Monday, August 6, 2018

My Life as a Hotelier in Cambodia I

As I wrote in a past post I wanted to counter the declining prices of natural rubber on my rubber plantation by diversifying and investing in another business – a business that I was familiar with from my past professional experience as a tourism expert in Europe, the U. S., and Asia. Being a beach person and an avid boater I chose Sihanoukville – at that time the only resort town with acceptable beaches.

Before I describe the pitfalls that one encounters when opening and running a hotel in Cambodia I am going to start by writing about the booking portals that make life for small, independent hotels easy in terms of marketing but can become really frustrating to work with over time.

We opened the hotel in early January and were fully booked within a week or two for January and February, the best months in high season in Cambodia. Although we did have a relatively high share of walk-ins the majority of bookings came from, followed by is the largest hotel booking portal in the world, claiming to represent over 770,000 hotels world-wide. The major slogan is unbiased reviews citing numbers in the millions. That number can hardly be disputed but the word unbiased is a misnomer in my view. A hotel guest writing a review cannot be unbiased, he/she is subjective and judgmental. Their personal experience is not based on neutral criteria. Some guests think the rooms are rotten, others feel they are superb. Unbiased connotes fairness which we have found not to be true with a majority of guests. Some guests like the staff, e. g. single men if one of your female staff is pretty, others don’t. Some eat breakfast like gluttons, others are happy with a muesli.

Nevertheless, which was founded in the Netherlands and later sold to had made enormous strides over time making it the one booking site that a small and independent hotel cannot ignore. In our case they contacted us immediately on learning that a new hotel was about to be opened. We never signed an agreement with them; they just went ahead and created a page on their website. We just furnished them with all the information and they did the work for us. worked the same way. We gave them our pricing (mid-market level for Sihanoukville from $30 to $50 initially, later up to $75 in high season) on which charged 15%, charged 20%. Later this was raised to 18% for and lowered to 17% for The more commission you pay the better the exposure you get on their website, i.e. ‘recommended for you’ or placing your hotel on their first page. If you choose certain program features this will also elevate your position on their pages. We paid 18% and showed up as their recommendation on top of all choices about 50% of the time.

These rates may appear very high as commission rates for agents are normally 10%, and in exceptional cases 12%. But one has to consider that they have this enormous presence on all search engines for which they pay probably equally enormous amounts to appear on the first page when looking for a hotel, e. g. in Sihanoukville without giving a specific hotel name.

So you could argue that this is our marketing expense. We take care of the hotel and the guests and these two booking portals do the rest. It definitely is a beneficial relationship in this respect. As in any business relationship there are drawbacks. does not collect the money upfront but only collects the payment details, i.e. credit card number without checking their veracity, etc. and lets the hotel charge the guests when they check in. This leaves the hotel with the risk of false credit card information, insufficient funds, etc. This is very irksome in case of no-shows, collection of cancellation fees, etc. We made spot-checks for certain guest groups which we knew from experience to be somewhat unreliable, Russians, Vietnamese, Cambodians, sometimes down-and-out Westerners. Upon notification by they were supposed to furnish us with correct details otherwise we had the option to cancel the booking. We tried out the ‘booking without credit card needed’ but that resulted in an increase of no-shows of more than 100% so we quickly abandoned that policy. Payment of commissions due are made by credit card online. on the other hand collects the payment from the guests and we charged agoda on a virtual credit card that was authorized for the value of the booking. About 2 years in we added with its many subsidiaries but this did not result in a significant increase in bookings. We found that Expedia covers North America, Japan, Finland well for us as far as we could ascertain from the bookings. Since the majority of our guests originated in Europe, mostly Germany, Great Britain, France, the Netherlands, Scandinavia as well as Australia and New Zealand, the bookings coming from Expedia were negligible in terms of earnings despite the low 15% commission they charged. They also collected payments upfront, which was a plus.

So all in all everything would add up to a beneficial cooperation were it not for those so-called ‘unbiased’ reviews which can make or break a hotel. Since those booking portals are our marketing instrument per se and these days the majority of hotel (and flight bookings) bookings are made via the Internet people use and abuse their power on the Internet to a very large extent.

