Segmenting leisure hotels

The original idea for this pertinent observation comes from the wife. However, since she’s on an extended vacation and hence unlikely to blog this soon, I’m blogging it.

Hotels are traditionally classified into “business” and “leisure” hotels. As the names suggest, the former mostly cater to business travellers and the latter to vacationers. The lines can be a little blur, though, since business and leisure travels have complementary seasonality, thanks to which hotels practice “revenue management” by using their capacity for both business and leisure.

However, as we discovered during our vacation last week, leisure hotels can be further segmented into “couple hotels” and “family hotels”. Let me explain using the example of Vythiri Village Spa Resort where we spent most of last week. Based on our reading of the hotel, it was initially built to be a “couple hotel” but perhaps based on the kind of clientele they were getting, they turned it into a “family hotel”.

Now, the difference between couple hotels and family hotels essentially has to do with how child-friendly the place is. Vythiri, for example, had a “kids play area”, the balconies had been shuttered up with windows (creating greenhouses inside the balconies which made them horrible to hang out it, but making them safer for kids),  had a pantry area (the balcony had been converted into a pantry – so people wiht babies could bring their electric cookers and cook!) and activities such as “guided nature walks” and “artificial waterfalls”. Even at its deepest the swimming pool was not more than three feet deep (no I didn’t test it).

The reason I say that the hotel was built for couples is to do with the large bathroom which also included the walk-in closet. Given that you might want to multiplex between one person showering and another dressing at the same time, this design made it obvious that it only works for couples, but not for people with kids – most parents are shy about letting their kids see them in various stages of undress.

Then this resort advertised itself as a “spa resort”, and a massage was included in our package. This is again a “couple thing” for people with kids are unlikely to be able to take time off from their kids to visit the spa! So everything about this resort told you that it had been designed for couples, but then changed its positioning to become a “family resort”!

I guess you get the drift. And so whenever the manager would accost us and ask if things were good, the wife would quickly nod him a “yes”, and then privately tell me that we were the wrong target segment for the hotel, and so our feedback didn’t really matter to him!

And so we stayed there, for three nights and a bit, looking at screaming kids every time we hit the restaurant (the buffet spreads were nice, so we didn’t order room service); looking in bemusement at people “going on nature walks”, ignoring the “entertainment” at the “gala Christmas dinner” and so forth.

We had a good time, though, eating, sleeping, talking, hanging about – mostly within the confines of the room. The service was great, the staff extremely friendly and pleasant. Only that we were the wrong target segment for the hotel, and we didn’t realise that while booking!

PS: I tried looking for a “marketing” category to put this post under but realised that none such exists. Goes to show what I’ve not been blogging about!

Sri Lanka diaries: Hotel of the tour

The “hotel of the tour” award for my just-completed vacation in Sri Lanka goes to Pigeon Island Beach Resort in Trincomalee. Now, it is not that they had the best rooms. It is not that the rooms were the best maintained. It is not that the service there trumped the service at every other hotel that I stayed in. It was simply that they seemed to have given the most thought to the hotel design.

At first look I wasn’t particularly impressed with the hotel. Now, it is a highly rated hotel going by TripAdvisor, because of which we had booked it, but the first impressions weren’t great. The reception area was small – just one table, staffed with people not in any uniform (it’s a beach resort – so I should’ve figured that the T-shirts they were wearing was actually uniform!). The hotel was rather small and narrow, with access to a narrow sliver of the beach. The rooms were big, but the loo seemed uncomfortable, with the way the pot was wedged next to the shower cubicle. And the air conditioning never seemed to cool the room enough!

It was after a trip to the beach later in the afternoon that I figured out the value in the hotel design. Now, when you go to the beach, you can expect to get all dirty and muddy. So resorts usually have a shower installed on the way back from the beach to the rooms. This was there. What really impressed me, though, was the tap in the garden right in front of my room! Now, even after showering on the way back to the room, my feet and slippers had got all dirty and muddy. It would have been a mess to clean up the room had I walked in with my muddy feet. So this tap meant that I could wash my feet once again before stepping into the room, thus saving the hotel the trouble of cleaning all those rooms whose occupants had taken care to wash their feet!

