Wednesday, July 8, 2009

Update: Founders Introduce 'Reverse Opaque Rates' and Point to Shortcomings

I wrote a post the other day about how Bob Diener and Dave Litman, the founders of HRN (a.k.a., have launched, and indeed they intend to shake things up.

Diener, who owns 50-50 with Litman, described the site's introduction of "reverse opaque rates" for hotel sales.

getaroom focuses on top destinations so if you enter your travel dates and click on Orlando, for instance, you'll see the Sheraton Vistana Resort at a published rate of $125.38 per night.

However, the reverse opaque model comes into play when you register on the website and phone getaroom's call center, staffed by a third-party company, in Dallas.

Diener said that over the phone you'll be able get an unpublished rate for that hotel and others for 10 percent to 50 percent less than the online published rate.

"Our goal is to bring a lot of vitality back and make booking hotels exciting again," Diener said.

The opaque-over-the-phone channel enables hoteliers to market their inventory at rates that they would rather not disclose online, enabling a four-star hotel, for instance, to compete against a three-star property if it so chooses, Diener said.

And, consumers get the advantage of finding a great deal and knowing up-front which hotel they are booking, unlike with Priceline, where you bid on a particular star category in a certain section of a city but learn the hotel's identity only after booking it.

Diener points out that most companies are trying to push consumers online, whereas is incenting consumers to dial for the best deals and values.

Diener and Litman obviously believe in doing things differently and are employing a strategy similar to one they pushed with HRN back in the day.

This is how one hotel consultant described's strategy.

"The strategy is EXACTLY the same strategy they used to launch HRN way back in the early 1990s," the hotel consultant said. "They focused on a few specific high-demand cities, got a handle on the revenue management/yield opportunities and managed the hell out of the pricing to optimize sales and margin."

"They wound up with a low-tech setup that had better demand/price point info than the hotel chains and leveraged it," the consultant added. "Also, speed is king to Litman -- note the results' screen populates within a second."

Diener did not have much to quibble with when I read him that analysis. He said is focusing on key destinations and offers a limited number of hotels with the best values in each of these markets, and "yes, speed is key," he said.

Commenting on the position of under Expedia Inc. today, Deiner said is a major player "and still has a great brand name, adding that he and Litman were "much more focused on value" when they ran the show. wants to be "everything to everybody," Diener said. "They have lots of hotels even if some are of low value. Their philosophy is to put on everything everywhere."

Diener said he and Litman decided to jump back into the fray after their five-year noncompete agreements expired because "we love the industry, it's in our DNA."

He said the duo saw a great opportunity because "the economy fell off a cliff last September" and the lodging industry needed a new channel to market its inventory.

"The industry really hasn't moved [in the last five years]," Diener said. "It really has stayed the same."

It is fitting then that has "several million dollars" for marketing and is launching spots on satellite radio and soon it will unveil TV ads, too, all to the tune of the William Tell Overture. getaroom, getaroom,

As you may recall, the William Tell Overture was also used as the theme music for the classic Lone Ranger television show.

However, there are no Lone Rangers in this story. Diener and Litman are back at it together -- and they may be driving their new model at a very ambitious pace.


Jeff said...

So if I understand correctly is *not* venture capital backed? And they have millions to spend on marketing? Interesting...

Dennis Schaal said...

Jeff: That is precisely what I was told, but I am double-checking.

Dennis Schaal said...

Jeff: Yes, I double-checked. Litman and Diener own the whole company, and there are no VC backers. Deep pockets prevail.

Mike Redbord said...

Innovative concept in a space overdue for it. I wonder, though, if users are ready for this. The site's unique value proposition links the online and offline in ways that are new for most people and casual travelers may not be ready for it. Right now the user experience (at least in the upper funnel) doesn't make it clear that you should be getting offline and picking up the phone for these low low rates. It seems that the value is in the discounted rates that appear once you search--people don't naturally expect the website's main value to be had over the phone.

But a few UX tweaks, a little testing, and this idea could develop into something really interesting.

Dennis Schaal said...

Mike: I think it has potential. One thing I didn't write about is that hoteliers will be posting specials on the site that will be highlighted and rotated on and off on a spot basis. So, there will be something there for online consumers at the top of the funnel. And, then again, remember that there is a subset of consumers who are more comfortable booking over the phone than they are online. I am sure there will be ample offline advertising for the phone lines. Ads on sattelite radio and TV are beginning. Also, another thing to consider that Litman and Diener certainly have a track record.

Anonymous said...

sorry, I am struggling to understand where the innovation is here!!! allowing a 4* hotel to compete on PRICE to a 3* hotel, is this what you call innovation! this is definetely not benefiting the industry. Hotels have fought for years to get to Rate Parity, Bbrand Protection, and to be able to sell direct n their own website. all I see in this new "innovative" business is someone trying to make money quickly but while doing that they are bringing the industry to the dark ages!
Hotels that participate in this model sooner or later will regret!

Anonymous said...

