Can Someone Explain the Hotel Business Model to Me?

[Otter]

I'm in Moab Utah driving back from meeting a client and just physically ran out of gas. Getting to the point where I'm going to fall asleep and kill myself on some back woods road where my body won't be found until the next generation of otters.

I pull into a Econo Lodge, not the Hilton, or Mandalay Bay but an Econo Lodge and ask for a room. Guy behind the counter says $150 dollars. I say 'dude, I just need a solid 4 hours of sleep and I'm not paying $40 an hour to lay in a bed. Can you cut me a deal'. Nope. No negotiations at all. There was one other SUV in the parking lot besides my Tacoma with easily 30 empty rooms I could see just from the front of the building let alone the back.

As a business person wouldn't you rather have a room occupied for say $50 or $60 dollars instead of just nothing? I mean I'm going to use up maybe $5 in electricity and $5 in hot water (and that's being generous) so you just made a $40 profit on top of nothing at all.

I wound up sleeping in my truck for 2 hours in their parking lot. This makes no sense to me. The whole motel industry seems antiquated and could be making more money if they adapted . Any insider info on why things are this way because I see an opportunity here unless I'm missing something.

[Prison Bitch]

Pricing models are about maximizing revenue. If they cut you and another guy a deal for $60 each, that's less than if one of you two caves and pays the $150.

[TribalElder]

It might cost them more than 40 to clean up after you stay there

I agree with what you are saying, hotel room is like show tickets. Something is better than nothing

[srvy]

Paki? East Indian? Did you smell curry cooking? If yes to any of those turn around walk away save yourself bedbugs. And they will soon have empty rooms than strike a deal.

[Otter]

Originally Posted by Prison Bitch

Pricing models are about maximizing revenue. If they cut you and another guy a deal for $60 each, that's less than if one of you two caves and pays the $150.

I understand that but you're talking nothing as opposed to let's just say a $50 dollar profit. I understand $50 dollars isn't much but let's top that between my travels 4x a month and the other guys just like me who just need to crash for a couple hours.

Obviously you don't want a meth head coming in with prositutes and abusing the system but maybe a VIP (kinda like a grocery store does, it's not hard) list where you've earned your bones and they know you're not going to trash the place and the only cleanup is making the bed?

Don't know man but I just see a business model here that's in need of revamping.

[Otter]

Originally Posted by srvy

Paki? East Indian? Did you smell curry cooking? If yes to any of those turn around walk away save yourself bedbugs. And they will soon have empty rooms than strike a deal.

Heh, first thing I do is pull the flashlight out of the glove box and flip the mattresses before even bringing anything in. I've heard horror stories bed bugs. No interest in experiencing them first hand.

[Prison Bitch]

You could use that argument to justify a complete barter economy. We don't advocate a system of haggling because it's inefficient. You can't just go into Panera and tell them: "Give you $2 for that ham sandwich. C'maan brah you're just gonna throw it out anyway, $2 better than nothing"

[Bugeater]

I've thought the same thing about stadium beers. If you're going to try to rape me for $9, I will drink 0 beers and you make 0 money. But if you only charged $5, I'd probably drink 2 or 3 and you'll still make a handsome profit. Makes no damn sense at all.

[AustinChief]

This is why Priceline and Hotwire clean up selling potentially unused inventory at discounted rates. The guy you dealt with probably didn't have the authority to cut you a deal.. or he's an idiot.

Next time, priceline that bitch and you probably would have had one of the ones on the main strip for $50-75 easy.

[Otter]

Originally Posted by Prison Bitch

You could use that argument to justify a complete barter economy. We don't advocate a system of haggling because it's inefficient. You can't just go into Panera and tell them: "Give you $2 for that ham sandwich. C'maan brah you're just gonna throw it out anyway, $2 better than nothing"

Totally differnt business model IMHO. I don't expect to be able to walk into a gas station and haggle over the price of a Gatoraid but their also not charging under the assumtion I'm going to drink it at their table, wait till my kidneys process it, use their bathroom then sleep it off on the floor while the guy with the mop has to work around me.

Sometimes you just need a Gatoraid.

[Rain Man]

I think part of it is the long-term model and not the short-term model. On this visit, your $50 is better than nothing. But then next time you'll remember and wait until the last minute and offer them $50 again. And then you'll tell your friends and other people will do it, and then at some point they're fighting with every customer to not pay $50.

Another issue is the time of day. I think hotels typically fill up later at night. If you show up at 5 pm and want to pay $50, that might cost them a $150 customer later that night.

[Otter]

Originally Posted by Rain Man

I think part of it is the long-term model and not the short-term model. On this visit, your $50 is better than nothing. But then next time you'll remember and wait until the last minute and offer them $50 again. And then you'll tell your friends and other people will do it, and then at some point they're fighting with every customer to not pay $50.

Another issue is the time of day. I think hotels typically fill up later at night. If you show up at 5 pm and want to pay $50, that might cost them a $150 customer later that night.

That's a good point. But this place was dead, they had NO business that night. It just seems there's some sort of scaling algorithm that could be implimented where it helps supply meet demand. Obvioulsly between moab and durango isn't a good example but I've experienced the same on interstates.

Dunno, just something to ponder for anyone in the business.

[Discuss Thrower]

I thought non-corporate motels generally offered hourly rates...

[Rain Man]

Originally Posted by Otter

That's a good point. But this place was dead, they had NO business that night. It just seems there's some sort of scaling algorithm that could be implimented where it helps supply meet demand. Obvioulsly between moab and durango isn't a good example but I've experienced the same on interstates.

Dunno, just something to ponder for anyone in the business.

I had to go to a funeral last week, and last-minute flights are a somewhat similar issue. With flights, one could offer two theories:

Theory 1. Flights should be cheap when you're in the last day or so, so they can fill up every seat.

Theory 2. Flights should be expensive when you're in the last day or so, because the buyers at that point are the people who have to travel.

Obviously the second theory is the one that occurs. Presumably the airlines don't care if 70 percent of people get priced out because they make more money by gigging the 30 percent of people. However, the other argument for raising prices is that everyone would wait until the last minute if prices got cheaper with time, so it's not really about the cost of those last tickets.

Still, one would think that if one airline wanted to capture market share, they'd go slightly cheaper than everyone else, which would cause the next airline to do the same thing, and so on until the prices declined to a fair profit level. And yet that doesn't happen. My assumption is that there aren't many airlines, so they all wink and nudge each other and keep prices high and negotiate market share. Oligarchy is not a good thing for the consumer.

I wonder if hotels have the same dynamic.

[Rain Man]

Originally Posted by Discuss Thrower

I thought non-corporate motels generally offered hourly rates...

I believe those are only offered if you arrive with a gum-chewing woman in hot pants. If you ask for that by yourself, you gross them out and they don't offer it.