Hi, welcome to another Expert Insights discussion
Following his recent article outlining some of the revenue management practices that could be considered to run a little close to unethical, we felt compelled to hear the words from his own mouth and get a slightly deeper insight
Obviously what are, or are not, ethical boundaries is a personal viewpoint, and this conversation is far from preachy, but, in our opinion, it does hold a mirror up to some of the techniques used which might lead to a guest feeling more like a walking ATM, than a welcome visitor.
There is a summary of the points below
Hope you enjoy the conversation
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HOW TO FOLLOW US
00:00 Guest welcome and topic intro
The Temptation of Hidden Fees Rate Manipulation
Let’s face it; we’ve all been tempted to play with rates to boost revenue. It’s the oldest trick in the revenue management book, you might even say that’s exactly what revenue management is. But I’m specifically referring to the practice of lowering prices during the booking process, then adding hidden fees later. The guest feels like they’ve been duped, but hey, you’ve made a few extra bucks, right?
The ‘Drip Pricing’ Dilemma
Ah, drip pricing, the art of gradually revealing hidden charges during the booking process. It’s like peeling an onion; every layer reveals a new cost. But here’s the catch: most guests don’t like onions, especially when they’re crying over unexpected fees.
Online Travel Agencies (OTAs) and the Rate Parity Dance
Now, let’s talk about our friends from online travel agencies (OTAs). They’ve become a necessary evil for many hotels. But here’s where things get tricky. Rate parity agreements can sometimes feel like a straightjacket for revenue managers. You’re forced to maintain the same rates across all distribution channels, limiting your pricing flexibility.
The Overselling Conundrum
Overselling rooms can be a tempting strategy, especially during peak seasons. You figure that a few no-shows won’t hurt, right? But what happens when everyone shows up, and you’re left with disgruntled guests and nowhere to put them?
Playing with Availability
Manipulating room availability is another ethically murky area. By making it seem like rooms are scarce, you create a sense of urgency that encourages guests to book quickly. It’s a psychological trick that can be highly effective, but it also flirts with deception.
The Human Element: Staff Incentives
Let’s not forget the human element in revenue management. Sometimes, hotel staff, including General Managers, Directors of Sales, and Front Office personnel, may find themselves motivated by bonuses or incentives tied to revenue targets, which can inadvertently lead to unethical practices like pushing guests into more expensive rooms when standards are available, or charging additional fees for services that are usually included.
Ethical Dilemmas in Upselling and Cross-Selling
Upselling and cross-selling are common tactics used to boost revenue in hotels. However, they can be a double-edged sword. When done right, they enhance the guest experience by offering relevant upgrades or services. But when done unethically, they can leave guests feeling like they’ve been taken for a ride.
The Gray Area of Loyalty Programs
Now, let’s wade into the murky waters of loyalty programs. On the surface, these programs seem like a win-win for hotels and guests. Guests get perks and discounts for their loyalty, and hotels secure repeat business. However, things can get ethically tricky when hotels start playing games with their loyalty programs.
00:54 Guest welcome and topic intro
03:13 Hidden Fees
08:48 OTAs – rate parity dance
13:05 Overbooking and overselling
18:26 FOMO – false sense of urgency
21:52 Staff ethics – incentives and upselling/cross selling
26:18 Loyalty programs
27:30 Attribute based pricing, summary and wrap up
34:43 More videos and channel subscription