If there was ever a time for the hotel industry to experiment, it's now. Left reeling after Airbnb landed the first punch only to have COVID-19 almost achieve a knockout, the hotel industry needs a lifeline. The upshot might entail guests having to get used to a different hotel experience.
What some hotels are contemplating
The latest experiment some hotels are pondering is to upcharge guests for services and amenities they used to get for free. We're talking early check-ins or late checkouts and unlimited use of the pool and weight room. Guests might need to be careful about assuming those types of features are part of their hotel stay moving forward because they soon might not be.
Why hotels are considering nickel and diming their guests
Hotels have lost so much money that the most recent estimates, which involve figuring hotel revenue per room, show hotels won't reach 2019 levels until 2024.
In order to stay solvent, hotels are considering changing their business model. Following in the footsteps of airlines that started charging passengers to check bags, one hotel chain, MCR, is considering a la carte services.
MCR owns about 20,000 rooms, making it the fourth largest hotel owner-operator in the United States. It runs hotels under 23 brands, including Hilton and Marriott. About a dozen of MCR's independent hotels, such as Manhattan's High Line Hotel and the TWA Hotel at JFK Airport, will be testing the waters by charging guests extra for certain services and amenities. The room rates are supposed to go down slightly as a result.
This new business model benefits hotels in two ways. First, they can make more money by charging for amenities they used to give away for free. Second, the cut they need to pay travel-booking sites like Expedia or Priceline will be less. (Booking sites get a cut of the price of the hotel room, not a cut of any amenities charged.)
Many hotels are skeptical
Hotels are traditionally loath to change, but something's got to give for them to survive the beating they've been taking. All the major hotel chains are watching this experiment that will most likely get negative reactions from travelers. After all, when airlines first started charging for luggage, customers were outraged, but the fuss soon died down as people came to accept the new policy. That could very well be the outcome with hotels.
Hotels need to tighten up operations and probably need to look at every line item if they want to stay in business. The thought process is that not every guest wants to use all the amenities, like the pool and gym, so why should those guests pay for them. In theory, guests who only want to use the room to sleep in should pay less than what they are currently paying, and guests who want to take advantage of all the hotel offers should pay more.
At MCR hotels participating in the experiment, guests can expect to pay about $20 for an early check-in or late checkout, the pool might cost $25 during peak times, and there could be charges to use the gym or partake in the breakfast buffet.
The Millionacres bottom line
If the MCR experiment works, and people still come despite being upcharged, you can bet other hotels will use this lifeline to get back in the ring.
And if that happens, many hotels will need to add technology that can handle the complexities this type of system presents. Investors might want to watch for startups that offer hotels a modern technology system.