In 2015, many hotels focused on introducing new technology, investing in new property layouts, and driving revenue through increasing direct bookings, says Rupert Naylor, Senior Vice President Applied Predictive Technologies.
Each of these will remain priorities in the upcoming year, as hotels leverage new technologies to personalise the guest experience and continue to adapt their properties to reflect evolving traveler preferences in the face of intensified competition.
Additionally, in 2016 hoteliers will craft new strategies related to revenue management and rewards programmes to remain competitive and increase guest loyalty.
1. Rewarding loyal guests for booking direct
The hospitality industry has historically been ahead of the pack in terms of establishing loyalty programmes and collecting customer data, but ensuring that rewards programmes drive value for both members and hoteliers is an ongoing and evolving effort. A compelling rewards programme can help drive true loyalty, and, importantly, direct bookings, especially in an environment where travelers have a growing number of lodging options. With so many different levers to pull such as various promotional offers, points structure, soft benefits, marketing messaging/channel, and more, hotel executives are trying new ideas to innovate within their loyalty programmes. For instance, Starwood recently launched SPG Keyless app for Apple watch in the U.K., which equips its Preferred Guest members with keyless entry, while Ritz Carlton and Marriott have offered accelerated loyalty status promotions.
However, as hotel companies seek to perfect their loyalty programmes, they should find the middle ground between satisfying their members with benefits and offers that resonate, while also ensuring that these programmes drive overall financial value. Top ranked loyalty programmes may not truly be the best if they are grounded in offers and rewards that subsidise bookings that would have occurred anyway. Trialing specific promotions or benefits with a subset of the guest base can help hotels avoid these unprofitable offers. Such experimentation can not only inform which programmes drive incremental revenue, but can also reveal which types of customers (e.g., those with high travel spending) respond favorably.
2. Exploring new approaches to price optimisation
Dynamically identifying optimal room rates is increasingly critical as players like Airbnb and TripAdvisor grow their share and sophistication and OTAs expand, leading to heightened price transparency. In fact, Airbnb recently implemented a ‘Smart Pricing’ revenue management system to enable their hosts to price listings to best reflect market demand. Amidst these factors, hotels have a heightened focus on improving their dynamic pricing strategies to ensure that their listings are competitive. In addition, a growing number of hotel companies are offering revenue management services to their franchisees or members on a fee-for-service basis. For example, Best Western just introduced enhanced pricing resources for its members, including a phone consultation team and training programme, while NH Hotel Group recently rolled out a new revenue management tool.
There is great opportunity to fine-tune such programmes to ensure they are generating as much value as possible. For multi-faceted initiatives like Best Western’s, small-scale tests can inform which versions or formats of the programme work best. For example, one training programme may be effective at some locations, while some properties may require more frequent training. Such experiments also serve to quantify the incremental RevPAR impact of revenue management improvements, information that hoteliers can leverage to generate franchisee buy-in.
3. Asserting differentiation in crowded marketplace
The number of hotel brands in operation is growing and so is the concern that travelers simply cannot tell them apart. Many leading hotels continue to introduce new brands to the U.K., particularly boutique-style locations, such as Marriott’s expansion of its AC Hotel brand and Best Western’s introduction of new brands including BW Premier Collection, Glo, and ViB. As hotels leverage differentiated brands to appeal to a full array of guest segments, they are also challenged to maintain a degree of consistency. Maintaining this balance is especially top of mind for companies like Marriott or Accor that are currently in the midst of integration after recent acquisitions of Starwood and Fairmont Raffles, respectively.
In an industry of brand proliferation and consolidation, marketing and real estate strategy are critical. Hoteliers should craft marketing messaging that will retain engagement among loyal guests and facilitate brand cross-promotion, while finding opportunities to rationalise marketing spend across brands. Perhaps even more importantly, hoteliers need a rigorous analytic process in place to identify the best new site locations, taking into account potential cannibalisation effects on the existing network, integrating information regarding the consumer spending at around a potential new location. By leveraging local consumer spending insights, hoteliers can also identify which of their brands will perform best in a potential new site.
4. Adapting to the evolving lodging landscape
While many hotel executives do not recognise Airbnb and similar rental offerings as an imminent threat to their business, the rise of the sharing economy is undoubtedly shaping the hospitality industry. Although such players still have a small share of the lodging market, their success reflects shifting traveler preference that hotels will need to keep pace with to continue to best serve guests. In particular, consumers are increasingly seeking both an authentic and hassle-free experience when traveling, via unique accommodations and a sleek, effortless booking process. In light of this trend, digital initiatives and revamping room layouts have been strategic focal points for many hotels: Accor recently made heavy investments in digital capabilities, while Holiday Inn Europe is undergoing a rebrand, redesigning rooms to include elements such as a “flexible work and rest corner.” Some hotels, including Hyatt and Wyndham have even invested in U.K. rental companies that are similar to Airbnb: onefinestay and LoveHomeSwap.
As hotels continue to innovate, they should be careful to consider both the direct (capital and implementation expenditures) and indirect costs of these new initiatives. For instance, while mobile check-in or redesigned room may resonate with certain types of guests (e.g., millennials), others may prefer the personal interaction of standard check-in or a traditional room setup. In some cases, new initiatives may deter bookings from previously loyal guests, but this effect is nearly impossible to measure without trying programmes in-market with a small group. By first understanding which locations or guest segments react positively to these changes, hoteliers can ensure that these programmes are only implemented for the customers or locations where they will be profitable.
5. Increasing customisation from booking to check-out
Luxury hotels have traditionally been the primary players focused on ultra-customisation of the guest experience. Yet, personalisation is becoming table stakes across the industry as hotels strive to target a “segment of one” throughout the guest cycle. From tailored marketing and promotional offers to technologies that enable guests to input their pillow and newspaper preferences, hotels are aiming to provide an end-to-end experience that is unique to each guest. New technologies are making it cheaper and more feasible to achieve this goal. For instance, Hub by Premier Inn’s mobile app enables guests to completely tailor their experience, from adjusting the room lighting to planning nearby excursions. Macdonald Hotels & Resorts recently made a substantial investment in digital technology to improve the guest experience, including self-check-in capabilities and an app that will alert guests of on-site spa and restaurant availability. Leveraging such technologies to understand guest stay preferences also equips hotels to customise marketing and promotions down to the icons in emails or the version of the website displayed.
However, when striving for ultimate customisation, hotels should be cautious, especially when offering promotions. For instance, offering a “third night free” promotion for a guest that usually books longer term stays or a discounted gym pass to a health-conscious guest may simply erode profits. Customer-level tests can help distinguish the programmes that will drive truly incremental RevPAR from those that are likely to simply discount existing booking or purchasing behavior.
2016 will be all about the guest, as hotels focus on driving loyalty through personalisation and compelling rewards, hotel and room layouts that reflect guest lifestyle, and rigorous systems to maintain competitive pricing. Executives who are able to capitalise on these trends will hold a distinct competitive advantage in the coming year. By testing each new initiative, leaders can accurately predict which programmes will work, where they will work best, and how they can be tailored for maximum impact, all with minimum risk.
Rupert Naylor, Senior Vice President, United Kingdom, Applied Predictive Technologies, is in charge of the European operations of APT. Prior to joining APT, Mr. Naylor spent many years at Bain & Company, working in London, Mumbai, Paris and San Francisco. In his early career, he spent several years in Japan working in banking for Merrill Lynch and with telecom companies. Mr. Naylor started his career in the UK Government, including a position at the Embassy in Tokyo. Mr. Naylor was educated at Oxford and is a Sloan Fellow from London Business School.