Five trending hotel news stories and Duetto’s Take on how they will impact your hotel Revenue Strategy.
1. A roadmap to prospering during a downturn
Are you prepared for an impending downturn in the hotel industry? When the business begins to turn south, revenue strategists as well as owners and GMs need to have proven plans in place to minimize the effects of a softer economic climate.
What you don’t want to do, according to an article in Hotel Management Magazine, is engage in a race to the bottom by cutting rates and relying on alternative distribution channels to maintain occupancy at the expense of revenues. In previous recessions, these strategies did little to improve hotel demand. Hotels can hardly afford to make the same mistakes in the next downturn, as they face a far more complex and prolific distribution landscape.
Duetto’s take: The recommended prescription from Lee Pillsbury and Patrick Bosworth is simple: Focus on your hotel’s RevPAR Index as a metric to help steal share from competitors. As the experts note, “Even small gains in RevPAR Index have significant multiplier effects on net operating income, meaning a hotel’s profits can still grow when the market’s revenues are shrinking.”
The way to accomplish these strategies is through effective use of data to gain the assurance necessary to make the right pricing decisions at the right time. More on harnessing Big Data to better understand your demand here. In summary, the most important thing hotels gain from having bigger and better data is the confidence to capitalize on competitors’ mistakes, such as holding rates steady when every other hotel is slashing prices too quickly or yielding rates up when your comp set is too hesitant.
2. Big Data is ultimate key to building hotel loyalty
It's effective usage of Big Data, not throwing points and perks at travelers, that is the ultimate key to building loyalty in the hotel business, according to Dale Nix, Hospitality Consultant at Avenue9, part of the JLL Group. His premise: Points, perks and even discounted rates are ephemeral and don't create an "emotive response to a brand."
Some hotel companies are offering experiential awards as well as free hotel stays to create responses that build loyalty. That’s a start, he says, but hotel marketers also need to leverage the vast amounts of data they collect from guests — especially frequent customers — to create actionable steps that add value to guest experiences and, by extension, buy their long-term loyalty.
Duetto’s take: So true. The big hotel brands are starting to make loyalty much more enticing by offering discounted rates. It’s time for small brands and independents to do the same and, with the right technology, more nimble hotels can offer personalized pricing flexible by customer worth.
But, as the author says, you’re not going to discount your way to true loyalty. Using guest data to personalize a stay — check-in prior to arrival, a seamless front-desk experience, on-site concierge messaging, post-stay follow-up and online reputation management — are all essential to making guests feel appreciated and eager to return.
3. Quantifying the profitability of direct bookings
Intuition tells us direct hotel bookings are more profitable for owners and operators. Now we seem to have the data to back up that notion: According to a Kalibri Labs analysis, direct brand.com reservations are 9% more profitable than bookings generated via OTAs.
There are other benefits to direct booking. When factoring in ancillary spend, that profitability jumps to 18%. Also, customers who book directly can more easily be converted to loyal guests, further reducing customer acquisition costs.
Duetto’s take: Research from Kalibri Labs to follow 2012’s Distribution Channel Analysis report has been a long time coming. This early leak is helping build anticipation for what should be an eye-opening look at the true cost per acquisition of hotel guests.
With more ways to capture guest eyeballs — namely through Google, Facebook and TripAdvisor, among others — an accurate breakdown of marketing and distribution costs by channel is critical for operating a hotel. More data from Kalibri will help you compare your hotels’ costs to industry averages. More research will be presented July 7 at the Revenue Strategy Summit in Washington, D.C.
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4. Mobile leads in last-minute hotel bookings
We all know the rising power of mobile computing, especially in hotel distribution. According to data from Mobile Strategies 360, in the first quarter smartphones accounted for 29% of hotel bookings in the United States. That domination is even greater in last-minute hotel bookings.
The research shows 60% of hotel bookings made through an OTA less than 24 hours before check-in were done through a smartphone. Desktop computers accounted for 33% of the bookings, with the remainder (7%) done on tablets.
The numbers differ considerably for last-minute bookings done though hotel company websites (not including apps). Three in 10 last-minute hotel-direct bookings were made through a smartphone, with desktop (59%) and tablet (11%) accounting for the rest.
Duetto’s take: There is a major and growing opportunity for hotels to fill last-minute inventory with leisure travelers looking for a hotel room tonight. But we’d caution against looking at those opportunities as discount channels.
By analyzing booking patterns, you might find that many of these guests were not waiting until the last minute just to get a cheaper rate, but instead are impulse travelers or business travelers planning last-minute trips. Take control of these segments by holding rate, even driving rate growth in certain cases, and consider your own direct strategy that doesn’t come attached with a hefty third-party commission.
5. OTAs gaining on traditional agents in China
In 2015, about 20% of 120 million outbound Chinese travelers used an OTA to book their trips, up 7% from the year earlier, according to a Skift article. And while OTAs grow as a force in the Chinese travel market, it's traditional land-based travel agents that still control the bulk of the business.
The country has more than 27,000 brick-and-mortar travel agencies, a 50% increase since 2006. The travel-selling paradigm is a little different in China than elsewhere: In many cases, tour operators also sell packages and tours directly to consumers.
Duetto’s take: Several factors work against increased use of web-based booking in China. More than half of Chinese citizens don't regularly use the Internet, which is highly regulated by the government. In addition, Chinese citizens traveling abroad for the first time typically feel more confident in booking travel on a face-to-face basis.
For hotels in China, use these numbers at the negotiating table when you’re striking deals with third-party partners. For international companies looking to do business in China, understand the varying buying behaviors and set a strategy to drive the most cost-effective business.
Stay up on hotel Revenue Strategy news and discuss industry tech trends in the Hotel Revenue Strategy Leaders Group on LinkedIn.