The Genius rewards programme is a brilliant move by Booking.com in its strategy to continue gaining market share in hotels by gobbling up other online channels as well as the hotel’s own direct channel, their website.
Reasons to join Booking Genius
Hotels usually resort to the Genius programme when:
- They look for more sales on low-demand dates.
- They consider that Booking.com has “high-quality” clients under control (frequent travellers) which they wouldn’t otherwise have access to.
- They want immediacy.
- They don’t see a problem in giving an exclusive discount to these Genius clients because they are low-demand dates and “what does it matter because the hotel won’t fill up anyway”.
- They consider that they have the situation under control and that they will “leave Genius” when everything goes back to normal and they don’t need it.
- They follow recommendations from their Booking.com account manager and try it out. In fact, com argues that, by activating Genius, many hotels see their average price go up instead of down. This, according to them, is due to many Genius clients booking rooms without the discount.
This reasoning means that joining Genius is logical, understandable and I would even go as far as saying that it’s the right decision in certain scenarios. However, in most cases, it doesn’t adjust to reality, it’s basis is wrong and, above all, it’s a strategically dangerous decision.
Why do hotels perpetuate the use of Genius?
After activating Genius, time goes quickly. Weeks, months and even years go by and “being in Genius” is perceived as normal. Many hotels do not re-evaluate it periodically (which they should do) to see if it’s still worth it. This happens because:
- Comfort. One of the key successes of Booking.com is that it makes life easy for hoteliers. Genius is also comfortable.
- Lack of time to measure results and analyse whether the value it adds is bigger than the one it destroys. Comfort and lack of time go hand in hand and Booking.com exploits this to perfection.
- Lack of tools to automatize data for subsequent analysis. Whoever wants to analyse something, has to do so by hand. Neither the PMS nor Booking.com help you with this task.
- Lack of knowledge to make the right exercise. Despite having the data at hand, how do I measure the impact Genius has over my income? And over my expenses and, therefore, my GOP? And over my average price? Which part of the sales is new and which one is cannibalised? How does it impact the sales from other channels?
- Ignorance or fear of “what will happen if I leave?”. Although many hotels have not been part of Genius for very long, they now feel fear if they leave, almost as if there was an abyss out there.
Visibility, new sales vs. profitability
We do not question that Booking Genius adds visibility to your hotel – a word that sounds great although it’s used lightly and even wrongly in many cases. This visibility allows you to access a larger pool of clients that you supposedly couldn’t previously access, although it also cannibalises clients that you already had and that booked rooms at your price without a discount. All of this ends up as an alleged larger sale, but at a much larger cost, although this is overlooked since it’s “low season”.
What we do question is the suitability of the Genius programme, its profitability on a global scale for your hotel and, above all, the model’s sustainability (is this the path we want to follow?). Therefore, our recommendation is to permanently revise the programme in all cases and, in most of them, leave it.
20 reasons why you should leave Booking Genius
We are only talking about hotels participating with 10% discount, not about hotels offering amenities. Booking.com doesn’t allow this second option anymore.
- For its high cost, no less than 29.8%. If we add up the income you are no longer making (opportunity cost) and the commission and we divide it by the income without VAT (tax base which is 10% in France and Spain), you get 29.8% for preferred clients and 27.6% for the rest. Would you accept a channel that asks for 30% commission? Well, you’re accepting it with Genius.
- Do the new sales compensate for cannibalised ones? By also having the discount applied during your high season, which is when you don’t need Genius, the income you miss out on making with these high-season discounted bookings -bookings which would have been made anyway at a normal price- means that this alleged new income made during low-season, which is when you want to reinforce sales, is cancelled out.Let’s see a comparison between two bookings: one during low season -a booking that is allegedly received thanks to being in Genius- and another made during high season -which you would have received anyway without being in Genius. This comparison does not apply to Genius hotels that don’t offer the 10% discount but rather differential values, an option that Booking.com is gradually eliminating.
