Hoteliers: Get that business traveler to extend her trip

by Jason Q. Freed, Managing Editor | September 06, 2016

Five trending hotel news stories and Duetto’s Take on how they will impact your hotel Revenue Strategy.

1. Business travelers will extend their visit — for an incentive

With families having trouble finding the time for old-style vacations, one option is to tag along with Mom or Dad on a business trip and then extend the stay. Apparently, lots of business travelers like that idea and are willing to extend their hotel stays, but they'd like an incentive to do so, according to new research.

About three-fourths of surveyed business travelers said they’d prolong a work-related trip for leisure if a hotel offered a discount or additional nights.

Duetto’s Take: It's up to revenue strategists and marketers to find cost-effective carrots to encourage these extended stays.

As an executive with the survey company said, “There’s tremendous potential to generate additional revenue from business travelers by encouraging them to stay for a leisure component. They’re open to the idea; the trick is creating an incentive for them to add more personal time.” 

Ensure your revenue management and marketing departments are working in coordination to come up with promotional strategies where discounts for these types of travelers are flexed based on the criteria, such as demand and total customer worth.

2. The wealthiest are also the most loyal to hotels

There are a lot of rich people in the United States, and that cohort continues to grow in size. More importantly for the hotel industry, the more money consumers have, the more likely they are strong advocates for the hotel brand(s) of their choice.

According to a recent study reported in Skift, about 60% of affluent consumers (which make up about one in 10 Americans) are loyal to a single hotel brand or a small group of brands.

Capturing loyalty of the affluent can be a difficult chore, say the researchers. As a spokesman said, “It’s very difficult to reach affluent travelers because these are people who can afford to not look at your ads. They have the money to consume media without the annoyance of advertising. They don’t spend as much time online as other people, so they’re harder to find.”

Duetto’s Take: After briefly dismissing the importance of hotel loyalty due to the costs of acquiring such customers, hoteliers are back on board with the idea. Brands are introducing more creative ways to garner loyalty, including discounting strategies and partnering with OTAs to capture guest profile information.

Of course, loyalty is a two-way street, so it's incumbent on hotel marketers and revenue managers to creatively and effectively exploit that innate loyalty. A member discount is proving to be a successful strategy, and personalized loyalty pricing – where discounts can be flexed based on demand and total customer worth – allows hotels to discount in a smarter, more profitable way.

[bctt tweet="Extended business tips mean big money + Five trending #hotelnews and #revenuestrategy articles " username="OptimizeDemand"]

3. Rate parity nears an end in Australia

Booking.com signed an agreement with the Australian government to drop its demands for rate parity by hotels that use the OTA, according to several news reports. As has happened in Europe, where this restriction has also been lifted, the end of rate parity might not have that great of an effect.

Under the agreement, hotel operators that use Booking.com can offer different rates and conditions on other OTAs and can offer lower rates or better conditions through offline channels such as telephone bookings and walk-ins. In theory, however, hotels can't offer these offline rates on its online channels.

Duetto’s Take: Staying in parity with OTAs on publicly available channels is probably wise no matter the legalities. More and more regions are looking at rate parity language as too similar to price fixing.

Of course, hoteliers have been able to skirt parity restrictions by offering discounted rates to fenced user groups, including loyalty members, for some time. Like most things, it took one hotel operator to introduce slight discounts for guest profile information, and now most brands are doing the same.  

4. The pace of room reservations continues to fall

There was some bad news and a little good news coming from TravelClick’s August 2016 North American Hospitality Review. First the good news: Committed occupancy and ADR for the fourth quarter are showing signs of growth for both group and transient travel.

Now the not-so-good news: The pace of new bookings continues to decline, with new August reservation commitments falling 2.8%. The slowdown began in June and has continued into August. In particular, there has been a deceleration in the group and weekday transient negotiated segments.

While transient bookings are up 3.5% for the next 12 months, it's the leisure segment that's driving the growth, with transient business nearly flat. Other good news: Group bookings are up 5.2% in committed room nights over the same time last year, and ADR is up 3.1%.

Duetto’s Take: The good news is that, should demand continue to drop to significantly low levels, hoteliers this time around will have a more comprehensive and readily available pricing strategy. With the future booking data available to hotels today, we should see the indicators much further in advance. Web shopping data alone — data from the booking engine that shows how many people are looking versus how many people are booking — will be extremely helpful. 

5. Loyalty program redemption rises sharply

Not only are more people joining travel loyalty programs, more of them are cashing in their points for travel, including hotel rooms. According to this study reported in Skift, points redemptions this summer for hotels and rental cars are up more than 70% year-over-year. One reason for the uptick is the general rise in travel spending: More people are traveling, so it makes sense more of them are using loyalty rewards.

A few other insights from the study:

  • About three-fourths of redemptions are made online via desktop computers. About 25% are done on the phone, reflecting the complexity of some programs and the redemption process.
  • About 30% of consumers who redeem rewards use a combination of points and cash to pay for their trips.
  • There is typically a 31-day lag from the time a traveler redeems loyalty points for a hotel purchase to his/her travel date.

Duetto’s Take: If hotel loyalty programs are commoditized, they’re not really serving guests, even if they’re successfully enrolling thousands more people.  

In this heightened competition for hotel loyalty, hotels needs to differentiate their rewards program by showing they can differentiate one guest from another. Personalized pricing and tailored rewards that resonate are the goal, not some static discount off the best available rate given to everybody.

Stay up on hotel Revenue Strategy news and discuss industry tech trends in the Hotel Revenue Strategy Leaders Group on LinkedIn.

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Jason Q. Freed, Managing Editor

Jason joined Duetto as Managing Editor in June 2015 after reporting, writing and editing hotel industry news for a decade at both print and online publications. He’s passionate about content marketing and hotel technology, which leads to unique perspectives on hotel distribution and revenue management best practices.

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