Then there were the clothes hangers outside each room. Now, you don’t expect everyone who go to the beach to be wearing swimsuits, and that means a lot of wet clothes. People usually fill up the bathroom with these wet clothes and it can get uncomfortable! Again, it was great thought to put these clothes hangers so that you needn’t fill up your bathroom with the wet clothes! It was another matter that they didn’t have enough of those, and we had to dry our clothes on a chair outside the room!

The following night we stayed at Hotel Earl’s Regent in Kandy, a new hotel inaugurated by “His Excellency President” Mahinda Rajapakse in January this year. It is a hotel which showed a lot of promise, and we were even upgraded to rooms with Jacuzzis. But the detail in design was missing.

For example, at one end of the bathroom was the Jacuzzi and at the other end the shower cubicle. Now, the towel rack was right above the Jacuzzi, and there were no towel hangers on the doors of the shower cubicle. This meant that once you got out of the shower, you had to get all the way across the bathroom to pick up your towel, thus wetting it in its entirety! Then, despite having bathing spaces at either end of the bathroom, there was only one foot mat. Again, this meant that if you failed to move it to your side of the bathroom when you stepped in, the bathroom was again liable to get dirty!

It is amazing how much people are willing to invest in hotels, without getting these small details that can delight a customer right!

Then there was the issue of the plug points. Sri Lanka uses Indian plug points, which meant that we hadn’t bothered to take adapters along. Both in Earl’s Regent and in Cinnamon Grand in Colombo (a five star hotel), most of the plug points turned out to be British-style! Now, you might get a lot of your guests from Britain and it might make sense to have those plug points, but it is surprising that only one point in each room can take Sri Lankan plugs! Now, when each of you has a phone, and then you have an iPad, all of which need charging, it becomes real hard to manage with such plugs!

I don’t know what it is about five star hotels that they refuse to offer health faucets! Every hotel on tour offered them except Cinnamon Grand (the most expensive), where we were forced to use toilet paper. Now, you might get some Western guests who don’t know how to use health faucets, but having them in the room does no harm, while providing great value to Asian and Middle Eastern guests! On a similar note, the Palm Garden Village Hotel in Anuradhapura (a massive forested resort) didn’t offer a health faucet but instead had a separate arse-washing pot. It was again inconvenient and ineffective design, when a simple health faucet would have done the trick with less real estate wasted! And if they had space for a separate arse-washing pots, they might have as well put Sochi-style adjacent pots – it was after all a romantic hotel, with adjacent showers, etc!

Cinnamon Grand also had the worst showers. They had two taps – one for adjusting the level of the hot water, and one for the cold water, and they were the only two controls you had to adjust both the temperature and the pressure of the flow. So if you finally (after a lot of trial and error) got control over the temperature, and wanted to increase the pressure, you had the unenviable task of adjusting two taps simultaneously! Or if you wanted to stop the shower to soap yourself, you had to again do the trial and error thing of finding the right temperature!

The shower at my home has three controls – one tap each for hot and cold water, and another to adjust the overall pressure of the shower. This third tap can be used to adjust intensity after the first two have been used to adjust temperature! The other hotels on tour offered a single lever – right-left movement adjusted the temperature while up-down movement adjusted the pressure! Worked beautifully. Maybe there is a theorem somewhere that the best shower controls have an odd number of levers!

Is TripAdvisor killing Expedia?

The coming of the internet has led to one round of disintermediation in the travel market, and I hypothesize that review websites such as TripAdvisor are going to lead to another. Let me explain.

In the “good old days” if you wanted to travel there was no option but to reach out to the neighbourhood travel agent who would give you options of a few airlines and hotels. The best you could do to figure out if you were being taken for a ride was to check across multiple agents, but even then the only thing you could compare was price. It was impossible to compare hotels in terms of quality and you would take the word of the travel agent.

And then the internet happened.

Now, with sites such as Expedia or Travelocity, you got more transparency in pricing – especially when it came to airline ticketing. The travel agent could no longer take you for a ride when it came to the air fares – you could cross check online and bypass the agent if he wasn’t offering you a good deal (of course some things such as flexible schedules were best booked via agents, and they continue to hold sway in the corporate segment for that reason). Simultaneously airlines started selling tickets direct, via their own websites (this was led in part by “low cost carriers” who saw this as a good way of saving cost by cutting out agent fees).