All booking portals have criteria in place by which a negative review can be removed. But these criteria are so broadly conceived and furthermore up to interpretation by the portal’s review team that hardly any review ever gets removed. The Internet is full of complaints about this from hotel owners all over the world. Guests can insult a hotel owner, misrepresent the facts, outright lie, the review will not be removed as this is the traveler’s experience. Insults are understood in different ways by different people. A Western rep might see this differently from, say, an Asian rep. This has happened to us many times. All portals state in their terms and conditions that a review is the guest’s personal opinion and experience and the portal cannot and does not accept any responsibility for the truthfulness. In addition guests can post anonymously. How does that help a hotel? If a guest uses profanity, sexual innuendo, etc. those reviews will be removed; after all those 3 portals are U. S. companies., which is also owned by Priceline, and Expedia comprise about 90% of all online bookings worldwide. alone has a share of over 70% of world-wide online hotel bookings. So what can a small hotel do against such behemoths? Their review policies are clearly unlawful as they commit unfair and deceptive trade practices as guests can post dishonest and untrue reviews harming the hotel’s business. There are EU and U. S. laws in place but an individual lawsuit is practically impossible as there must be clear and substantive evidence that the business suffered harm from those reviews. So a hotel would need to show the loss it suffered from harmful untrue reviews. Only a class action would bring relief as the totality of complaints would make presenting a case in court much more feasible. Those booking portals regularly state that only 2 rooms are still available, or this place is in high demand, so hurry and book quickly. Most of this is untrue and regulators in Europe stepped in and made this illegal. Now they say only two rooms on our site. This might now be legal and is advantageous for the hotel but it just goes to show that portals aren’t fair in serving their customers. The just want you to book there quickly; they don’t care which hotel, the main thing is the guests book.

All portals have a rating system from 1 to 10. You never see a 1 as I have never seen a 10 or even a 9.9 either. They start publishing ratings at 5.0. used to let the guest choose from 4 choices, ‘ fair, good, very good, excellent’. Additionally a guest got to choose to rate five more criteria – cleanliness, staff, location, pricing, and service. They converted this into an average for all ratings a hotel got using a scale from 1 to 10, in other words, if you got a straight very good which would be a 7.5 it would show up as a 7.5 on their website but with a verbal rating of ‘good’ only. Requests to have this changed (not only by our hotel) resulted in a slightly modified system but it took years. Instead of ‘fair, good, very good, excellent’ they now introduced ‘poor, fair, good, excellent’. So if you got a straight ‘good’ you would now get a 7.5 and a ‘good’ rating on their site. If you averaged more than 8.0 you got a very good, and over 8.5 it was excellent, and 9.0 or more got an outstanding. So it was a slight improvement for those that before only got a good instead of the deserved very good.

When we started out we received excellent ratings on all portals. As time wore on this slipped down a 7.9 on all three sites in the end due to complaints about certain older rooms we had in a front building. The rooms around the pool would almost always get at least a very good rating. We couldn’t help this other than remodeling these rooms at very high expense which we had shunned as our aim was to recover our investment first.

In my view as a result from my experience these companies are by far too powerful and need to be split up. If you have a world-wide market share of over 70% it is a monopoly. Regulators are only now recognizing the immense influence of those huge internet companies like Google, Facebook, etc. Booking portals seems to have slipped by their attention so far, it seems.

Not for nothing are the big chains trying to move away from those third party booking portals. Large airlines now offer access to hotels through their websites, another indication of a widespread dissatisfaction. We also strived to lessen their impact on our business and for reasons unknown as we did not do any other marketing outside those portals we achieved a share of direct bookings, extensions, walk-ins, etc. of 35% which really significantly contributed to our financial success in the end. When I worked in this business way back there was no internet. Travel agents booked hotels directly by fax, or room allotments; granted, a much harder way of doing business. Complaints were handled by mail so never see the light of publicity. So the internet is both a boon and bane for hotels. A hotel owner really has to be on their toes to reap the benefits of the internet.

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