22 January 2020 | BI and data analysis, Pricing strategy, Revenue management
Each hotel booking has a singular profitability profile that depends on a number of factors, including the amount of commission paid to third-party distribution channels.
Commissions paid by hotels have been increasing as OTAs spend more money on developing and marketing their platforms, pushing hotels to pursue more business through the lower-cost direct channel in an effort to preserve the profitability of each booking.
In April, Gino Engels, OTA Insight co-founder and Chief Commercial Officer, wrote an article for Hotel Executive on how hotels can drive direct bookings to increase revenue per available room (RevPAR) and mitigate rising distribution costs.
Scroll down to read a summary of Gino’s top tips to produce more direct business and increase RevPAR, or click through to Hotel Executive for the full version.
#1: Segment and personalise
Each guest segment of your hotel has different needs and expectations. To segment effectively, train staff to collect emails at check-in and to add any relevant notes on to the guest’s profile in the PMS. In addition, keep a close eye on the performance of your marketing campaigns and third-party channels.
#2: Upsells and ancillaries
Once you’ve segmented your audience, it's time to get serious about upselling. Basic segmentation should include pre-stay, arrival, and post-stay cohorts.
Advanced segmentation groups people according to shared characteristics. You can mix and match to create micro-segments to target with exclusive deals and relevant messaging.
After segmenting, creating offers, and crafting messaging, implement automation to avoid manual delays. Then revisit at regular intervals to tweak and optimise according to performance results for RevPAR.
#3: Focus on your best guests
Even those properties with loyalty programs should invest in a hotel-specific CRM with detailed guest profiles that calculates the lifetime value of each guest. Compare and contrast your highest-value guests to identify shared characteristics that guide marketing initiatives.
#4: Design packages and promotions creatively
Promotions and packages can be a wonderful draw for direct bookings. The key is to be creative while staying on-brand.
To guide your brainstorms, start with your segmentation. Look at your highest-value segments first to determine the types of promotions that appeal most. Then set up small experiments to test your messaging among specific segments.
#5: Upgrade your booking experience
Many consumers prefer shopping and booking on OTAs due to the simplicity, speed, and accuracy of the experience. To compete, hotels must invest in modern websites with rich imagery that speaks to target guest demographics, as well as a mobile-optimised booking flow.
Leading hotels also leverage chatbots as extensions to the existing customer service options, and the boldest show potential guests relevant room prices on other channels. These OTA comparison pop-ups give guests the confidence to stop shopping and make a direct booking.
#6: Develop relationships online and face-to-face
Strive to find ambitious staff and then provide the training and cultural support to help each team member become sales-orientated, without turning into a pushy salesperson.
That could mean in-person interactions at the front desk can be less transactional and more conversational, and responses to online reviews could contain information about offers and services relevant to the feedback received.
#7: Optimise your hotel’s channel mix
Direct bookings aren’t free. Even if the reservation comes without any marketing expense, there's almost always an associated cost.
The proper balance of direct, wholesale, and intermediary business gives the hotel more control and agility to respond dynamically to daily market conditions, maximizing RevPAR.
#8: Focus on rate parity
As OTAs drop rate parity clauses, hotels have more leverage to use pricing as an enticement for direct bookings. However this strategy loses some of its power when wholesale rates appear on non-contracted OTAs, as they are often lower than a hotel’s current Best Available Rate.
To avoid a hit to the profitability of bookings via that OTA, crack down on disparity by investing in tools to help you monitor and enforce rate parity across channels.
#9: Properly forecast demand
Use a pricing optimisation tool to dynamically adjust rates based on current trends and sync rates and availability across all booking channels in real-time. This will boost RevPAR by securing bookings at the highest possible rate.
#10: Exceed guest expectations
The most straightforward way to increase direct bookings is to give guests a strong reason to return. Provide a memorable experience and you are more likely to see repeat bookings.
Read the full article on Hotel Executive.
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