Five trending hotel news stories and Duetto’s Take on how they will impact your hotel Revenue Strategy.
1. Chain CEOs are giddy over direct-booking efforts
Another week, another handful of global hotel chains announced discounts for loyalty members to spur direct bookings. Over the past few months, Hilton, Marriott, Hyatt, IHG and Choice have all gone public with strategies to blunt the increasing market share being taken by OTAs.
A roundup of comments CEOs made during first-quarter conference calls on Hotel News Now shows early success from the initiatives. Speaking from an owner’s perspective, an executive of RLJ Lodging Trust said, “In New York City we have seen positive impact [of Hilton’s new lower rate for loyalty program members]. We’ve seen a savings in commissions, a reduction in OTA bookings and displacement of them with direct bookings through the brand channels."
During his company’s call with stock analysts, Choice Hotels’ CEO Steve Joyce hinted the chain will launch a marketing campaign to promote direct booking through its Choice Privileges program. But it was CFO Dave White who was most forceful in his indictment of the OTAs. “While we’re certainly welcoming the other OTAs as a channel to utilize, we are not happy with the price points that they want. And so you’re going to continue to see us try to drive business to our channels,” he said.
Hyatt Hotels’ chain-wide initiative to offer discounted rates to members of its Gold Passport frequency program is only a month old, but CEO Mark Hoplamazian says the company has seen good results from a year-long test in eight hotels. “If we look back over the eight markets that we had tested, we had a very significant increase in Gold Passport member signups,” he said. “So engagement levels were really high. Signups were up over 100% year-over-year in the markets that we were testing.”
Duetto’s take: To a man, the CEOs of major hotel brand and ownership companies are excited about the game-changing potential of new direct-booking initiatives. But initial efforts are simply scratching the surface of the dynamic and profitable pricing these programs can afford.
Hyatt’s program appears the smartest. The member discount rate is “actually a yieldable rate,” CEO Mark Hoplamazian said. “That is, it’s a manageable rate by the hotels. So they’re not required to sell the member discount rate at any given point in time. And the level of discount that they apply is actually in their hands.”
The brand’s program resembles the beginnings of an Open Pricing model. Yielding the loyalty discount based on overall demand is a good first step, and Open Pricing’s benefit to hotels is the ability to flex discounts by segment and create varying offers that reflect a guest’s level of loyalty and total worth to the hotel.
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2. TripAdvisor wants a piece of hotel direct-booking rates
Following the hotel chain announcements, TripAdvisor is now hoping suppliers allow it to offer the discounted room rates to its users. Skift author Dennis Schaal believes it won’t happen, however, saying, "The whole point of hotels offering lower rates for loyalty program members is they want guests to booking directly on their own websites and not through an intermediary such as TripAdvisor or Expedia, for example."
Duetto’s take: Of course, part of brands’ recent initiatives is to create tighter bonds with their most loyal customers. Still, it wouldn’t surprise us to see hotels and metasearch sites find a model that could work for displaying loyalty rates on third-party sites. It will be important for brands to receive the traffic and own the guest data, which they could pay for on a cost-per-click basis.
Metasearch sites have been making a strong push toward direct bookings since late last year, when TripAdvisor launched its Instant Booking initiative, Trivago launched direct hotel bookings on its site and app, and Google debuted its Book on Google platform.
3. Booking platforms create angst for business travelers
Most corporate business travelers (74%) say they are willing to use one corporate platform to book their travel. But in reality, just 34% use a single channel, instead opting for multiple distribution platforms to complete their travel plans, according to a new survey discussed in Business Travel News.
Many of these corporate travelers are using supplier websites to book travel, with 49% saying they do so because of the convenience these sites offer. About one-third cited a wider choice of travel content, and 14% named lower costs.
Duetto’s take: Corporate business is a critical channel for hotels and one reason why we don’t see the GDS going away any time soon. Businesses that utilize a booking platform offering the same convenience, user experience and choice of options that consumer-based services do will be successful in getting their employees to adopt it. As always, revenue strategists must weigh each of these channels and determine the best ones for their unique corporate demand needs.
4. Disney massages its revenue management tactics
Last year, Disney announced a variable pricing initiative for its parks division. And while the company had a shaky second quarter—mostly due to divisions outside of parks and resorts—executives told the Orlando Sentinel they plan to continue to refine Disney’s version of Revenue Strategy.
CEO Bob Iger told analysts during a conference call, “We like the steps we’ve taken in terms of pricing. We’ve taken a number of steps … to essentially grow revenue, in some cases actually at the expense of some attendance.”
Duetto’s take: Revenue Strategy and dynamic pricing in general are working their way into companies across many business sectors. At Disney, the strategy seems to be working: The company’s theme parks generated $3.9 billion in revenue, and divisional operating income increased 10% to $624 million. Per-guest spending at the domestic theme parks jumped 8%. Per-room spending at hotels increased 5% even though hotel occupancy declined 1 percentage point to 88%.
5. Marriott, Facebook partner on Dynamic Ads product
Marriott International and metasearch site Trivago became the first travel sector companies to sign up for Facebook’s new Dynamic Ads product. The technology allows companies to track consumers’ activities as they move from site to site and follow up with pertinent messaging.
As the example in Skift shows, a consumer might browse a destination or hotel without booking or book a flight without making a corresponding hotel reservation. The hotel could target that consumer with an ad message offering a special rate or deal.
Duetto’s take: There’s no doubt that hotel marketers can glean a tremendous amount of information from web-shopping data. Not everyone searching for lodging ends up actually booking a room. The ability to monitor potential guests searching specific dates and checking prices can provide incredible insight into demand and price elasticity. Adding Facebook activity to your own website data gives you just that much more information by which you can make decisions.
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