The “new” booking brought in by Genius during low season (we put “new” in quotation marks because we question the fact that it wouldn’t have come in without Genius) means a new income of 53.21€.On the other hand, the booking made during high season that comes in through Genius -when you didn’t need Genius to have this booking anyway- makes you lose 20€ of income, which ends up being 18.18€ after taking away the VAT.If the ratio of bookings that come in through Genius is 3 to 1 during high season in comparison to low season, you are clearly losing money. You are missing out on 18.18€ per booking, which is 54.55€ for 3 bookings, and only making 53.21€ thanks to the new booking from Genius. - Because you are building customer loyalty for Booking.com (and not for your hotel) and, on top of it all, you are paying the bill for it. It makes no sense whatsoever.
- Because selling at a discount has no merit, not even during low season. Speak to any bed bank or OTA, give them an exclusive 10% discount and wait for the clients to arrive.
- Because exclusive discounts are something of the past… or perhaps not? If another channel asks for an exclusive 10% discount, do you accept it?
- Because there are other ways of gaining visibility when you need it without having to activate Genius and losing control:
- Moving your prices more actively and aggressively, both upwards and downwards.
- Launching commercial actions on other channels, including your direct one, and that they cost the same as that 30%. Have you tried calling a channel to offer 30% commission to boost sales on specific dates? They would love to hear from you.
- Over-commissioning Booking.com on these low-demand dates. You can reach the same cost without giving the advantage of the exclusive rate.
- Because Genius clients are not under control nor exclusive. If they are “frequent travellers”, then they know how to search and compare before choosing a hotel on different OTAs and price-comparison sites. In other words, you can have access to them without having to join Genius. Also, your hotel still appears on searches of Genius clients although, naturally, with less presence than Genius hotels.
- Because the programme is not as clear as you would need. Despite that Booking.com is committed to giving more information of what is going on in the Genius world -for example, we already know the bookings from Genius clients with discount, Genius clients without discount and non-Genius clients- the key question for hotels still remains: how many NEW sales does your hotel have for being Genius and how many sales has it cannibalised from clients who would have booked anyway at a normal price? Booking.com assumes, from a self-interested point of view, that the sale that comes from Genius clients is a new sale when that is never the case.
- Because it’s a rigid programme in which you cannot set the limits that you would like. Genius is applied on your most popular room, no matter which one it is, and you can configure 30 blackout dates, which are the dates that the Genius discount cannot be applied. 30 blackout dates is a very low number, and you’d need many more days to protect. In order to be able to choose single days in the calendar (not a range of dates, which limits you even further), you have to do it through your Booking.com account manager, which is an inconvenience from an operational point of view.
- Because Booking.com offers Genius rates to companies that are registered on Booking.com and this may attack your corporate segment. On top of it all, anyone can create a corporate account, since they do not require a VAT number or any kind of credentials for registration (just a name, which can be made up).
- Because, further down the line, you can reactivate it if you need to, respecting the six-month hiatus imposed by Booking.com to rejoin.
- Because Genius openly competes with your loyal and direct clients and even with your rewards programme if you have one or wish to set it up. What will your loyal client think if he sees that it’s always cheaper for him on Genius? Nothing good, as you can imagine.
- Because it increases your dependence on a channel that in most cases is already dominant, particularly for urban hotels.
- Because the more it sells for you, the more fear you will have to leave.
- Because, believe it or not, you cannot compete with your own rewards system. It’s the equivalent of a local independent store trying to compete with a large department store. On equal terms, the big fish always wins.
- Because it you tell your account manager that you want to leave Genius, he will be on alert and this once again shows the (strategic) importance that Booking.com gives this programme.
- Because Genius, with its exclusive price advantages, eats up the rest of your distribution channels, including your direct web and phone sales.
- Because it may damage your preferential rates for groups or weddings. They see a better rate on Genius and they could ask for the same discount you gave them albeit over the Genius rate, an absurdity that many hotels are currently experiencing.
- Because it’s the year and month to do so. If you don’t make these decisions in 2017, which is forecast as a record year in Spain, when are you going to make them?
