Those who know me know that I have a visceral distaste for the concept of jugaad, which means "making do". Jugaad is usually spoken about in India in positive light -- often for good reasons -- but I think it's worth aiming higher. Read this and this for reasons why I think using jugaad as a guiding principle sets yourself up for mediocrity.
I'm not the only contrarian in this respect.
Amit Saberwal is a senior hotelier-turned-entrepreneur who has deep insights into the travel industry. In a blog post he wrote a few months ago, he gets into the guts of why optimizing for the short term can have a negative impact in the long term. Said differently, optimizing for local maxima can sometimes mean entirely missing the longer path to a global maximum.
Photo by Robin Benad
Specifically, Amit points out why hotels shouldn't pass on OTA commissions to online customers and shouldn't offer preferential prices to customers who call them directly even if this looks like the easiest way to compete.
An independent hotel is tough business to run. The lack of differentiation in the brand and product means that hoteliers have lower bargaining power with third party distributors. I have been speaking to scores of hoteliers and one common operating procedure they employ is to simply increase the price of the hotel by the amount of commission they need to pay Online Travel Agents.
Example if a hotel generally sells at US$100 and the market manager for Expedia insists on a 25% commission, they start selling the hotel online at USD 125 on all online channels, including their own websites. They then track the Average Daily Rates AFTER paying commissions. Should any customers search on an OTA and call the property directly they promptly discount the rate by 10-15%. It is a win-win situation for all in their mind - the customer gets a discount, the hotel gets revenue that is over and above their Average Daily Rates and the OTA is cut out.
Makes perfect sense? Except that this is a terrible idea!
Read the rest here to see what Amit recommends hotels do instead.
