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.
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.