“Matt, you’re pulling the covers to your side of the bed.”
I’ll admit, when I was a young travel startup entrepreneur I was a taker.
I tried to take at every corner.
I felt that the only way to succeed was to be a ruthless and take as much as I could.
If you let me I’d take you right to the bank.
I had a name for this.
I called it slamming.
I am going to slam you.
I got burned doing a business deal with a handshake when I was a sophomore in college and lost $1,000 in one night. $1,000 a night is huge for a 21 year old. I said to myself never again.
I am not sure why I was so ruthless.
I know it produced results.
I made money and lots of it when I was slamming. People would tell me I had no fear.
When I was 22 years old I had a General Manager of a ski resort tell me that I was so tough and such a shrewd negotiator that one day I was going to own his resort.
Then one day my slamming changed. The owner of a ski resort, a guy I really respected, was a legend.
He said to me, “Matt, you’re a talented young entrepreneur but you pull the covers to far to your side of the bed.”
I said, what?
“In your dealings with my director of sales, your deals are one-sided. You need to start sharing more of the covers.”
After that day, I focused on creating win-win deals so the other side prospered as well. All my deals going forward identified and delivered benefits to my supplier partners other than just the negotiated rate.
Hotels loved to do business with us after they got past rate negotiation. They heard we truly cared about the experience our guests would have at their properties, we always paid, were supportive and respectful to their staff and we worked harder than any wholesaler to promote and represent their hotels.
In the travel business if you are contracting with a travel supplier, negotiating rates and inventory is the key skill you need to master.
If you or your sales team can’t negotiate rates you will get slaughtered.
How our company communicated with the travel supplier, our process of confirming and checking in guests, how we paid, how we would adjust during the season and be flexible with our travel supplier partners enhanced our business relationships.
We started sharing the covers.
I made it a mission for our company to create value for our suppliers outside of the rate per room or lift ticket price we paid for ski lift tickets. We became a supportive partner of each and every supplier.
The travel business, travel industry is a ruthless business.
Everyone is always trying to take more, that’s how it works.
I want lower rates on my wholesale hotel contract.
I want a better profit margin.
I need that room back that I sold you yesterday.
I need you to block 5 more rooms on these dates.
I want, I want, I want…
Before we sold our OTA in 2007, I tried transitioning our hotel and ski resort contracts to long-term deals, long-term being 3-5 years out. I did this for multiple reasons.
The main reason, I was trying to reduce the take, take aspect of the business that exists between every travel company and travel supplier on rates and move to a more stable relationship where we could work on strengthening the business outside of the rate.
I wanted to support our suppliers beyond just rate and bookings. I wanted business partnerships that meant something. I know this might sound crazy but that’s how I felt.
Could we create relationships and go beyond the price of rooms, bookings and margins? I set out to try.
Do I sound like a softy?
Was I in la-la land?
Can you be a great businessman and be soft?
I am not sure.
I had a few takers for my long-term deal pitches. A hotel group that was our biggest supplier was open to discuss the idea. We started working on a 3-year deal, then their rate counter offer came back to me with a 74% increase in cost over last years rates vs. my offer of an annual 3% increase each year over the next three years.
I called my rep and said,
“so for next season you want 74% more money than what we paid for rooms this year vs. my 3% increase.” We are your number one wholesale buyer of hotel rooms. We have been business partners for 10 years.
Are you on drugs?
What the fuck!
You are pulling the covers so far to your side of the bed that I am left lying here naked, freezing in the cold.
The rep said, “Matt, I know this is crazy but the top brass think that you cut such a great deal all these years before that now you have to pay up.”
Are you kidding me?
This is funny.
Well of course I cut a great deal.
But what about how we support your resort in every other aspect of the business? What about the business relationship of the past 10 years?
Does this matter?
In the travel business everything generally comes down to rates. You can throw everything else out the door. There is a reason the hotels say “heads in beds.”
In the end it’s only about placing heads in beds.
Your “in the money” if you’re delivering heads in beds today.
Your out on the street if you’re not delivering tomorrow.
The hotel group came to their senses after 6 months of hard-core negotiation. What I found out was that the hotel group wanted to lodge our customers in different properties they owned from previous years and they wanted us to take more of these rooms.
Why didn’t they just tell us that?
So we worked a deal like we always do and compromised. Our company paid 3% more each year, wrote a 3-year deal, and we lodged our guests in the hotel properties they wanted.
It all worked out in the end.
It was a win-win.
When we sold our company, the 3-year deal with a publicly traded hotel group was very appealing to the buyer of our travel company. Part of the reason I sold our company was because the 6-month negotiation sucked the life right out of me. I mean this was a business partner we had for 10-years.
There is no nice ending to this story. I wanted you understand as a travel startup that this is how it works in this business.
Our company was the hotel groups biggest buyer of rooms and this is how we got treated with a counter offer of a 74% increase to a sensible 3% increase.
Everyone is going to try to kick you in the ass.
You have to fight, scrap, kick and scream and then repeat it, repeat and repeat it some more.
You can try sharing the covers but I am not really sure it matters in the end.
Sometimes I wonder if that ski resort owner legend was really just out foxing me with his story of sharing the covers. There was a reason he was the owner and a legend in the ski resort business.