Most in the trades industry have some pretty strong feelings when it comes to flat rate pricing, and there’s usually no gray area. Contractors that are on flat rate pricing feel like it’s the best thing since sliced bread. However, contractors that are not on flat rate pricing usually raise objections like, we’re too small, our customer base won’t stand for it, our city is too large, or too small, the techs won’t accept it, or simply, I don’t want to gouge the customer.
My objective during our time together is not to try to convince you to move to flat rate pricing, but rather to share a real life situation that recently occurred to my wife and I that might just simply shed a little extra light on the subject in a way that you might not have considered before. I actually wrote this script while sitting on an airplane heading home from a wonderful week of presenting an R&R in Maui, Hawaii. Yes, Maui is a beautiful place, as beautiful as the postcards.
The food is wonderful, the beaches, they’re outstanding, and the weather really is perfect, actually every day. However, this is not an infomercial for Hawaii. This presentation is simply another effort to provide yet one more reason why your company should at least consider going to flat rate pricing.
The story actually took place a couple of months ago. My wife and I got up at 3 a.m. to drive to Evansville, Indiana to catch a 6 a.m. flight, the first of many on our way to Hawaii. A short 24 plus hours later, we were checking in at one of the most beautiful resorts in Maui.
It was about 9 p.m. Maui time, which meant it was 2 a.m. our time. So as you might expect, we were a little bit tired and looking forward to settling in for a good night’s rest, anticipating a wonderful conference and some much needed rest and relaxation. We were greeted by a less than enthusiastic employee at check-in.
She began a much scripted process of telling us the room rate, which was actually pretty good based on the size of the conference. However, she then proceeded to inform us that there was an additional $10 charge per person for portage of our bags. Now keep in mind, my wife had already proceeded to the room with the bellman and was totally unaware of the per person portage charge.
Guess what happened? That’s right, my wife tipped him. Now, over and above the $20 I had just paid for having the bags brought to the room. The reservation specialist then proceeded to inform me that there was also an $18 per day resort fee on top of our room rate.
I promptly asked her what it covered and was it optional? The reply was that it was not optional and it covered the use of the exercise room, internet service, which I later found out was the slow version, but for an additional $14.95 a day you could have the fast version, and it covered self-parking. Now I’m sure you’re way ahead of me. Yes, I’m thinking, why don’t they just add these fees into the room rate and provide a flat rate for the room? At that point I was a bit irritated to say the least.
Then, then she proceeded to tell me there was also a $3 housekeeping gratuity per day for the maid service. Again, it was not optional. If all that were not enough to get us off on the wrong foot, her next statement was, oh, by the way, Mr. Grandy, that non-smoking king bedroom you requested six months ago, guess what? It’s not available.
We’ve assigned you to a non-smoking room with two double beds for the week. Now you can imagine what was going through my mind as I anticipated a week in paradise with my wife in one bed and myself in the other. I expressed my unhappiness with dignity, but forcefully, all to no avail.
The final request from the desk clerk was that my wife and I both sign for the room. I had no idea why, nor did she. It was simply the policy.
It’s now 10 p.m. Hawaii time and we’ve been up for 24 plus hours. My wife and I literally dropped our bags in the room and decided to take a quiet, find a quiet place to sit down for a few minutes, have a refreshing Hawaii drink, and then go to bed. After a long hike, we found what happened to be the only remaining open bar around 10 p.m. We ordered two drinks, and as you might have imagined, we discussed our less than enjoyable initial exposure to this beautiful resort.
Now it was time to leave and get a restful night’s sleep in our separate beds. The bill for the drinks was $25 plus tax, and of course, the ever expected tip. Now what a great way to end the day.
After I got into bed, I grumbled and tossed and turned seemingly for hours. Why? Perhaps it was because of the five hour time change. Maybe it was the fact that we’d been up for well over 24 hours.
But mostly because of the multiple unexpected charges we were told of at the front desk. I kept asking myself over and over again, why didn’t they simply bundle all these miscellaneous costs together into one easy to understand room rate? The facility really was beautiful. The other people connected with the hotel were wonderful.
The food was great. The view, breathtaking. And in short, it was a perfect place to work for a couple of days, and then relax for a few more days.
