What Would Cesar Ritz Say About OTAs?
When we think of legendary hoteliers, there’s one name in particular that comes to mind. It has stood the test of time, becoming synonymous with luxurious surroundings and impeccable service. That name is Cesar Ritz.
Ritz’s story is an inspiring one. Born in 1850 to a poor Swiss family, he worked his way up from the bottom ranks of restaurant kitchens and hotel lobbies. Soon he was managing hotels across Europe and Africa. As his reputation grew, he joined forces with wealthy friends and guests to form the Ritz Hotel Development Company. His key supporters included the Price of Wales, and his landmark hotels include the Grand Hotel in Rome, the Carlton Hotel in London, and the Hôtel Ritz in Paris.
How was Ritz able to achieve such an enduring legacy?
Quite simply, he introduced a level of service the industry had never seen before. He was a consummate professional in all aspects of hotel management, from the biggest ideas down to the finest details. His vision was unlimited satisfaction for every guest. If someone complained about the food or wine, he had it replaced immediately. The popular motto “the customer is always right” was coined by Cesar Ritz.
There is no doubt that Ritz faced numerous obstacles on his way to hotel greatness—problems with staff, shortages of produce, and increasing competition to name a few. If Ritz were operating today, he would face all of those challenges plus some entirely new ones.
One new challenge—among the most difficult faced by hoteliers today—is the rising cost of commissions to online travel agents (OTAs).
In Ritz’s time, the travel business was young. Working with intermediaries was relatively simple. Ritz would have offered them the same unparalleled service he gave his guests, and used them as a channel to grow his word-of-mouth reputation.
Even over a century later, during my own early days as a hotelier, we dealt with bricks-and-mortar travel agents and airlines whose employees we knew personally. We had a plan for calling on them, and the commission was always 10%. It was a reliable and reassuring system, since anyone who booked travel always went through an agent.
In the 21st century, however, the process has changed so radically that any old-style hotelier would be tempted to throw their hands in the air and walk away. In recent years we have seen commissions rise from 10% to 12.5% to 15%. Today, some OTAs are charging 25% of a room rate, just to place a body in a bed. This is why hotel groups are devoting more resources to IT and social media. By convincing guests to book direct, they hope to avoid losing such large chunks of cash to OTAs.
If there’s an obvious way for hotels to address this problem, I’m not sure what it is. Just as King Canute realised the waves of the sea would not halt by royal decree, hotel managers cannot expect to halt or resist the way hotel bookings are made in the 21st century.
So what do you do? Raise your rates on OTAs? Put more effort into cultivating repeat business and direct bookings? Perhaps a combination of the two?
One thing is certain: As popular methods of booking hotels continue to evolve, owners and managers cannot lose sight of the things that matter most. Even if Cesar Ritz had to deal with 21st century OTAs, I am sure he would nurture his supporters. He would stick to his belief that the customer was always right and, if they wanted to book via an OTA, then he would possibly create an even better experience by booking direct; No matter who the intermediaries were though, people would always want to come back. In a world of bland hoteliering, Cesar Ritz was a disruptive influence who stood out by doing something that others were not (and charging for it). Can you?
For further industry insight, please follow the links below.
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