It’s very clear that we’re no longer operating in a business world where the goal of most companies is strictly to create the greatest product.
For many companies, the goal is to create a product which makes people buy more products, some of which they probably expected to have been included with the first product they purchased.
It’s a devolved way of thinking, where companies pretend that everything is a choice, and therefore everything should be an add on. Like use of the hotel pool, or even toilet paper, pillows or sheets. Why would you ever expect a hotel room to come stocked with shower gel?
While there are valid situations in which this logic could be argued, most things having to do with hotels are not among them. One brash hotel owner thinks the hotel loyalty programs they employ to put heads in their hotel beds, gives away too much “for free”.
He wants to change that, and if you see hotels as a welcome retreat, your Airbnb may start to feel full service, if the owner gets their way.
Major Hotel Owner Has His Say
Tyler Morse is the boss of MCR Hotels. You’re excused for not knowing anything about them, despite them being the 4th largest hotel owner in the United States.
They are the layer in the hotel game most people don’t realize: the people who actually own the big chain hotels you stay in, which are not in fact owned by the big chains.
In the vast majority of cases, a Hilton, IHG or Marriott doesn’t actually own the hotel you’re staying in, bearing their name. Instead, they simply have a contract to bring in guests and manage the property, via the awareness, brand standards and trust that a big brand brings.
Loyalty programs are the biggest marketing tool in the hotel business, which instantly transform a property from a no-name boutique with few guests, to a place with many millions of sales leads, via the global reach of a major hotel group.
Think of opening a hotel in Barcelona with no alliances, versus the day you flag it as a Curio Collection Hotel, as part of Hilton’s boutique program. You go from a place at the bottom of any search results, to a place every Hilton fan will see immediately. That’s a lot of people.
Pandemic Soured This Relationship
Before diving in to the remarkable words of Mr. Morse, who wants to turn hotels into giant pay as you go vending machines, it’s worth mentioning a tricky industry trend.
Loyalty programs bring hotels more customers than they would have without them. At least, that’s the idea. Part of the “deal” there, is that the hotels then have to take care of the loyalty program customers, such as elite guests getting breakfast, or upgrades.
As part of the management fees which brands like Hilton, IHG, Hyatt and Marriott take, a portion of the revenue is enjoyed by the big chains.
Many hotel owners, such as MCR Hotels, have been cranky about having to “shell out” on breakfast, upgrades and other perks during the pandemic, and have urged loyalty programs to offer “less” to their top members, so that they can save on costs.
They have a powerful bargaining chip: reflagging.
If a hotel thinks a loyalty program is costing them too much money, they can threaten to join another hotel loyalty group which is less generous to members, and therefore more profitable to owners — in theory.
One major hotel CEO went a bit far in backing up hotel owners over his own loyalty program guests, effectively agreeing that people should accept lower standards. As hard of a pill as it is to swallow, hotel owners matter more to a major chain, because without properties, they have nothing.
Basically, the people that own the hotels want the companies that put heads in their beds to stop being “so generous” (wtf?!) with their loyalty programs, so that they can make more money on each guest. Which brings us to Mr. Morse, of MCR Hotels.
“Stop Giving Everything Away For Free”
MCR Hotels is the 4th largest hotel group in the United States, with more than 20,000 beds in their properties. Some are Hilton’s, some IHG, some Marriott.
MCR Hotels’ leader, Tyler Morse, wants hotels to stop giving everything away for free. He told a large industry panel about his wide ranging thoughts, and really, they’re a modern gem of lip service, themselves.
“I keep kind of trying to push the envelope here and say, as a hospitality business, stop giving things away for free. Being hospitable does not mean giving people things for free.
Business travelers never use the pool, so why should they pay inherently an indirect cost to use the pool. It allows us to charge a lower rate to everybody, and then people can buy up for what they want. So, everybody gets a lower rate.”
“To the extent the hotel business moves in that direction, the customer gets what they want. Everybody gets a lower price point, and the industry becomes more profitable.”
“(The major hotel CEOs) all pay lip service to it but remember: They’re in the business of giving things away for free. That adds brand value. We owners are in the business of not giving things away for free because it’s our bottom line. It doesn’t hurt (Marriott CEO) Tony (Capuano) or (Hilton CEO) Chris (Nassetta) to give things away for free. It hurts our P&L.”
His pet project on the subject has been the TWA Hotel at New York JFK, which MCR owns. At the hotel, just about everything except the bed is extra, including use of the hotel pool.
Rather than seeing room rates as an opportunity to bundle the costs of running a business into a fair and equitable package for people to enjoy, with things like pool or gym access included, Morse goes for the oft disproven fallacy of “we can create lower rates” if we stop giving things away for free.
That’s just Mr. Morse paying lip service to suckers who believe that major hotel groups are going to lower rates, rather than simply leaving them where they are and charging more for things which were once free.
Rates Are Supposed To Be Transparent Bundles
As accurately argued by View From The Wing, packages exist precisely to extract more from the customer on margin, not less. Therefore, Mr. Morse is just arguably doing a bad job at packaging the right things into rates, which is more of a reflection on him and his team, than the market forces at hand.
Hotels continue the despicable practice of “resort fees”, which is a micro-attempt at getting people to pay extra for things which should be in the rate — because they are mandatory at check in — but this is next level.
Also, I don’t see my “free breakfast” as free.
I spend between $10,000-$20,000 a year in hotels, between work and personal travel in a normal year. In any semi-retail business, a customer of that volume is certainly worth incentivizing to stay loyal. It’s not as if they are buying me a bottle of Dom on every stay. It’s just eggs and coffee. Like $2 a dozen.
Airbnb Would Actually Look Full Service
The chaos this could bring aside, such as not knowing if you need to bring your own toilet paper, or sheets, or pillows, so as to avoid any potential extra charges, just leads travel down a remarkably uninspiring path. Travel is supposed to inspire, not be dire.
Thankfully, free markets will dictate whether this approach proves to be the correct one, if Mr. Morse sends MCR’s various hotels in this direction. Another market force at play could certainly be how actual guests respond to his statements.
Airbnb, which started as very hit-or-miss in terms of what to expect, has now stratified things quite a bit. “Plus” level properties on their platform are guaranteed to provide a certain set of amenities. Properties clearly and transparently display what’s on offer to each guest, and don’t charge extra to “use the pool”.
Basically, Airbnb is making things very easy to understand and adding more amenities to many stays, while a major hotel owner, with hotels taking part in major programs, is looking to strip away everything that’s not bolted down. We’ve seen hotels attempt to charge separately for electricity recently too.
A leader effectively telling their employees or service providers across hundreds of hotels to offer “less” isn’t likely to result in fantastic customer experiences. Much like hotel groups like Hilton, Marriott or Hyatt are nothing without their franchisees, hotels are nothing without guests.
If dissatisfaction goes far enough, Mr. Morse may indeed get lower rates regardless of whether his proposals to stop “giving away things for free” work out, as guests flee for better experiences.
What a time to be alive.