Five trending hotel news stories and Duetto’s Take on how they will impact your hotel Revenue Strategy.
1. New York lawmakers pass anti-Airbnb law
Over the weekend, as TechCrunch and other outlets reported, lawmakers in the New York State Assembly and Senate passed a bill outlawing the advertisement of short-term rentals — meaning shorter than 30 days — on Airbnb and other sharing economy sites. The legislation is closely related to a 2010 multiple-dwelling law passed in New York City, which targeted unscrupulous landlords and developers operating illegal hotels out of apartment buildings.
If Gov. Andrew Cuomo signs the bill, any New Yorker caught renting out an entire home for less than 30 days on Airbnb or other peer-to-peer lodging sites faces a fine of $1,000 for the first violation and up to $7,500 for the third. Airbnb users are still allowed to list spare bedrooms and living spaces on the site.
Airbnb estimated that as many as 31,000 people in New York would be affected by this legislation, as more than half of the site’s listing in the state are for entire homes and apartments.
Duetto’s Take: In New York, San Francisco or other cities where lawmakers are strengthening their authority to crack down on illegal hotels, local hoteliers should feel relieved. Airbnb is sure to challenge the legislation in court, so the issue is far from settled, but the playing field is certainly shifting back to level as supply from illegal hotels gets weeded out.
Interestingly, CEOs of the largest hotel brands were ambivalent about the effect of the sharing economy when asked at the recent NYU Hospitality Conference, likely in part because they were confident that illegal-hotel legislation would go their way. The sharing economy remains popular with consumers and isn’t going anywhere, however, so all hoteliers — large or small, independent or branded — need to make sure they know how to compete with a spare bedroom rented out on their block.
As Duetto CEO Patrick Bosworth has noted before, some P2P lodging sites can even be customer acquisition partners under the right circumstances, so we might see some more investments in such players like the ones from Choice Hotels and Accor Hotels. In any case, it comes down to the level of hospitality a hotel can offer a guest to turn her into a repeat customer and not drive her into the arms of an Airbnb host.
2. Has the Hotel Industry Reached ‘Peak Travel’?
That’s what one research note from PiperJaffray is suggesting, anyway.
Two analysts at the firm recently wrote that the expansion in the “share of wallet” gained by consumers’ purchases on travel has peaked. As a Skift article pointed out, the implications of this slowdown are that hotel industry RevPAR could decelerate significantly — and soon — and that OTAs would benefit at the expense of hotels.
In an environment of low-single-digit RevPAR expansion, hotels likely would be compelled to give more preferable inventory allotments to OTAs, PiperJaffray’s analysts wrote. That would certainly complicate hoteliers’ major efforts to take back share through direct bookings, which have been evident all year in marketing campaigns from Marriott, Hilton, Hyatt and the like.
Duetto’s Take: PiperJaffray’s analysts may very well be right, but hoteliers should keep in mind that even if American consumers can’t increase their spending on travel, they won’t cut it down to zero. There’s still much to be optimistic about, especially a growing global middle class and rising, travel-hungry demographic groups like millennials and affluent baby boomers.
If a slowdown in demand for travel causes some market share gains for OTAs, which happened during the previous two recessions, hotels must aggressively optimize their messaging and service to their guests to win their loyalty and repeat business on direct channels. If guests come to your hotel via an OTA, show them the same high level of hospitality you give to your loyalty members.
From a revenue management perspective, the “Peak Travel” era would make using lost-business data all the more important, so that hotels are still converting as high a percentage of web shoppers from “looking” to “booking,” even if the number of people search for a room decreases. Understanding how to leverage web shopping regrets and denials will also help hotels know when to publish targeted discounts and when to hold rates steady.
3. Shifts in Distribution Causes Hotel Website Referral Traffic to Plummet
Digital market research firm SimilarWeb’s newly released “Trends in the Online Travel Industry” report found that referral traffic to hotel websites fell more than 25% from March 2015 to March 2016. The group explains this drop by noting that online travel agencies' efforts to push for onsite bookings naturally sent fewer people to hotels' sites.
Overall traffic to the top 25 hotel and accommodation sites decreased more than 17% in those 12 months.
Direct traffic and organic-search traffic rose more than 15% and more than 19%, respectively, in part due to the popularity of sharing economy sites like Airbnb and VRBO. Of the 25 largest hotel and accommodations sites studied, Airbnb garnered the most traffic during that 12-month period.
One bright spot of growth was mobile traffic for the largest hotel and accommodation sites, which rose from about 48% in March 2015 to 54% in March 2016.
Duetto’s Take: The rise in mobile booking has been top of mind throughout the industry, and hotels don’t want to get left behind. As for the falloff in referral traffic to hotel and accommodations sites, some of that was bound to happen as more brands begin to make direct bookings the centerpiece of their marketing messages.
A diversified distribution strategy, such as the one laid out in this whitepaper, still holds true for hotels, even in this time of fragmented and diluted web traffic. Aim for as much traffic and as many conversions as possible on your direct-booking platforms, but also leave all other distribution channels open, even on the most compressed dates. The onus is then put on hotels to segment their customer base as intelligently as possible, and yield rates and offers dynamically in a way that produces the most profit.
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4. Visa: International Travel to Jump 35% by 2025
Payment processing giant Visa estimates that more than 280 million households will make at least one international trip per year by 2025. Fueled by a rising middle class in emerging markets like Russia, China or Brazil, that figure would represent a 35% increase over international-travel levels in 2015.
The company’s research also found that the average age of global travelers would skew older, leading to a healthy increase in medical and wellness tourism that could benefit destinations in the United States.
Visa predicts a concurrent boom in travel infrastructure investment during this period, as some 340 airports are expected to come online over the next 10 years.
Duetto’s Take: An overall increase in international travel is great news for hoteliers, though it would necessitate investments in revenue management to get the greatest benefit for their bottom line. New information sources, such as airlift data, can help hotels gauge incoming demand from countries that already send a significant number of guests to their markets or from countries those brands would like to target.
As Duetto’s Chris Knothe explains, a robust international-travel market has far-reaching implications for the OTA partners a hotel chooses as well. When branching out into new markets, either by opening new hotels in a foreign country or when trying to attract people from that market to properties in the U.S., an OTA with the right geographic reach makes a huge difference.
5. Could TripAdvisor Be a Takeover Target?
Investment bank Goldman Sachs pegs TripAdvisor’s chances of being acquired in the near future at 15% to 30%, according to a report in the Boston Business Journal.
Goldman noted that TripAdvisor’s stock price, which sat at $66.50 per share 10 days ago and was down significantly from its all-time high of $110 from June 2014, is the main driver of interest among possible suitors.
Skift went so far as to speculate that Priceline Group would make the ideal suitor for TripAdvisor: “Priceline’s Booking.com could provide substantial marketing and content assistance to Trip Advisor as it expands its book on TripAdvisor feature, Instant Booking, to locales around the world where Booking.com has a higher profile than TripAdvisor.”
Duetto’s Take: Even if TripAdvisor gets acquired, especially by one of the players in the OTA duopoly, the dynamics of managing distribution would change very little day to day for hotels. As the third-party distributors continue to consolidate and get bigger, they remain important partners for marketing and customer acquisition.
No doubt, bigger and bigger combinations for OTAs and metasearch players will drive further consolidation and investment among the larger hotel brands looking for the scale to compete.
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