A Tale of Two Hotels
Once upon a time, there were two hotels confronted with a crisis. Hotel A was doing great business until the pandemic hit. Suddenly, they were losing customers and losing money. They chose to furlough their employees down to a mere three employees for a hotel of over 300 rooms.
Eventually, the customers came back and the hotel had to hire new people and train them. Some of the new people quit during training or shortly after training. Eventually the hotel had 20 employees but the vast majority of them were new and did not know much, let alone each other. Only three employees had experience in how the hotel ran.
The customers noticed and the hotel had bad reviews. Yes, many customers had returned but the hotel was still losing money. The hotel had a choice: raise rates to cover costs, or lower rates to encourage more customers to stay. This is a very bad scenario and is a lose-lose situation. This hotel does have an exit to this problem but it will not come from within the hotel.
The other hotel, Hotel B, had a different approach to the pandemic. They knew if they treated their employees right, the employees would treat the customers right. As fewer customers arrived, the hotel reduced the hours of their employees to the point each employee was working one hour a week, coming into work, playing Candy Crush on their phone for an hour and going home.
Eventually, the customers came back and all the manager had to ask employees: “can I add back hours to your schedule?” and every employee said “yes”. They had no need to hire or train anyone The hotel would soon be fully operational and fully employed. All the employees knew each other and the processes of the hotel. The customers loved it. They did not care if the AAA rate was not available for this is the hotel they wanted to stay at.
This hotel had another problem, it kept selling out of rooms. Eventually, the franchiser of the hotel, Carrot Corporation, called the hotel manager and said, ”You need to raise the room rates”. The general manager responded, “But we will lose customers”. But the Corporation was clear “Yes, you will lose some customers but you have too many customers chasing too few rooms. You want to have the customers who are willing to pay the most, so raise your rates, and you will earn more money by doing so. Your employees are working overtime and being paid time and a half which is expensive ”. So the room rates went up, and most customers did not care.
The Carrot Corporation, the franchiser, receives customer complaints. Hotel B’s customers complain and say: “This is highway robbery! You’re price gouging! Your prices are outrageous!” The Carrot employee responds ”well sir, there is this Hotel A across the street for $100 less. I can book it for you right now.” The customer responds, ” Oh really? I will take it.”. So with a confirmation number for Hotel A, the customer is on his way.
But, you will say: aren't they turning away business to another company? No, because Hotel A is also a franchised hotel of Carrot Corporation. What Carrot company has done is balanced out their customers' desires. Those who are quality-sensitive go to Hotel B and those who are price-sensitive go to Hotel A. You get what you pay for.