Make Your Hotel More Profitable “Shoulder Seasons” are Sleeping Giants!
Everyone understands peak demand periods, whether it is a certain season like spring break, or prime ski season or special events. It can also be one or more days of the week, that are always stronger than others and can command higher room rates.
One best practice for many sales people and hoteliers is to monitor the high demand periods using proven revenue management strategies. This is logical and should be continued. Another tendency for those same people is to attack the off-season, spending advertising and marketing funds and efforts to attempt to draw new clients to their location. These efforts usually include major discounting and a great deal of effort that often yields very little measurable results.
The suggestion offered here is to carefully analyze your seasons or demand periods, so you can see where the peaks and valleys really are. For example, Bangalore market was experiencing very high demand six nights per week, with Sunday the off night. Creative marketers in hotels packaged meals either in their hotel or with nearby restaurants, offered options for tours that appealed to social travelers and business center programs for business travelers. Room rates might have a slight discount overall when it included a Sunday night but the concept was aimed at enhancing value, rather than promoting discounts. The same pattern followed in Goa, with the big name entertainers performing on Sundays.
Shoulder seasons in locations that have high demand can target clients that might have flexibility. Families with school age children must adhere to the school calendars and cannot adjust their plans, but singles or seniors that might be drawn to the location could have flexibility and enjoy the experience without a concentration of children. It is a matter of research, which includes your own and that of the area visitors’ bureaus or other centers. Adding demand in the shoulder period can make a huge difference in revenues.
Sundays, for example, represent 14% of the total week and gaining as few as a dozen additional guests can make a substantial contribution to top and bottom lines. Adding a certain demand before or after special events or activity can keep your staff working longer and allow you a much better opportunity of gaining measurable results. It is not being suggested to ignore the off-season, but prioritize potentials. Use packages and promote as many of your services as possible.This resource began with definitions of the words “profits” and “profitability. ” Shoulder seasons can be an enormous addition to profitability – IF people take the time to think about it more!
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One Third of World's Travel Sales to be Booked Online by 2012
By the end of 2012, travelers will book one third of the world's travel sales online, according to a new PhoCusWright report. Online leisure/unmanaged business travel bookings will grow twice as fast as the total market, to surpass US$313 billion by 2012.
PhoCusWright's Global Online Travel Overview Second Edition compares four major regions – Europe, U.S., Asia Pacific and Latin America – revealing a global travel industry still recovering from the 2009 recession, which triggered a 13% decline in global sales. PhoCusWright projects that global travel bookings will increase 6% in both 2011 and 2012, at which time the market will recover from 2009 losses.
Among the four regions studied, the U.S. and Europe represent more than three fourths of all online sales, but less than two thirds of total travel sales. As online travel bookings in the emerging markets of Asia Pacific and Latin America accelerate, combined share for Europe and the U.S. will fall to 73% in 2012 and continue to decline thereafter.
"As online penetration growth in the more mature U.S. and European travel markets slows, travel companies are looking to the Asia-Pacific and Latin America regions for the next pot of gold," says Lorraine Sileo, vice president, research. "In these emerging markets, macro-economic gains, increased travel and growing technology adoption will continue to fuel significant growth in online bookings."
Unique factors impact online travel growth in each region and market. PhoCusWright's Global Online Travel Overview Second Edition features both global and regional market sizing through 2012 for the total travel market and online leisure/unmanaged business category. Other topics include:
Global market share by region
Online travel penetration and regional growth potential
Analysis of supplier-intermediary dynamics and variation by region
Market trends for key countries in each region
Despite cultural and technological challenges, more and more consumers prefer to book online and seek the opportunity to do so
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Hotels Turn to Social Media to Connect With Travelers
Hotels have begun offering direct bookings through Facebook and smartphone apps, and they hope that the convenience and direct contact will lure back travelers who have been turning to online travel agencies.
“We want to be there when someone transforms the recommendations of their friends into booking a reservation,” said David Godsman, vice president for global Web services for Starwood Hotels. “If they press the ‘Like’ button, we want to start a conversation.” He said he viewed his company’s Facebook pages as a way to extend Starwood’s relationship with its customers “from the 10 days they stay with us, to all year long.” Starwood has Facebook pages for 1,000 hotel properties across its nine brands.
Hotels need to make sure that their booking engines can be found wherever the customer is, rather than asking the customer to search them out, said Glenn Withiam, a spokesman for Cornell’s School of Hotel Administration, which recently held a hotel industry conference that examined social media.
Offering reservations directly helps to keep the conversation between the hotel and its guests, Mr. Withiam said. He added that using social media to communicate took the relationship beyond the booking transaction. The hotel can find out what pillow guests prefer, the drinks they want in the minibar or the type of room they need. Personalized service can keep a guest coming back, he said, and that, in turn, helps hotels hold the line on room prices.
“Hotels need to demonstrate the value of staying with them,” Mr. Withiam said, because when the focus is just on the lowest price, the competition leads to fewer amenities, lower service levels and decreased customer satisfaction.
Mr. Withiam added that travelers were expecting trip-related services to be available on the new platforms. PhoCusWright, a travel research firm, has found that 13 percent of social-network users now shop for travel on those Web sites and 35 percent of mobile-phone users expect to book travel on their phones in the next year.
Axses Systems Caribbean, a company in Barbados, has helped about 30 small hotels and chains in Barbados and nearby make their reservations available on Facebook since early 2009. Ian Clayton, the chief executive of Axses, said he hoped that by offering reservations directly, while customers were excited by the property, his hotel clients would lose fewer bookings to online travel sites.
