I often get emails and questions from innkeepers about the BedandBreakfast.com Online Reservations program (AKA our "Global Partners Network" that makes properties bookable on sites like Expedia, hotels.com, Kayak, Sidestep, Travelocity and others in addition to BedandBreakfast.com). With any program of this magnitude, it is only natural that there are questions. I felt it was worthy of a thorough/detailed blog post explaining how the program works, and helping distinguish the facts from the fiction.
In the not too distant past, our industry could only have dreamed of having similar access to consumers as a 300 room chain hotel. We’ve put together that access, along with convenient ways to manage the inventory, at competitive and often better rates than hotels get. If you need more exposure and revenue, there is no comparison to what this program can do. Let me go into some details.
First, the BedandBreakfast.com Online Reservations Program is an optional program available to all members. Our members are not required to participate in this program, although almost 2,000 of them do. Our standard memberships we’ve had in place for over a decade are still based on a flat monthly or annual fee with no commission – although some of our competitors would try and have you believe otherwise - even though they know it is not the case.
Secondly, this program has no hidden fees. There are no additional up-front or annual fees like most GDS providers charge, no hidden transaction fees, and your property is given great billing and content on distribution sites. To explain a bit of history, when companies like Expedia and Travelocity first started out, they got a lot of properties onto their sites through the Global Distribution Systems. We know these systems well – we actually provide this type of link for properties that want it through our technology company - RezOvation. As times changed though, virtually all of the major travel sites launched preferred booking programs known as the “merchant model,” or “net rate model” where they started favoring the sales of rooms from properties that give them a rate that they can mark-up and resell, rather than earn a commission. In addition, they tended to not only focus on the larger chains for their inventory. In most cases, properties that were listed in the GDS were usually relegated to the bottom of the display pages, or in some cases just removed, and usually didn’t have much content included in their listing often lacking simple items like photos. Properties could join these preferred programs through a GDS connection, but then they wound up paying the GDS fees on top of 25-30% required net rate discounts. You can imagine that didn’t work very well for B&B’s as it was costly, and very few B&B’s were in the GDS in the first place.
So we set out to change the game for small properties. Our connections with these sites get properties full content, photos, etc., and have no GDS transaction fees, or up-front fees, and connect directly to the properties PMS in many cases. This enabled properties to join with no risk and only pay when they get a transaction, and thus came the day that thousands of B&B’s would become available to the masses on the leading travel sites.
Third – With our program, you control your inventory, and you do it all in one place. You are not required to give us any inventory you do not want to. Even when you give us inventory, you can pull it back if you are able to sell it yourself. This enables properties to have the flexibility they need. We do require you to load at least six months of inventory to get listed on Expedia and hotels.com, but if you don’t have that much then I would wonder why you even want more exposure, and of course you can still black out peak dates you feel you can sell on your own. We even worked out a system where if you do put in a room or two in for every day of the next year (that you can still sell yourself), we can get you a reduced effective commission of five percentage points. Best of all, you are able to manage all your reservations from all these top channels from one convenient location. Many hotels don’t even have this luxury. When you participate in this program through BedandBreakfast.com, you become visible and bookable on Expedia.com, hotels.com, Travelocity.com (and their affiliates including American Express Travel, Yahoo and AOL among others - coming this Fall), Kayak.com, SideStep.com, TravelPost.com, Away.com, UpTake.com, LATimes.com, NexTag.com, iExplore.com, Vast.com, and many more. ). You do not have to manage each of these sites individually. You can do it all easily and directly through BedandBreakfast.com, RezOvation GT/GTO Software or now even through Webervations.Most PMS’products in our industry also work with Webervations – which means you can also manage your inventory in this program through any of those. If your PMS doesn’t connect to Webervations it Is not because we have not allowed it to force folks to use our PMS.We’ve approach every major PMS product we can think of in our industry and we will allow them to connect to Webervations without charging them anything. Some simply are apparently not interested in giving their users this optional value.
Okay – so that all seems pretty straight-forward. Usually the next question is - So what are the real costs? Some innkeepers get caught up on the fact that at face value the program costs between 25-30% (depending on the amount of inventory you put in the system). If you look at the true costs however, you quickly see it is much less than that and that 25 or 30% is typically more like 7-15%. Let me explain. First off, we cover the credit card fees in every case which saves you an average of 3%. So right off the bat, the true costs is only 22-27% not even considering any other impact.
Next, if you look at any independent third-party travel research out there you will see that it has been clearly demonstrated that for every reservation you get through a channel such as Expedia, you can expect to get another 2 reservations directly from folks that saw you on a leading travel site and then went to a search engine to find your actual property and booked directly with you. They call this the Billboard Effect. Innkeepers love to question this “fact” as well call it. It seems so foreign to folks, yet there is a great example that everyone recognizes right away of this very thing happening right under their noses. I always ask innkeepers “do you get any business from Trip Advisor?” The answer is usually “of course I do… (you fool!)” Well the next question I ask is how? Trip Advisor has no direct links to your website? “Well they see my property, then they search on me directly…” Bingo – there is a site that has no links to your property, and everyone knows they still send business. So why is it so hard to believe that this would happen from sites like Expedia or hotels.com? The answer is it isn’t – the exact same thing happens. Large research firms like Forresster have documented this, and hotel marketing firms like Travel Tripper say this number could be as high as 4-to-1.
