The airline industry is one of the most heavily regulated industries in the world, but that doesn’t stop airlines from trying to innovate. Delta Air Lines has been experimenting with new technology like self-boarding kiosks and mobile boarding passes for years, and Marriott International wants to bring this same innovation to the hotel industry.
The jw marriott is a major hotel chain that wants to make their lodgings like ultra low cost airlines. They want to charge for the room and only provide basic amenities, such as food and drink.
The owner of Marriott and Hilton wants to transform the hotel industry like that of ultra-low-cost airlines.
on September 24, 2021 by Gary Leff
Guests may use the pool at the TWA Hotel for $50 per person from Friday to Sunday, half that during the week (business travelers don’t use the pool), and children are $20 each.
The hotel charges a facility fee that does not include usage of the facilities, which is even worse than the Motif Seattle, which charged a price to use the bathroom vanity but then allowed you use it.
MCR Hotels, the country’s fourth biggest hotel ownership company, owns 125 properties in 34 states, including Marriotts, Hiltons, and even The New Yorker, which they briefly lost control of after refusing a visitor a lease for his religious non-profit (yes, New York real estate law is byzantine).
Every hotel, according to MCR’s CEO, should adopt TWA’s pricing model, charging “guests for add-on services in the same way airlines do.” Anything included in the hotel cost, he believes, is akin to “giving it away for free.”
“I keep trying to push the boundaries here by saying that as a hospitality company, we should cease giving things away for free… Being hospitable does not imply that you should give things out for free.”
This entails levying fees for items such as,
- Check-in early (maybe $10)
- Check-out at 2:00 p.m. ($20)
- The pool ($50) is available for use.
- Wifi that works (standard wifi may be thought of as a utility, though some hotels have tried to charge for the utilities too)
The hotel CEO says that this translates to cheaper prices, but we know that isn’t the case.
“Business tourists seldom use the pool, so why should they pay an indirect fee to use the pool?” asked Morse. “It enables us to charge everyone a cheaper cost, and people may then purchase up for what they want. As a result, everyone receives a reduced rate.”
Because business travelers will not be using the pool, hotels will not charge them a reduced cost. They charge what the market will bear, which is determined by the number of rooms available and the demand for those rooms on any particular night.
Some consumers may be less interested since the hotel does not offer pool access, but most will think it does – after all, the hotel room cost includes the pool! – and they’ll be taken aback by all of the extras. This complicates comparative shopping and imposes additional fees on visitors who have already committed. It’s the same as flying with a European low-cost airline.
Of course, in the United States, this forerunner of future falling guest pleasure overlooks the reality that the tax system incentivizes airlines to unbundle. A 7.5 percent federal excise tax applies to domestic US airfares, but not to airline ancillary costs. As a result, unbundling constitutes a $50 million or more tax arbitrage move on the part of the major airlines. Despite the fact that hotel taxes vary per jurisdiction, establishments are unlikely to profit in the same way.
When a hotel develops or invests in an amenity, the cost of making it accessible is typically minimal. Bundling may result in increased room prices as a consequence (since different guests value different amenities differently). Cable corporations bundle because it results in higher package pricing and income than unbundling, which allows consumers to pick and choose whatever channels they want.
Sure, there would be a “rocky transition time for hotel customers to get accustomed to such unbundling of services,” but it might become the industry standard, similar to how airlines adopted comparable measures. Except that, unlike the airline industry, where there is a lot of consolidation and entry hurdles, making hotels less customer pleasant simply drives people to Airbnb. Outside of the most budget-conscious properties, following the example of “Allegiant, Spirit, VivaAerobus, and Wizz Air” makes little sense.
So, what’s the stumbling block? The chains themselves, according to this CEO:
[The CEOs of the big hotel companies] all say that, but keep in mind that they’re in the business of giving stuff away for free. This adds to the brand’s value, according to Morse. “Because it’s our bottom line, we don’t give stuff out for free,” says the owner. Giving stuff out for free doesn’t harm [Marriott CEO] Tony [Capuano] or [Hilton CEO] Chris [Nassetta]. It has a negative impact on our profit and loss statement.”
However, if that is the case, then this ownership group is just drafting poor contracts. The chain doesn’t want the brand diluted if all they’re doing is renting it. However, in a controlled situation, incentives are more closely matched, with a focus on profitability measures (and penalties from the chain for not hitting those).
Of course, the CEO of another major hotel holding company believes that instead of charging for everything a la carte, customers should simply tip extra.
The concept of earning more money by delivering a product that visitors want to purchase and providing a better value proposition than rival options like homesharing doesn’t seem to have made it into the vernacular.
More From the Wing’s Perspective
Marriott International is looking to make their hotels more like ultra low cost airlines. The company wants to create a hotel experience that is similar to the cheap flights on major airline carriers. Reference: marriott careers.
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