Debate ran high at the recent Revenue Strategy Forum in London, when big brand hoteliers, independents, technology innovators and search engines came together to discuss the future of hotel distribution.
As the global markets prepare for more instability, Revenue Strategy has never been more important.
Central to debate was winning the online battlefield. For many hotels, it seems the online travel agencies have a stranglehold on the market. But is that really the case? Is the argument there that hotels could do more to raise their online game?
Another hot topic came in the form of corporate bookings versus leisure and transient guests. Hotels still discount heavily for large corporate groups, associations and events. Does this make the DMC as vilified as the OTA? What is the solution?
And what about the guest? Is there a real danger that we are actually losing sight of what matters as we focus on search engine result page rankings rather than guest satisfaction?
A Hotel Guest's Lifetime Value
Before we look at the pros and cons of the OTAs and, indeed, the DMCs, a lot of the debate at this year’s RSF centred on the guest.
Lennert de Jong, CCO of citizenM, said during the panel discussion “Merging on the Digital Highway” that, instead of focusing on the channels, or the eco-system that is required for a booking, hotels should look at the customer.
“Be happy that people choose to stay with you, no matter which channel they book through,” he said. “It is then your job to turn them into a repeat guest. We track the customer lifetime value rather than their acquisition cost.
According to Remy Merckx, vice president of marketing for The Rezidor Hotel Group, hotels need to change their mentality and get more personal with the guest.
“The customer is in front of you,” he said. “They are not face to face with Booking.com. So talk to them, ask them for information and advice, ask them about their experience.
“You need to understand the customer,” he added. “Don’t fit the customer to your product; you fit your product to the customer. The OTAs are looking at the customer.”
Fernando Vives, CCO of The NH Hotel Group, agreed. He said: “The key is to understand why consumers are coming to your hotel. The only person who knows that is the customer. You have to ask them!”
The Clout of the Online Marketplace
If great hospitality is so important, then why are so many guests using impersonal OTAs to book? Why is the travel market now more transient than ever?
According to Peter O’Connor, professor of information systems at Essec Business School, 2017 will see a 39% online market penetration in Europe. Of these, 66% of bookings will come through an OTA.
O’Connor, in his keynote address, “The Distribution Cost Conundrum: Are OTAs Actually Good Value for the Money?” argued that hotels should be replicating some of the OTAs’ strategies if they want to compete on a more level playing field with these online travel supermarkets.
O’Connor looked at the cost of driving direct bookings versus OTA costs. The OTAs have a wide reach and they are growing, but hotels can improve their own approach to digital marketing in order to get ahead.
Competition online has increased since Google dropped its right-hand-side ads earlier this year. Now, getting onto page one — whether through organic or paid search — is more difficult than ever.
In his presentation, O’Connor looked at the benefits of investing in content marketing, SEO and paid-search advertising.
However, once you have attracted a customer to your site, converting them is another challenge, O’Connor pointed out. He identified four areas upon which hotels could improve:
- Path to conversion: Make booking as easy as possible. Offer one-click bookings.
- Price: Shout from the rooftop that you have a lowest-rate guarantee. Make it easier for the customer to see you have the best value.
- Merchandising: Push the sale. “We only have 3 rooms left,” or “Someone else is looking at this right now.” Fear of missing out is a powerful marketing tool. Encourage your customer to book now.
- Up-sell: Give your customer a very good reason to book the more expensive room. Think McDonald’s and “Would you like fries with that?”
All of these can have a fabulous impact on revenue — so why aren’t more hotels doing any of this?
Opportunities in Corporate Travel
While many in the industry are waving a clenched fist in the direction of the OTAs, another business segment is also often undervaluing your room rates: the corporate sector.
Merckx from Rezidor raised the argument that, while hoteliers are quick to question the costs of OTA fees, no one questions the cost of distribution through a DMC. All too often, fixed discounts are offered on corporate bookings, without questioning if this is the right tactic for the hotel.
“We need to shift to a BAR model to take away segmentation between business and leisure travellers,” Merckx said. “We have to change our mentality, as the customer is often both leisure and business.”
It seems the overly heavy focus on corporate sales is one that could be providing a barrier to online success for many hotel groups, he said.
“Rezidor has 400 hotels in Europe, with 1,300 sales managers. Yet I have 32 people for digital marketing,” Merckx said. “That’s where the hotel industry needs to focus its efforts. To build and manage a website, conduct A/B testing, etc., costs money and time. Neither of which I have. I simply don’t have enough people to do that.”
So do hotels need to refocus away from the corporate sector? Or could a corporate BAR be the answer? With associations commanding control over thousands of hotel rooms, the bargaining power often lies with them. Hotels need to readjust the division of this power.
More Discounted Rates
The hotelier’s knee-jerk reaction to discounting is another barrier to maximising on Revenue Strategy.
“Why is it good to reduce your price over time?” questioned de Jong from citizenM. “The customer is becoming smarter. Don’t do it! Look at the New York hotel market, where 85% of hotels will take their price down three days before arrival.”
Terri Scriven, head of hospitality for the United Kingdom at Google, added: “Hotels need to optimise the profitability on the price they have. Offer a value-add to book direct with you, and provide the best guest experience.”
Hotels can’t just sell on brand and rate anymore. If they want to hold a commanding presence on the digital highway, they need to know their guest, know how they want to book, know what buttons to press to get that reservation, and then ensure that they wow the guest once they arrive on property.