- Because deep down you know it’s the correct decision, but you never find the time to make it.
Update on November 2017 – Reason #21: Booking.com started publishing Genius rates on Metasearch
Conclusion
Genius is a simple, comfortable, functional and highly attractive programme for hotels. It’s easy to give in and get carried away, since it makes your life easier and you barely have time but do have many open fronts.
Once again, the question is: do we prioritise comfort or profitability? Both in the same formula are not compatible. At Mirai, we are committed to profitability by working harder. Everyone chooses what they want or can but make sure you are consistent and accept the results.
True, but hotels without strong loyalty programs might be obliged to take advantage of genius , for guests who are looking for Saving on Amy room type they book, the challenge we have as hotels that booking.com making it more re appealing and attractive with huge marketing campaigns that no hotel can afford to buy
Cooool guys it’s a long time I’m thinking to leave the genius program… but as you correctly said… we need lot of courage to do it. Maybe “they will get angry, I will have less visibility, they will crucify me?” for sure I’m afraid as we make billions with booking.com and for sure we MUST have a good relationship with them… you know there’s also this point. If I bicker with Booking.com I risk a lot… maybe too much… We’re died without booking.com so maybe we have also to “thank them”… I know we already give commission but I can also say that they’re clear with us, they don’t make any secret discount in other countries without saying it (as Expedia, Agoda, Hotelbeds ecc. make).
Anyway I’m seriously thinking in a way to exit. In a good way for us 🙂 Thanks for your article! And greetings from Italy!
Now can please do the same calculation on other channels of business?
Like wholesale? Travel agents? Corporate?
Cost of sale exists everywhere, from hotels, to Ford and Mercedes, to Mars and Nestle.
Otherwise we wouldn’t need car showrooms and supermarkets….
Hi Ralph,
Thanks for your comment.
The best showroom today is Booking.com. I do not argue the value of being there. In fact you need to be there (and accept the cost it implies).
However, I don’t agree with the need to give Booking an exclusive discount. It is a very dangerous trap. The sooner you get out the better.
Pablo
I am thinking to leave Mobile and Member rate plan on OTA too, without this rate plan our hotel still visible through those OTA’s plan with higher rate. However in the other side we need to ensure that we have good content and hotel’s reputation to encourage the customer to book with higher price. Please give your feedback on it.
As far as I know Booking.com offers an analytic tool where you can actually check periodically if it is worth it keeping the genius program or not, and you are always free to decide if quitting when it is not benefitial anymore.
Hi Daniela, you are right. You are free to leave. However Booking.com does not provide the transparent information you need to make a proper decision.
Sentences such as “By offering Booking Genius discount, you got 222 more bookings and 65,000€ more revenue” are incomplete. Where is the sentence “Although 201 of these bookings would have also booked your hotel without the discount” (of course I’ve made up the 201 number in this case).
Personally, I found some of comments are too subjective because you are not the hotelier and you don’t know whether they really attract more customers or not.
What’s good in this article is reminding hotelier to analyze the P&L; that’s their duty and they know how to make a business decision.
What I found not constructive in this article is: the author doesn’t want/or can’t see the network effect created by Booking.com today in this industry;
If Hotelier wants to do more online or web marketing or other promotion activities by themselves to save genius commission, they might have other operation or labor cost adder; they might need to invest in software or other tools.
If you want to sell your service via a platform, it seems to me normal to pay commission;
ie. Paypal charges 4.5% of commission from e-commerce, why most of e-commerce still need Paypal instead of other payment services as” Paylib”? Because PayPal earns-Consumer/End-User trust already with their great service.
Hi Amanda,
Sorry for my late response. Didn’t realize about this comment until today. My apologies.
I’m not a hotelier you’re right. However, I’ve been working for more than 15 years with my clients understanding where their customers come from and how they use Booking.com to attract more.