This was the  first round of disintermediation in the travel industry. Airlines selling tickets direct and customers being able to book directly online meant the overall business of travel agents reduced. Some of them were cut out completely while others were replaced by large-scale technology enabled agents such as Expedia or Travelocity. Those that survived either have corporate clients (who need flexible schedules and have little time to book online) or have resorted to packages – where they arrange for flights, accommodation and cars, and quote you a consolidated fee – in which there are margins to be made.

The move to large-scale technology-enabled agents meant that some of these agents were now large-scale aggregators. This gave them significant bargaining power vis-a-vis hotels and this allowed them to bargain for deep discounts. While earlier conventional wisdom was that “travel agents” could get you “good deals”, now these large online aggregators were the ones providing the “best deals”. Thus it made eminent sense to book via these aggregators.

Simultaneously most hotels also started direct booking on their own websites. However, the problem was that the hotels themselves did not have the technological capability to implement good revenue management practices on their own websites. They also did not have the technological capability to offer a seamless and smooth booking experience. Thus, large online agents such as booking.com and Agoda prospered.

There are two functions that a travel agent performs – helping customers discover hotels and then actually executing the booking. In the traditional model, agents don’t charge for the discovery process. That service is instead cross-subsidized by the fees they make on the actual booking process. The first level of disintermediation in the travel agency (which we’ve seen above) has chipped away at this model, however. What do I, a travel agent, have to gain if I put in painstaking research and find you a hotel, only for you to find that you can book it for a lower price online? Agents, however, have not figured out a way to charge for the discovery process.

However, it is unlikely that they need to. For you now have websites such as TripAdvisor which have user-generated reviews and ratings for a large number of hotels, and which rank hotels in each city by type and user ratings. TripAdvisor has become so ubiquitous for user-generated ratings for hotels that nowadays travel agents add links to TripAdvisor profiles of hotels that they are recommending. Thus, we can see that the hotel discovery process can exist independently of travel agents.

What of the bookings itself? Don’t we need travel agents for that? Note that irrespective of whether a travel agent is online or offline, the hotel has to pay them a commission for selling their inventory. In the past given their size, hotels (unlike airlines) were unable to effectively sell rooms on their own websites and thus resorted to paying travel agents. However, advances in technology now mean that it is easy for a hotel to adopt a third-party software to effectively manage their inventory and sell tickets on their own website, and at a fraction of the cost they need to pay travel agents.

So, if TripAdvisor helps you discover hotels and then you can book hotels directly through their own websites, who needs travel agents? For now, most large online aggregators have a price matching policy and thus match the prices that hotels quote on their own websites. However, in order to save booking fees (rumoured to be of the order of 17% of the total booking value) hotels are trying to innovate and add freebies to their offering.

For example, a hotel in Cambodia I stayed in last week offered a free massage to guests who had booked through their own website (unfortunately I booked via Agoda and couldn’t avail of this offer). The Bangkok hotel I stayed in last week offered a 10% discount on payments made via American Express on their own website (again we discovered this after we had booked on Agoda, using an AmEx. To their credit, Agoda gave us a refund to the extent of the discount we would have got on the hotel website).

Essentially hotels have figured that with the growing popularity of platforms such as TripAdvisor, they don’t really need travel agents, small or large. As TripAdvisor gets more popular and third party hotel booking softwares gain traction, we are likely to see the decline of large travel aggregators such as Expedia, Travelocity and Agoda.

In essence, the growth of TripAdvisor is going to lead to the partial downfall of its erstwhile parent Expedia.

The “Per Person” catch

Every time a travel agent sends you an itinerary for a tour package, look for the units of the cost. Usually it’s quoted in US Dollars per person. The funny thing is that this is how it is quoted even when it is just an accommodation package where two or three of you are going to share a room.

I wonder if this is a way to encourage more spending, since the customer perceives the total cost to be a much smaller number when he sees “per person” than when he sees an all-inclusive number.

Like for a forthcoming trip, the travel agent sends me an email saying “the hotel will send a taxi to pick you up at the airport at a cost of EUR 50 per person”!!

On a similar note, I realize travel agents love to bundle. When costs across several hotels and trains and taxis are bundled together and presented to you as an aggregate (“per person”, again), it is easy for them to pass on overheads to you without you figuring out where exactly that overhead went.