2 questions to be answered:
1) in the age of the internet why would poeple pick the phone to make hotel reservations? I don't understand!!!! people have moved away from offline a long time ago, and tomorrow's bookers are today's kids who do ot even use email! they communicate on facebook, youtube, twitter etc...
2) if hotels want to sell distressed rooms over the phone, surely they can do it themselves, they certainly don't need getaroom!!
3) what value, besides discounting and bringing cheap clients, do the owners of this site bring to hotels?
4) how can they compete with those thousands of websites out there!

run my friend as quick as you can...

Anonymous said...

After reading and rereading this post I am still not sure that "reverse opaque rates" exist. Wouldn't this really be a fenced rate, just like TVL, AARP, or GOV. The customer must sign up for the (albeit free) service/group to qualify.

On top of that the traveler still ends up with a high/full penalty, third party, run of house reservation. Not to mention they have no recourse with the property since they don't have your money.

I don't think it is a bad idea, opaque rates work best in a high supply market. I just think they should be ready to sell after 3 quarters of profit.

Anonymous said...

What isn't noted is what is taking as its cut. took 25%, money up front, and payment in the month following the stay. If this is their model for their new enterprise, it will only include the most desperate hotels during the worst periods of time. No one wants to be in that race to the bottom and get raped along the way.

Mary Song said...

I think it's a brilliant idea given that hotels don't want everyone to know how low they are discounting hence the success of priceline and hotwire. I agree with Dennis and would add that the subset of people who pick up the phone to make the final booking is quite large but also that the site needs to make it more obvious that the best price to be had is actually over the phone and not online.

They're tapping into the knowledge they had from five years back when more people picked up the phone to book than completed the online booking process. The subset of phone bookings may still be the majority of bookings.

Dennis Schaal said...

Why would people want to pick up the phone to make a booking? For a deallllllll. I'd do it. The hotel industry was never crazy about the clout of and and still isn't. But, when the industry needs to unload some rooms that otherwise would go empty, the lodging industry turns to Hotwire and Priceline to put heads in beds. Obviously, plenty of properties are participating in, too. There must be some value there, no?

Adam Kirby, Associate Editor of HOTELS magazine said...

Sorry, I'm just not buying the idea that there's going to be a big market going forward of people willing to pick up the phone and haggle over rates, especially with a third-party site. There's a reason why online booking has grown in market share year after year, and it's ease of use. As a Millennial consumer myself, this concept does not click with me at all.

And from hoteliers standpoint: If they really want to compete on price without lowering published rates, they should take a page out of what Graves World is doing and let consumers place opaque bids on their own site. ( Keep the bookings in house while also keeping the bookings online. Win-win.

Anonymous said...

To the point re: people being willing to pick up the phone for a deal, I think that average OTA consumers are completely jaded to the "online pricing" message and agree they would be willing to pick up the phone. To them the OTA model is old hat and they have watched Expedia, Orbitz, Travelocity, etc. struggle to truly offer significant value one versus another & rarely succeed.

These consumers have experienced first hand the lack of impact those OTAs have had within their pricing frame of reference & now actually don't believe savings and/or any additional value can be extracted by booking OTA versus other channels. These consumers who have really only ever known OTAs as their main source for travel content see booking online as the standard... any idiot who can turn on a computer & type a URL can access these tools, but everyone shouldn't be able to get THE cheapest rates. Cheap = scarce, so they inherently assume that additional effort and/or action must be taken to achieve something better - like a reduced rate.

And take into consideration how much time we all waste when not using a metasearch (and even when using one), we have to be SURE we are getting the very best rate. Quantity of available information has actually caused us to waste more time than save it, so we spend hours searching from site to site looking for a deal, since again none of the large OTAs can differentiate based on price in any significant way. I think people are tired of seeing the same rates fed through multiple sites with different faces.

In my mind, the appeal of the model is the fact that it is the equivalent of saying "Let me talk to your manager."

A website is not a decision maker & doesn't offer you a different price from Jo-Shmo next door because you pulled some strings or talked to the right person. This model subconsciously offers customers that value of a 'negotiated, rare rate' because of the strings they pulled, and frankly I think the value a consumer sees in that is currently being underestimated.

I think this model will be interesting to watch... let's see what these 'kiddos' can do. If nothing else, it will be entertaining.

Anonymous said...

Consumers don't associate OTAs with true value as much as they used to... any idiot can turn on a computer and type in a URL, so why would they ever feel as though they are truly getting a "good" deal in comparison to the rest of the world? Good is relative, even if everyone is paying just $2/night. If $2 is the rate I see appear on Expedia and all other OTAs, I automatically know I am paying the highest possible price at that point, and thus I feel indifferent or negative about the price I paid, even if it is only $2. Yet if you show me that all online sites are publishing $2, and instead of wasting my time searching all over the place for the one OTA priced at $1.99, I can call and get a rate of $1.79? Bet your hotelier behind I'm calling.

