Charlotte Fincham, Partner Manager for Hotels at Upgrade Pack considers how independent hotels can explore some cost efficient ways to increase direct bookings, and the role of evolving technology.
Technology is a significant budget spend, for any hotel. For independents in particular, technology investment – from distribution through to digitalising In-hotel experiences – can be perplexing when balancing priorities.
Recent research by Expedia found that chain hotels are nearly twice as likely as independents to prioritise technology spend, whereas independent properties are 1.5 times more likely to prioritise room renovations.
But while the costs involved in investing in technology may not be an area of common ground for hotels at each end of the proverbial size scale, a desire to increase revenue from direct bookings will always be common to both the independent and chain property.
A number of large hotel groups are actively, aggressively even, tightening up on their distribution models, to drive more direct bookings. For instance, IHG has invested in software that actively manages which discounts are seen in various sites and apps, as well as software that monitors and benchmarks their rates across direct, OTA and other channels. Marriott on the other hand has invested significantly in relaunching its loyalty program and even tied up with ecommerce giant Alibaba in a joint venture in China.
With independents less predisposed to technology investment, and often without the budget and resources of their chain counterparts, we consider four things that independent hotels may want to weigh up when seeking to increase direct bookings;
- Should we ‘speculate to accumulate’? – It’s fair to say that most advice for independent hotels will still involve some kind of upfront spend. As customer booking habits evolve, flexing your distribution channels to maximise direct booking potential while optimising new ‘distribution trends’ can become a job in itself. And often with little guarantee that investment in the ‘new’ will generate the desired revenue return. With options aplenty, from metasearch to spending on a specific marketing campaign, it’s worth exploring what models, or platforms, are available that don’t involve upfront or annual fees, or even paying a commission.
- Should you join, or start a loyalty program? – Joining a third-party loyalty program can certainly increase your audience reach, and drive direct bookings and engagement from potential new customers. However such memberships can be expensive initial investments, and if they’re not driving incremental value, can risk diluting your brand. While these can achieve a goal of increased direct bookings, is the customer profile suited to your hotel? If you are a hotel that’s geared towards leisure stays but find through the program that it’s mainly business travellers interested in ‘earning and burning’ their loyalty points courtesy of your hotel, then it may not be the most profitable partnership, or give access to your ideal kind of guest. Creating your own loyalty program may mitigate this but requires time and resources to manage. It’s also likely to cost in terms of incentivising or rewarding members that may still be relatively low frequency guests with your high value premium inventory.
- What can we learn from other sectors? – Could what’s being done in other sectors offer an example or useful information? It may not seem a natural comparison, but over the last year banks have opened up their technology to allow customer access to relevant offerings and increase choice. While this has aligned with changes in the regulatory landscape the key intent is for customers to ‘get more benefits’ from their interaction with their banks. Regulation aside, there are similar patterns in the hotel industry, with some channel managers integrating new third-party apps and software to enhance the guest experience. Being aware of the increasing number of additional apps a guest can download, from in room temperature controls, to concierge connections, and how these may work for your market share of potential guests, is something independent hotels should be aware of and explore.
- What else can a technology solution give me? – Any investment, certainly in technology and distribution channels should come with the question “What else can it give us beyond a platform and a route to a given audience?” Independent hotels should expect technology providers to give them a compelling case for any investment, and increasingly this means access to valuable and insightful data beyond pure performance metrics. Data needs to empower not just the platform providers, but hotel management and staff too. The application of insights should help them make informed long term decisions as well as critically help optimise revenue over volume. With our platform for upgrades we make it clear to hotel partners that, along with our closed user marketplace not only do they access a customer base that highly values, and is prepared to pay, for upgrades, but they also get access to data that helps them understand guests’ booking habits. This can be anything from what triggers that converted booking upgrade to other motivators that can aid future segmentation. For independents competing with larger hotels that already benefit from more aggregated data the “what else?” question is something they should increasingly require providers to bring to the table when considering any technology solutions.