Why did they have to spoil the beginning with all those nitpicky costs? In your terms and mine, why weren’t they on flat rate pricing for the room that included all, yes all the costs we were being forced to pay anyway? Then it hit me. What a great way to introduce my program on collections the next day at the conference. I could begin the presentation by explaining how a customer is presented the pricing is just as important, if not more important than the price itself.
Morning came. I got a pad and pencil and began to put thoughts on paper. To ensure what I was presenting was factual, I called the front desk to determine a couple more details just to be sure I’d not misunderstood the evening before.
I found that all the costs were correct, and we also found out they have 780 rooms, and the average stay was with two adults for a week. Out came the calculator. Conference room rate, which is usually $450 a night, was only $208.
Great deal. Add on top of that the resort fee, $18 a night. We add to that a portage fee, now that’s $20 divided by 7 nights, so that’s $2.86 per night, and then we add in the housekeeping gratuity of $3 a night.
That makes my total all inclusive room rate $231.86 per night. Why not simply charge me $235 a night and include it all? Then another thought hit me. What would have made my wife and I customer cheerleaders the night before? I walked out on the patio of our room while my wife was sipping coffee and watching the ocean with all the lush vegetation around us.
Wow, what a view. I said, Dora, what could the resort have thrown in with the room that would have made you a very happy camper, as opposed to our actual experience the night before? The conversation quickly came up with several wonderful ideas. Number one, it’s pretty obvious, combine the cost.
Combining the room rate, the portage fee, the resort fee, the maid gratuity, all into one room rate was pretty much a given. Now let’s add something else. Daily water in the room.
There was one medium sized bottle of spring water in the room available for $6. Why not provide two bottles of water every day, free? On the way to the hotel the night before, we’d stopped and we bought a case of water for about $7. That’s 24 bottles.
The cost of providing two bottles of really great water, whatever that is, could not possibly exceed $1 a bottle. Remember, the hotel is purchasing water for 780 rooms. Free water each day would cost the hotel perhaps $2 a day.
Third idea, two free drinks. As I mentioned earlier, the two drinks in the lounge area the night before was $25 plus. Hotel costs probably $5 at max.
Number four, spa certificate. When this resort was built it was literally, literally recognized as one of the top spas in the world. Doris suggested the hotel include a $75 gift certificate free of charge that could be used anytime during our week.
What a great idea. Hey, we were sitting there dreaming of the perfect day, so let’s create the package that we wanted it to be. Now there’s a unique idea.
What if the company provided what the customer wanted? Are you beginning to get the point? So let’s dream a little bit more. Two free breakfast buffets. This place had one of the most beautiful, best buffets we had ever had.
It was outstanding. It was outside, overlooking the Pacific Ocean, and the food was wonderful, especially the fresh Maui gold pineapples. The service, it was outstanding.
The waiter even provided fresh silverware and napkins each time we left to visit the buffet. Yes, it was expensive. It was $28 per person, plus tax and tip.
Altogether, breakfast for two was about $65. The idea? Why not throw in two free breakfast buffets with the room that could be used anytime during our stay? That would do a lot in terms of creating customer cheerleaders. It wouldn’t be a big deal for the hotel from their standpoint.
The hotel cost would probably be around maybe $20. And lastly, two free Hawaiian drinks. Most guests arrive late at night because of the time change and the flight schedules.
One last perk would be two free drinks that could be redeemed anytime during the week. Cost for the hotel from their perspective? Eh, maybe $5. Now let’s do some quick math from a flat rate pricing perspective.
The hotel’s cost for the above items would look something like this. Our room rate, $208 per night. Portage fee, remember that was $20 to buy it by seven days, so that’s another $2.95 per day.
We have the resort fee, that was $18 a day. We have the housekeeping fee, that was $3 a day. Then we got our two bottles of water in the room each day at a cost of about $2 a day.
Now let’s throw in the two free breakfast buffets, one day only, at a hotel cost of about $20. We divide that by seven days, that’s another $2.85 a day. Now let’s have the spa gift certificate of $75 during our week’s stay.
If the cost of the hotel was probably a lot less than that, but hey, they gotta pay the staff, so let’s take the full $75 and divide it by seven days, that’s another $10.71 per day. Now we got the two complimentary drinks at the bar anytime. Hotel cost, $5 divided by seven days, that’s another $0.71 a day.
Now let’s add in some extra profit per day. Let’s throw in another $11.88. That makes a nice round flat rate for the room of $260 per day with everything included.