So if you take the effective 22% rate, then factor in another 2 reservations that come direct, your true landed cost of a reservation through these channels is just over 7%. This isn’t hocus-pocus or black-magic – this is the true cost for those of you that really want to truthfully evaluate a program like this. This is a very reasonable effective commission to pay, particularly when you compare it to the true cost of the traditional GDS.
In the good ‘ole days, the GDS got you onto Travel Agent screens. It still does. Typically you pay up-front to be loaded into the GDS. RezOvation charges $700 up-front and $500/yr maintenance, and we are about the lowest priced out there. You also pay per transaction. We charge $15 per transaction and again are about the lowest out there as well. This isn’t a big money-maker for us. On top of that, you have credit card fees of 3%. So lets look at a $200 reservation through the GDS and just assume that a property does 10/month. In the first year, per reservation, that is $7/up-front fee, $15/transaction, $6 for credit card fees, and another $20 to the travel agent. On a $200 reservation, that is an average of 24% landed cost per reservation. In later years that would drop a bit due to the lower annual fee than up-front.
Keep in mind though that there is no Billboard Effect at all – you are only displayed to Travel Agent’s, not on a website for everyone to see. So the 24% landed cost per reservation through the GDS and a Travel Agent compares to the 7% through our program. Quite a difference… And if you actually use the GDS to manage rates and inventory on major websites, you will likely have to pay them their 25% - not just the 10% you would to a travel agent. Which means the cost of a reservation goes up to 36% (but of course there is a Billboard Effect now, so there is some benefit there).
We occasionally hear from innkeepers that they are upset with the program because we charge 25-30%. These innkeepers don’t seem to realize that that these leading travel sites are in business to make money and there is a cost to buy “shelf-space” if you will to display our rooms. It’s sort of like a grocery store in a way, if you have a product to sell and the store cannot make as much or more money from selling your product than they can from selling their existing products – guess what, they do not sell your product. These sites are used to working with large hotel chains that represent hundreds (if not “thousands”) of rooms and have a single point of contact and are willing to pay the fee for the exposure. If we as an industry are not willing to bring all the properties together on a consolidated platform and accept a price that is competitive with what the travel sites can make selling rooms at other places, we just won’t get sold. So we don’t decide what the price is going to be so much as the market sets the price along with the travel sites.
In any case – I think you are starting to get the picture. Innkeepers often see the 25-30% commission and their first impression is that it is too-much. It is only after truly looking into the details and comparing the pricing that they start to realize that it is actually pretty darn reasonable.
Now I am not saying you wouldn't rather sell the rooms directly on your own website. You should be doing both! For folks that find you on your website, absolutely make sure you offer them the ability to put their credit card number down and get a reservation. For the millions of folks that will not make it to your website, get in front of them as well. There is no excuse – we’ve made it risk-free and easy to do. You will most likely not always be able to sell all of your inventory yourself so by utilizing this program correctly you can sell more rooms and not only make more revenue today, but create more repeat and word of mouth business which is my next point.
The majority of travelers have never experienced a B&B – most industry figures say only 4% of travelers have tried one!!! Imagine if we as an industry can get that to even 6%! Innkeepers would see a 50% increase in business on average! To be on the big travel sites where travelers aren’t necessarily looking for a B&B, but rather just looking for lodging, your property can stand out as a nice alternative to staying at a big box hotel. You can find new guests that can ultimately turn into repeat and referring guests. After all, once your new guest stays with you that first time, you aren’t going to encourage them to go back to Expedia to book another room at your property….you’re going to hand them your card and/or brochure or direct them to your website where you pay no commissions or fees other than for the technology – no marketing costs there. Travelers that know they want to stay at a B&B will likely end up on sites like BedandBreakfast.com where they will find your B&B. It’s the travelers that don’t necessarily know they want to stay at a B&B that we as an industry need to reach out to. That is done by being on the larger travel sites listing right alongside your local hotel competition. And don’t get me started on the whole “These aren’t B&B guests”. How do we grow our industry if we don’t start converting non B&B guests to become B&B guests!? One thing is for certain…if your room is sitting there empty and people can’t find it where they book the majority of travel, it is doing nothing to add to your revenue.
We’ve heard stories and misperceptions from our member innkeepers with claims from our competition that they can provide the same connectivity or exposure through their proprietary programs. The fact is, this is rarely true. There is no other option out there for B&B and inn-type properties that gets them anything close to the exposure this program provides. We’ve spent over four years time, countless development hours, and countless dollars to create this program. No one in the B&B space has dedicated that kind of resources or has come up with the results. Our properties using this program are considered “merchant direct” properties with our partners Expedia & hotels.com. “Merchant direct” properties enjoy the same exposure as the merchant direct hotels that Expedia and hotels.com work with directly. Other connections to these sites are typically GDS connections and they just aren’t the same thing. For lack of a better way of describing it, I would call the GDS listings second rate listings on these sites. We all know that over 80+% of travel is booked from the first page of the search results so if you are on an online travel site through the GDS on page 3, is it really doing as much good as you think it is? I mean if it drives no reservations, it is not working.
I hope this helps you better understand the program and why it is such a great tool if you use it correctly as one tool in your overall marketing arsenal.
Please feel free to add any comments or ask any questions.
Thanks for your time!
Eric
Need R&R? Go B&B!