Finding the lowest hotel price is the Holy Grail for consumers, but rate-shopping should not be the highest priority for meeting planners. Cultivating long-term relationships with hotel partners so they can develop a package that provides the right value is a better strategy, suggests hospitality consultant Cindy Estis Green.

Cindy Estis Green

Estis Green is managing partner of the Estis Group and a 30-year hospitality industry veteran with expertise in marketing and technology. A current focus of her work is how hoteliers can best manage distribution, given the tangled network of channels and its impact on revenues.

It’s a topic that should concerns planners, suggested Estis Green, whose career has spanned managing an airport hotel, teaching marketing at Cornell and speaking at national conferences. Distribution channels that significantly lower hotel revenues lead to reduced investments in infrastructure and staff, and that results in a poorer experience for meeting groups.

Travel Market Report asked Estis Green to explain her concerns about today’s hotel distribution channels and why planners should care – including why it’s a mistake for planners to let price drive their lodging choices.

You said at the recent NYU Hospitality Conference that planners were taking advantage of opaque sites like Priceline to get lower prices. Is that something you recommend?
Estis Green: This isn’t about planners getting the lowest rates. The point is that there is not that much difference in price no matter where you look.

The problem  is that third-party sites like OTAs are taking 20% to 30% of hotel revenues. That means hotels won’t get those revenues, won’t reinvest in their properties and won’t hire.

It’s not that having third parties is a bad thing; in fact for some hotels it would be appropriate to use more of them. The point is to manage these distribution channels properly to maximize revenues for hotels.

How does it affect meeting planners when hotels don’t maximize distribution?
Estis Green: It is not so great for planners. Their priority should be optimal service in hotels. In my mind, this lack of channel management can cause a weakening of hotel infrastructure or in hotel staff. 

Hotels simply have to have be more sophisticated about which spigots drive revenue to them – and they have to have the right mix of those spigots.

Everybody – including meeting planners -- seems to think there are always lower rates out there. Isn’t that true?
Estis Green:  Of course there are promotions in certain markets that result in lower prices. But it’s like going to Best Buy to buy an electronic item. They’ll have promotions on a couple of items, but on 90% of the products, you’ll pay the same as you would anywhere else.

It’s the same with travel. You may occasionally find a good rate in a certain place for a certain time, but for the most part nobody is paying much differently than anybody else.

But planners are pressured by their companies and associations to get lower rates.
Estis Green: There is a balance to be struck. I recently interviewed over 100 planners about their relationships with resorts. They told me almost uniformly that they had not seen a reduction in service from hotels during the recession, that hotels were going overboard to deliver even better service. And the planners appreciated that.

The bottom line is that, in terms of pricing issues, it comes down to the relationship between the planner and the hotel. They have to get together and come up with the right value and the right package.

There’s not any formula. The planner can’t just say, ‘Hey, I saw this rate on Expedia.’ A meeting is complex. If planners are looking to hotels as partners, they have to sustain long-term relationships. Ultimately, they have to look at the whole meeting – all of the services involved, before they come up with a deal that works.

What about the possibility that lower rates are available on some sites?
Estis Green: We’ve all been on flights where we sat next to someone who paid less. Planners have to be realistic about what they’re buying – and part of that involves looking for long-term relationships.

When I interviewed planners, they were surprisingly supportive of the partnership idea. I thought they would be much more concerned with rate, but they turned out to be most concerned with making sure they had good relationships with resorts. They wanted to come to a fair deal in the interest of a better future relationship.

What is the hotel industry doing about the issue of distribution?
Estis Green: I’m doing a study in cooperation with STR (a hospitality industry research firm) and the American Hotel & Lodging Association that will be the beginning of developing a new set of tools to help hoteliers manage their channel mix. This is the first time the hotel industry will have a snapshot of how distribution channels are working.

Editor's Note: The "Hotel Distribution Channel Analysis” Estis Green is working on in cooperation with STR and AH&LA will be published by the Hospitality Sales & Marketing Association International (HSMAI) Foundation and available later this year.
 
Are you getting meeting planner input?
Estis Green: Not on this study, but there will be a follow-up study that looks at the meeting sector.