Sorry I have been rather quiet the last few days since Hostelworld announced they are increasing their service fee to 12%. I know some of you have been waiting for my input. I have a general rule, that whenever something happens that gets me unsettled, I always try to quell my knee-jerk response. Instead I prefer to consider the situation carefully and premeditate my response.
I should start by saying that the increase in Hostelworld’s service fee (aka commission) is no surprise. HostelManagement.com members including Rucksack Brian analyzed the last contract quite thoroughly back in July and predicted and warned this would happen.
Although, Hostelworld conceded many things in the July 2013 contract, the language that changed to make the Deposit and Service Fee into two different definitions remained. As a result, my hostel and a number of other hostels (especially in San Francisco) did not sign the July 2013 contract. Many of these hostels (including mine) refused to sign and were delisted from Hostelworld last week and we have been deciding how to handle this situation going forward.
As a side note: Fortunately, I was prepared for this delisting (especially when the HW & HB merger was approved) and began diversifying my hostel marketing 6 months ago. Years ago my friend and mentor, Jim Williams (editor of The USA Hostel Handbook) taught me to always diversify your hostel marketing as much as possible. Jim previously learned this the hard way when a prominent guidebook delisted his hostel in the pre-internet era. This wisdom is something I continually encourage with other hostels. But I will admit, even I have, at times, become complacent when it has been so easy to rely on Hostelworld to fill beds.
I know many hostels are scrambling to figure out what to do with Hostelworld’s latest announcement and feel they do not have the time to diversify their marketing. I don’t have all the answers and I of course can’t recommend what’s best for your hostel, but I can share some wisdom I have learned as a parent that feels relevant to the current situation. Children will push, annoy, whine and cajole their parents to get what they want. If the parent eventually gives in and allows the child to get their way, they will teach the child that this behavior works to get what they want and the child will do it again and again. It’s important to say a firm “No” when your line has been crossed. This is not always an easy thing to do and there will almost always be a temporary emotional and even economic price to pay by saying no. However, if you don’t establish your absolute “No” at some point they will come back later wanting more.
Where does this leave us now? I have a few opinions and ideas I would like to share with the industry.
OTHER OTA’s (HostelsClub, HostelTimes, GoMio, WeHostels etc)
Since taking over management of the HostelManagement.com site I have had an opportunity to talk with numerous hostel owners and with various OTA’s.
On the one hand there seems to be a tendency for hostels to shun the newcomers in the hostel OTA game.
1. Some hostels owners/managers will avoid the work necessary to get listed and provide allocations on new OTA’s until the OTA is more established or until other hostels give the OTA their blessing.
2. Some hostels will abandon the lesser known OTA’s when they fail to provide a minimum number of bookings.
3. Some hostels will reject these alternate OTA’s when they do not offer terms as favorable (to the hostel or to the backpacker).
The people who manage these alternate OTA’s have also on occasion confided to me privately. They all tell me similar stories. “We thought if we build an alternative to Hostelworld, the hostel industry would flock to us. But they didn’t” This creates a “Chicken and Egg” problem for the OTA. If they do not have inventory from a wide and diverse number of hostels, they don’t have a product to sell their customers. This creates a bad experience for the customer and they don’t come back to the new OTA.
As an industry, our individual unwillingness to provide inventory to alternate OTA’s collectively has the effect of making it very difficult for these new OTA’s to get footing in a world dominated by Hostelworld.
Solution: Get your hostel listed on as many of the OTA’s as possible and provide them with at least a little inventory to sell. Once they sell that give them more. Yes, this is a lot of work and you might not get a booking from some of these channels for a year or more, but it’s worth it for the diversification of our industry. Channel managers like MyAllocator.com and SiteMinder.com can help you manage all these channels.
OTA’s TO AVOID
In my opinion, the hostel industry is very different than the hotel industry and we should not be treated the same way. Good hostels are not about simply providing a cheap place to stay - Good hostels are about creating an environment where community and friendship can flourish. In short, we are selling an experience - not a commodity. Some large OTA’s fail to understand this basic and important difference in our industry and will try to sell hostel beds in the same way hotel rooms are sold. They will insist on writing your property description for you in order to maximize their commission and the number of “wallets” that come through your doors. The reputation of your hostel depends on avoiding this temptation. The community you create in your hostel is the most important asset your hostel has. Your carefully chosen language in your marketing sets the tone and expectation for your guests and is the first step in crafting YOUR community of travelers.
Of course, every hostel should also strive to increase the number of direct bookings they receive on their own website. This will give them more in control of their own
destiny and increase the amount of money that can be used for the guest experience.
HostelManagement has had a comprehensive project planned to help with this for months, but we still do not have enough sponsorship dollars to make it a reality.
So rather than waiting for the money before making the idea public, I’ve decided to try a different approach to hopefully energize our industry, I’m considering a Kickstarter campaign to see if this will serve as a call to action for our community. Here’s a preview of that project.
Hostels-Direct.com will be an online AND most importantly an in-hostel kiosk platform for backpackers to book hostels directly. The site will NOT collect deposits from the guest or involve 3rd party payments to OTA’s. All bookings will be conducted directly on the hostel’s own booking page. You keep ALL of your money and manage bookings as you see fit.
Both the website and the kiosk will provide backpackers with an easy way to find the booking page of hostels and enable them to book the hostel directly to save money and never pay OTA booking fees.
The most important aspect of this project involves hostels making the kiosk available to their guests to book their onward trips. Stay tuned for more details on this.
ORGANIZING OUR INDUSTRY
Time and time again we hear about the need for a "voice" for the hostel owners and managers in our industry. I agree. However, I think it's a bad idea for a hostel owner to simply pay some money to a third party organization and let them be your voice. Likewise, I do not think it's my place or HostelManagement’s place to represent hostel owners by proxy. Instead I’m committed to using the technology of HostelManagement.com to provide a democratic and engaged process for hostel owners to control their own destiny.
However, this will mean giving up the anonymity that some members prefer on HostelManagement.com. If we are going to implement industry voting and private discussions we need to validate the member profiles through a vouching system. This way we can determine who is a hostel owner and who is not. I have spoken with my programmer about implementing this feature and he estimates that this functionality will cost $500-$1000. I do not want to spend this money on my own and especially if the HostelManagement.com membership will not use it.
As a side note: Currently the most active members are using the Facebook group page to communicate rather than the HostelManagement.com site itself. This leads to three problems. 1) We do not own the content we post there and can not control, archive or search it in the future. 2) HostelManagement.com gets no SEO benefit for the discussions made there. and 3) we have very little, if any, way to validate users to determine if they are actually affiliated with a hostel. In my opinion, for the same reasons we need to reduce our use of OTA to control our own destiny we also need to limit our use of Facebook as a communications platform in our industry.
What are your thoughts? Please post them below in the comments below or start your sponsorship of HostelManagement.com today! Thanks for reading.