Needing Sympathy?: Hotels

Hotels full, record numbers of passengers passing through Palma airport. Oh what a summer. A great summer for the numbers-games players, especially the regional government, which loves the numbers more than most.

The hotels bursting at the seams, and so how do the hotels respond? They intend to put their prices up by 6% next year. It's cashing-in, payback time. A few years of keeping prices down and of seeing margins squeezed, the hotels want their money back.

Whether they get it is another matter. The tour operators, as ever, will have something to say about it. This summer of relative fortune has presumably seduced the hotels into believing that 2012 will be a golden summer as well, so they sense the opportunity to harvest some of the gold for themselves; the only problem is that north Africa will probably bite back and will be pricing competitively.

The hoteliers will argue that, having held prices down and despite the high levels of occupancy, their profitability has either plateaued or gone down. They, like bar and restaurant owners, complain about a lack of in-resort spend by tourists. But put prices up, either of direct sales or through a tour operator's package, and what do they think will happen? The tourist mentality is firmly and primarily wedded to the cost of the holiday itself; spend in-resort comes a poor second in the budgeting process, hence the attractions of the all-inclusive.

Should, though, one feel any sympathy for the hotels? They bring a lack of it on themselves. The constant attack on the residential tourism market and the at-times failures to deliver what it says on the tin and contemptuous attitudes make it hard for anyone to be sympathetic.

This is unfair on those hotels that play fair and treat their customers with respect, but as a body the hotels attract little compassion. The bad apples have the bad experiences they give their guests (or those who might have been guests had they not been turned away and sent elsewhere) plastered all over Trip Advisor, giving themselves a bad name together with resorts and the island as a whole.

Yet the bad experiences are not necessarily all down to failures on behalf of hotels; they can be a reflection of arrangements with tour operators, some of which can change in between holidays being booked and being realised.

The hotels, one cannot emphasise enough, form part of a distribution network in which they are independent of tour operators but also highly dependent on them. This network has four heads: the tour operators, the airlines, the travel agencies and the hotels. In certain cases, three of them are one and the same thing. Guess which one isn't.

Common ownership of three of the key elements in the network is all good business integration stuff, facilitating the regular mantra of "customer demand" to be put into good practice. However, there is another side to it.

Let me cite you the example of holidaymakers who wished to book a particular hotel. They went along to their local travel agency which informed them that the hotel in question was fully booked. This was for a holiday in May. The holidaymakers were offered and accepted an alternative hotel, one that is exclusive to the tour operator, the same tour operator that owns the travel agency. Once on holiday they went to the hotel which they had wished to book in the first place and spoke to people there. The hotel had of course been nothing like fully booked.

The point of this example is that, unless the relationship between hotel and tour operator and therefore travel agency is that strong, hotels can find themselves losing out. So what do they do? Put their prices up in order to compensate?

The hotels with the stronger relationships, which usually means exclusivity, have at least been guaranteed their sales and their money. Or have they?

There have been reports this summer of hotels being unable to meet monthly salary payments because they haven't been paid by tour operators. Which could well be hotels that, prepared to take a tour operator's shilling exclusively, have pared back prices to the bone.

It's hardly surprising therefore that the hotels might want to put their prices up. They can try, but whether they succeed is another matter. And even if they do succeed, getting paid on time is another issue entirely.

Do they deserve any sympathy? Through partially gritted teeth, I'm prepared to say that they do.


Any comments to andrew@thealcudiaguide.com please.