Hoteliers do not use OTA correctly. Of course OTA create the necessary network effect (visibility). However, hoteliers do not know how to limit it and end up being eaten by OTA. This is the problem: OTA are winning and hotels are losing.
Booking Genius is just another example of why. Genius is a great program for Booking (especially in the long run), and the best part of it is that it’s being paid by hoteliers and not Booking! Another masterpiece by Booking.com tolerated by many hotels.
Pablo
I guess it depends whom we are trying to attract. I guess Pablo is right about the seasoned travellers and their knowledge of how things work in the industry. They will get their discount one way or another and in the end, it really doesn’t matter whether it’s booking.com or some other OTA. The question we should be asking is a) which of the OTAs will be the FT’s choice (and given the insane cashback rates booking tends to offer, it’s likely them anyway) and b) what it does to the general pricing: putting up an exclusive with some OTA that shows up publically on OTAs may or may not increase revenue but it does mainly attract one-time guests, resulting ever so more in the initial problem of lowering my rates long term.
I agree in it being absolutely imperative to remain on top of the sales channels but where I disagree is the generalization: keeping the prices sky high on my direct channel while offering significant discounts may work for getting Ma & Pa Kettle’s money due to all the scare-mongering (seriously: who is behind that?) but if we’re trying to attract the frequent guests, they’re going to be laughing all the way to the bank.
Again, depending on our property, it may make more sense in investing some money in higher rankings instead of giving discounts of any kind BUT offer more reasonable prices initially over all channels. I admit that competing with HHonors & Co is absolutely futile but that simply means we under no circumstances may make the direct channel even less attractive than it already is. We really can’t complain about OTA commissions and simultaneously make our own booking channel the least attractive way.
I believe that offering exclusive discount rates can be a very good way of addressing the frequent travellers in a seclusive environment while not throwing heavily discounted prices at everybody else.
Thank you for this information. I have always asked myself why I should even join such programmes when I am doing well without it. You have given me more support to remain outside such genius and preferred programs
Brilliant article, thank you for collating the data. I especially love reasons #3, #12, #14, #16, #17 and #20.
The questions is always, how much longer will hospitality owners remain ignorant to how the internet works (for everyone) and start building relationships with their own customer databases, and stop relying completely on third parties to bring them their customers. It’s absurd, and it doesn’t happen in any other industry. Thanks again
There is a fundamental calculation issue here — the opportunity cost of 30% is for leaving booking.com altogether (because it includes the genius discount and the baseline commission of 17%), NOT for leaving genius only.
Most of the other points are rather generic — yes, if you are willing to foot the cost for building your own channel and getting people to use it, then go for it. Otherwise, do your own analysis and pick the next best thing. But make sure your numbers are right.
How about providing a sampling of these things in the article — like, the cost of customer acquisition if you staff your own internet operations is $$ which is xx% of the revenue for a typical outfit, Compare that to ~yy% for booking.com, take into account other “qualitative” factors and decide which way to go.
Great article. I am reading it today, a day after I emailed Booking.com agent saying that I want to opt out from Genius. I got a call from them in 30 minutes but I did not change my mind. It took me a day to make a decision and that’s it. We are a small family hotel (12 rooms) and our review score there is 9.9 (100+ reviews). We had many problems with returning guests asking additional discount because they know about 15%+ commission we pay to Booking.com. Long stay discount+ Genius + direct reservation discount they ask = up to 50% discount sometimes. That’s just insane. I guess that quality of service and reasonable pricing beat every hyped discount mania out there. Thanks again for the article. Take care.
I am just an ordinary person and we probably stay away say 30 nights a year. We use Booking for research and then often try and book with the hotel direct. But often they don’t want to know, which I don’t understand. Anyway, it breaks my heart every time I use Booking because I know how much Booking charge the hotels and I want the hotels to stay in business. I’ve often wondered why all the hotels don’t join together to have their own ‘Not on Booking.com’ site. We do cycle touring and are often ‘forced’ into making bookings as Booking.com give us the impression we won’t get a room unless we book now, which has completely taken away our flexibility and at times landed us in problems.
how do i get out of genius,the system will not let me out.
