third party site actually paid the hotel.
What the Revenue Manager Does
To understand how the whole process works – and how it can benefit you – you need to understand what the revenue manager does for the hotel. The revenue manager is responsible for maximizing the revenue associated with guest rooms. The involves balancing room rates with what people will actually pay, offering discounts to large groups, and setting the walk-in rate every night. I’m sure you know that room rates fluctuate a lot – even on the same night.
At the hotel I work at, room rates can go anywhere from $69.00 to $259.00 on the same night, depending on what type of guest you are! The revenue manager would allow a $69.00 rate for a group of 100 people staying for 4 nights because of the sheer amount of guaranteed revenue, but on the same night, if we’re close to selling out, a guest walking in and making a reservation could pay up to $259.00. This is all to say that the revenue manager holds the power, and that rates massively fluctuate.
Front Desk Process
Most hotels are like mine, in that the front desk staff has no idea how the back end process of setting rates is handled. You have to understand that if you want to get a better rate. Most don’t even know that when dealing with a customer who wants a different room rate they should call the in house reservations or the revenue manager. So, when trying to get a lower rate, be prepared to ask them to call in-house reservations.
The actual rate
It’s time for the goodies – the information that will give you power! In a hotel, the average cost of one room for one night (to the hotel) is between $25.00 and $35.00. Obviously, this depends greatly upon the city, hotel brand, and things like that. Most however, are between $25 and $30. Sites 3rd-party last-minute booking sites know this, they have pre-negotiated a really low rate. At my hotel, it’s between $35.00 and $69.00 Just enough that the hotel makes a little bit of money.
Why Would a Hotel Accept such a low rate?
There are a few reasons why a hotel would accept such a low rate. First, they are making money on a room rate – even on that is that low. No, it’s not a lot of money, but bear in mind that with that $10-$20 that the hotel is making, they are also getting you on property, where you may then pay for parking, internet, upgrades, room service, bar drinks, or breakfast in the morning. While the revenue off of the room may not be stellar, the revenue potential while you’re physically on property is.
Second, it keeps people employed. I am not thoroughly versed in employment law, but I do a fair amount of work with Human resources, so I’ve seen many of the things that they have to deal with. The bottom line is people like full-time hours. When they’re full time, be they a housekeeper, a restaurant cook, or a front desk agent, they have access to a 401K, health insurance, and other company benefits. Not to mention that their paycheck is larger. But, even on part-time hours, if there are no rooms to clean or check in, then no one gets scheduled. therefore, booking up the hotel even at a low rate is better than not at all.
How to Beat the System
Now it’s time to actually beat the system. Of course, you could go onto Priceline right now and book the hotel I work at for $79.00 a night no problem. Truthfully, that’s a pretty good rate. And, if you want to avoid making a phone call, go for it! But if you want a cheaper rate, you need to call the hotel. Chances are, you’ll speak to an operator. Ask the operator is you can speak to in-house reservations. When the operator transfers you, chances are you will not speak the the revenue manager, but rather a reservations analyst or something like that. It is important to note that you need to call the specific hotel location – not the corporate brand. As long as you’re calling the specific property, you just need to speak to someone in in-house reservations.
Now that you’re talking to reservations, you need to be straight with them. Tell them you’re on (blank) site right now, and rooms are selling for $79.00. Tell them you know that they’re the hotel gets significantly less money than that, and would they be willing to negotiate? And don’t be annoying about it either. People get annoyed when you say “I used to work in a hotel, so know. how it is” or “I read this article…..so therefore I know everything.” Don’t do that. Approach it as trying to help the hotel. Say “I understand that you get incredibly low rates from these 3rd-party sites, but I was wondering if I could book straight through you for a lesser rate, and let you guys end up with more money?” It’s a psychological thing – you help them and they help you. Chances are, they will be willing to knock some money off the rate. Even if they’re not, don’t lose hope, because the other type of cost reduction could be even better.
Now there are several types of reductions in costs – and some of them aren’t actually a rate reduction. If the hotel is unwilling to lower the rate, booking through them could still have it’s advantages. Our reservations department will offer a $79.00 rate than includes parking, internet, and even breakfast! If you were to book a $69.00 rate with all of those things free you would be saving $56.85 per night! That’s almost the cost the rate!
Have you ever called a hotel to negotiate? How did it go? Are you willing to give this a try?
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