I think consumers would subconsciously expect to have to take some additional action for something perceived as more valuable than what is accessible to every average Jo Shmo, and they would be more than willing to take that action to get something better than what the OTA offers, such as a reduced rate. Cheap = scarce. People are willing to do more for that which they value & which is scarce.

The model is the equivalent of "Let me talk to your manager." They empower you in the exact same way, yet ensure you will get exactly what you want every time you "speak" with the "manager." Automatically happy customers on every single call. Customer service ratings for this company will be exceptionally high, an accollade no OTA has ever ventured into the same universe as, not to mention this call center is located in Dallas - not overseas. This customer service aspect may very well build this company's foundation for long-term loyalty & success.

Anonymous said...

There is great value with's unique unpublished rate model.

First, it is a new innovative way to book that will get consumers excited about booking hotels.

Second, it will attract a huge audience of consumers that are sitting on the sidelines waiting for a great value and reason to book that are currently not booking. is investing millions of dollars in promoting the site and the new way to book. By being on the site, it is massive free publicity for the hotel. The hotel controls the inventory. When a hotel needs more business they simply add inventory to the unpublished program which they can take out anytime. is being promoted now on many online sites, satellite radio,major newspapers and will soon begin a lage television campaign. This all means free exposure for those hotels that participate.

Third, there are no costs or fees to participate. Hotels can participate in the published channel and have the additional option of participating in the unpublished channel. What better time than now to find these new distribution channels that are likely to be huge in the near future.

Fourth, many hotels have had great success with opaque models especially during weak periods. This new model will bring hotels a new opaque channel to move inventory while hiding the rate. The rates are not published online and only offered to registered members that pick up the phone and call for the rate. It does require extra steps for the consumer and is certainly not for everyone but as other opaque models have proved, there is a large market of consumers that are willing to take extra steps to obtain value. This is a great way to attract leisure travelers that are very expensive to market to.
Regarding acceptance and understanding of the program, if consumers do not understand initially, they certainly will with the large PR and advertising campaign that is getting undeway. This will be a major channel of distribution that hotels should not miss.

Anonymous said...

There is great potential with this new model.

1. will create great excitement with their new model and get leisure consumers excited about travel.

2. Even if consumers do not fully understand the program now, they will with's massive PR and advertising campaign across online, newspaper, radio and tv. will likey be a household name in the near future and a huge channel of distribution.

3. Other opaque channels have proven that consumers will take extra steps to obtain value. Although's unpublished program is not for every one - it will likely attract a very large consumer audience that will become registered members of and pick up the phone to obtain the rate. Yes, many people will not pick up the phone or bother to register, but this channel can attract enough of an audience to fill your hotel and at no cost. There are no fees or costs to participate. It is even better. Since limits the number of hotels per market - you will not get pushed to the 12th page of the site but all participating hotels receive great placement on the site and great exposure through their extensive marketing campaign. This channel allows a hotel to hide the rate and attract a different market of consumers to their property.

4. In today's market - let's welcome a creative new way to book hotels and attract more business, especially at no cost.

Anonymous said...

This isnt a new service - LateRooms have been doing this for years in the UK and screwing the hotels by offering a take it or leave it approach.

Dennis Schaal said...

I really don't know anything about LateRooms so I don't know what you mean about its "take it or leave it approach." Can you explain? Here below is what LateRooms says about online and phone bookings (I don't see anything about over-the-phone opaque pricing/discounts.

Why should I book my hotel through

We work completely independently from any hotel groups; so we work with all types of accommodation providers – from hotels and apartments to B&B’s and guest houses. We have over 22, 000 properties at your fingertips so you can compare the best rates and availability easily. Bookings are entirely flexible – you can book up to a whole year in advance or up to the minute of your stay. Bookings can be made online 24 hours a day, or if you’d prefer to talk to someone, over the telephone between the hours of 08:00 and 22:00 Monday to Friday and 08:00 to 20:00 Saturday and Sunday (GMT).

Anonymous said...

They push low value telephone deals on to the smaller hotels with a take it or leave it approach. They will sell a room at £40 even if the hotel wants £50 minimum. They are also renowned for holding back payment to the smaller hotels - a massive cashflow issue for the hotels when they pay the hotels four months after the guest's stay.

Patrick Landman - Xotels said...

Lets be realistic, there guys know what they are doing. They have done it before and they will do it again.

And lets be honest no one is screwing hotels. You can choose to join or not. And if you have empty rooms why not...

If you haven't invested enough in direct sales you will need 3rd party distributors who invest in marketing and distribution to sell your rooms.

The discounted rates are based on flexible availability by the way. The hotel decides when... That's good no? You control...

Anonymous said...

Several Travel Companies including hotelliers have been selling WildCard rates. Example The customer pays 99$ a night for a Club Med and only finds out 7 days prior departure in which Club Med he is staying.

Don Jenkins said...

Not unless your Choice Hotels. They just got screwed by Expedia and This means that the big players are controlling the fate of some travelers.