There have been times in the past when I’ve received packages from travel agents, then tried to purchase each component of that package online, and found that the total cost of buying the parts separately is approximately half the bundled cost that travel agents impose!

Agoda + TripAdvisor

Ok here’s a startup idea. Basically a combination of Agoda and Tripadvisor (basically a front-end combining those two backends). I’m looking to book a hotel for a forthcoming holiday. So what I’ve been doing is to search through agoda for hotels available for those days and within my price range, and one by one searching for them on tripadvisor to see their ratings and comments and all that.

Now, the deal is this: Agoda is an excellent and reliable booking engine. However, it’s tripadvisor that has the reviews that I’d trust but it neither does bookings nor has details of availability or lowest price available. Hence I’ve to keep the two windows open which is quite frustrating and time-consuming.

For someone who’s experienced in developing web apps this is quite simple I think (since I have no experience or interest in this I’m just giving the idea away). A front end that queries agoda for available hotels and tripadvisor for ratings of these hotels and then presents both together in a nice frontend. The actual booking can be done through agoda itself (to where there can be a link).

As for revenue, I’m sure hotels will advertise on this site. Problem, though is to get the tripadvisor reviews in a way that can be extracted to this third-party website without actually going to tripadvisor. But why would tripadvisor allow this since the reviews are their intellectual property and the basis on which they make their money? But well worth a try, I think!

Mysore trip – Table of contents post

I returned last night from a two day driving trip to mysore and surrounding areas. There are several things to blog about, but I felt too lazy to make notes in my mobile. Also, I was driving most of the time, so didn’t really have the time to make notes. I made a lot of mental notes, though, but I’m prone to losing those easily – I don’t have a very good short term memory.

I made two major stops on the way to Mysore – first at Kamat Lokaruchi near Ramanagara for breakfast, and then at Seringapatnam. At the latter place, I saw a couple of temples and a jail and a palace-cum-museum. The last named turned out to be pretty strong. Also, my car started making funny noises when I kept it parked in front of one of the temples. Turned out to be a problem with the A/C. This problem was going to become significant later on in the trip.

At Mysore, I stayed at the Ginger (subsidiary of Indian Hotels which runs the Taj chain) and was amazed at the kind of cost-cutting that they have put in compared to the extravagant 5*s. Then I went in search of the supposedly world-famous Mylari restaurants, found not one but two of them, both of which claimed to be the original, got put off by the amount of oil on the dosa and came out after having had just a coffee.

I walked around the palace area in the evening and was amazed by the respect pedestrians get in Mysore, at least in that area. Nice pavements, strictly enforced pedestrian crossings, etc. And there were millions of people walking around the area. And everywhere I saw boards that called Mysore a “JNNURM city”.

I also discovered that wearing shorts is a surefire way of announcing that you are a tourist. Hundreds of people started speaking to me in Hindi and seemed slightly startled when I replied in Kannada. I didn’t see a single other soul in shorts through my 2-day stay in the city.

Lunch and dinner on Tuesday was at the Dasaprakash, and yesterday’s breakfast and lunch at Siddharta. Got me thinking about pricing and delivery systems in sit-down restaurants (had done a series on pricing systems at darshinis in Bnagalore a few years back). Most intriguing is that “meals” are pre-paid while everything else is post-paid.

Then I went to the Chamundi hills, Nanjangud (beautiful temple), Somnathpur (again extremely strong ruined temples, but lousy roads) and the Jaganmohan Palace. Time constraints meant that we skipped going to the main Mysore palace.

On the way back, we stopped at a Sathya Sai Baba ashram in Seringapatnam after which the rain came with us. We would see dry roads ahead, and would hope that there would be no more rain. And soon, there would be rain. Heavy rain. Cupped a/c meant that the windshield kept fogging, and I could hardly see the road as I drove.

I think the rain got confused when we stopped for an hour for dinner at Kamat Lokaruchi, and decided not to accompany us all the way to Bangalore.

I took lots of pics using my phone camera. While at Somnathpur I was thinking about Aadisht’s 50mm low-light lens. I need to find my data cable now and then I’ll post pics. In the course of the next one week, I’ll also write half a dozen more detailed posts.