Hi Heather,
Not sure you can do it online. You can always ask your Booking.com account manager.
Pablo
Also, the clients in their genius program are not necessarily frequent travelers. It just put me in there and I’ve only booked through them twice, both times in 2015.
Well, the main point with Genius is that ALL OTAs have some form of discount. Not only Booking.
If all of OTAs offer 10%-15% discount, then there is really no difference. Just consider selling at a comfortable for you price, counting what would be left after 10% off with Genius.
What I did is simply raising all the rates 10% up and then activating Genius 10% and similar programs on other OTAs because they help to boost visibility. Worked out really well.
Hi Roman,
Thanks for your comment. I agree with you. Booking Genius is not the only OTA practice to increase hotel distribution cost (no matter in the form of higher commission or lower rate). Your move to jump into Genius and increase the rates by 10% is very smart. Hope Booking.com does not notice.
Pablo
“What I did is simply raising all the rates 10% up and then activating Genius 10% and similar programs on other OTAs because they help to boost visibility. Worked out really well.”
This is why we can’t have nice things. Because everyone is a cheater. This is practically done by every hotelier on booking.com and it is the reason why for smart travellers , genius tag and its “benefits” represents absolutely nothing. I would not even bother with that. And if you are a cheater , I will be a cheater too – because I’m not stupid. I lost count of the number of hotel that gave me a better price that what was on booking after calling them directly. Go figure.
Booking.com should really take measures on this but I’m afraid they can’t do anything as it’s impossible to control everyone. And it’s a shame as booking offered much more for hotels that it offered for customers.
One more trick is the referral programme but even with a link from friends you are still going to get much higher prices than normal , giving you a false illusion of saving money.
Brilliant. Thank you.
Your review is nothing short of amateur. When my hotel is even at 50% capacity I’d rather get 3% extra via the genius program, spending an extra of 150$ per room night, and getting 450$, rather than hoping that the remaining 50% will magically fill up through walk-ins and I lose 90$. I am risking 90$ at a risk probability of under 2%, when I can gain 300$ at no-risk and no extra expense.
Basic math puts you deep in the wrong. But… You are a salesman of some aspiring competitor, and not even remotely the sharpest tool in the business toolbox.
Hi Eugene, thanks for your comment,
If you get to a point that you are at 50% capacity for tomorrow or the day after tomorrow, Booking Genius is a great tool and you have to use it.
However, if you are at 50% capacity, you do not have a “channel (direct or OTA) problem” but a “pricing problem” or a “strategy problem”. And that’s a different story.
In this post I question that many hotels rely on Booking Genius to fill dates that they don’t need, and at a huge cost they should not assume. Besides the many problems that Genius has in the long run.
thank you very nice website article
I agree that at some points Genius can be opted out and not necessarily used. In fact, Hotel was convinced by Booking.com (with statistic) that (like you said) Genius generates new sales and its actually additional to the current revenues, which is actually not. Thanks that you reveal it in this article.
3. Building customer loyalty for Booking.com it’s true,but we can still do something on our brand.com appealing to clients,using Booking.com as showroom. In this case joining
all Booking.com / OTA programs is also advantage (of course with considering all cost)
9. At my hotel or maybe for some hotel also, we do have access (without having to contact Booking.com) to set the 30 days blackout for Genius. I agree with you 30 days is not enough.
OTA has customer big data and it’s their advantage ,”leaving Genius” probably suitable for a really high demand hotel, they don’t even need to join any OTA program,not only genius. The fact ,for some hotels filling up based occupancy itself , already a struggle.
I think each hotel MUST do their own assessment/analysis ( based on your 20 reasons as reference) to finally decide whether leaving genius will be the right or wrong decision.
I have small family business. Genius was turned on automatically.
When I find the time to thoroughly check it out I was shocked in a negative way. Don’t know about large hotel but if you have small or medium sized business, you have to be crazy to participate in something like this. It is simply 100% absurd.