The online agencies — Expedia, Travelocity, Orbitz and Priceline among them — increased their share of total online hotel bookings to 46 percent last year from 41 percent in 2008, according to PhoCusWright. Douglas Quinby, senior director at the firm, attributed most of that increase to travelers’ greater price awareness and decreased business travel during the recession.
While those travel agencies can be great assets for hotels — allowing them to sell more rooms and to sell those rooms at a lower price without diminishing the hotel’s brand image — there are multiple drawbacks, Mr. Withiam said. Hotels make less money for rooms sold through an online travel agency than if customers had booked directly. Those customers may also start to think about meeting their travel needs through the online agency, rather than through the hotel, becoming in essence a customer with a relationship to the booking Web site and not the hotel.
Trump Hotel Collection has been offering Facebook reservations for around six months, and Ivanka Trump, executive vice president for development and acquisitions at the Trump Organization, even has a booking widget on her personal Facebook page. Ms. Trump said her company had an advantage in social media because “we are a personality-driven brand.” She added, “When I tweet out a hotel special, a million people see it.” Once guests have made reservations though Facebook, Ms. Trump said a hotel “attaché” contacted them to complete a “dossier” of their personal preferences, like the newspapers they wanted delivered, in-room amenities they required or particular room temperatures.
Jillian Carroll, a Facebook spokeswoman, said that the travel industry was a natural partner. “Travel is inherently social,” she said. Travelers have long asked their friends for hotel and restaurant recommendations, and then shared their impressions afterwards. In addition to making reservations, Ms. Carroll said, some travel-related companies used Facebook to respond to customer complaints, notify users of travel reviews posted by their friends or run sweepstakes to win a free hotel stay.
To help the companies refine their pages, Facebook offers analytics showing the aggregate demographic information of the people who “Like” a particular page. Companies can also discover the time of day that receives the most engagement and which actions spur more people to press the Like button.
Hotels are trying different ways to use the new media. Hyatt guests with smartphones can check in and check out with them. That means travelers can check in during the taxi ride from the airport and simply pick up keys at the front desk.
Hilton Worldwide estimates that about 615,000 customers have downloaded its mobile apps. Along with the ability to make or modify a reservation, it has offered new services like meals that are ready when guests arrive.
While at-your-fingertips booking and personalized service may be important to business travelers, there is no denying the bottom line. “All too often, travelers will leave a hotel Web site and look for a better rate in an online travel agency,” Mr. Clayton said. To entice customers to book directly via Facebook, some hotels are offering a guaranteed lowest price.
Using Facebook and smartphone apps, hotels hope to deepen or regain the relationships they had with customers and to raise the quality of their experiences when they check in. Attracting guests to book directly in new ways is a win for the hotel, said Mr. Withiam, from a financial, customer relationship and brand perspective.
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Can hoteliers take back the initiative from OTAs?
Since 2008, OTAs have increased their market share in hotel distribution by nearly 45%. For some, a serious setback for the hospitality industry. In the midst of improving economic climate and rising travel demand, can hoteliers reverse this negative trend and take back control of the online distribution channel?
You would think that the direct online channel would be the main focus for hoteliers and they would be investing heavily in this channel and trying to shift market share from the OTAs and GDS Travel Agent channels. Wrong!
In just three short years since 2008, hoteliers’ direct online channel lost significant market share to the Online Travel Agencies (OTAs), who increased their booking contributions by a staggering 45%!
Here are some disturbing stats from the Top 30 Hotel Brands:
- In 2010, only 67.3% of the online bookings for the top 30 hotel brands came from the direct online channel (i.e. the major hotel brands own websites: Marriott.com, Hilton.com, etc.), while 32.7% came from the indirect online channel (the Online Travel Agencies—OTAs) (eTRAK Report).
- In comparison, in 2008, 75.2% of all CRS online bookings came from the brand website, while 24.8% came from the OTAs (eTRAK).
- In other words, OTA contribution increased from 11.80% of total CRS bookings in 2008 to 17.10% in 2010 i.e. OTAs saw an increase of nearly 45% (HeBS Digital Research).
- This constitutes a significant increase of OTA contribution, compared to 2007, when 75.9% of all CRS online bookings came from the brand website and only 24.1% of the online bookings came from the indirect online channel (OTAs).
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The Brave New World Of Online Hotel Distribution
The relationship between the hotel industry and online travel agents (OTAs) continues to develop and deepen, as customers increasingly use electronic distribution channels to search out and purchase hotel rooms.
While OTAs have substantial sales, it turns out that a major use of search engines, online travel agents, and other internet sites is to gather information regarding a room purchase. Quite frequently, that purchase is made on the hotel chain’s own site.
Consequently, hotels need to think strategically in terms of rate setting and market differentiation.
The OTAs have numerous tools and policies that enable hotels to distribute rooms at various prices while also maintaining rate integrity and improving revenue. Perhaps most important is for hotels to use their relationship with an OTA as an ongoing business alliance, which helps sell rooms in both high times and low periods.
Being listed on OTAs also creates a billboard effect, whereby sales at the supplier’s website pick up when a hotel is listed on the OTA.
Most critically, a hotel needs a strategic revenue management function that includes effective forecasting and an understanding of how various business segments respond to price promotions.
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GDS Hotel Bookings Continue To Grow Substantially
February global GDS hotel bookings grew a substantial +23.5%, driving revenue up +36.8% over 2010. Both length of stay and booking lead time for this segment also expanded. Forward-looking data by Pegasus shows this segment displaying average monthly growth of more than +20% through July, with accompanying rate, length of stay and booking lead time increases.
Global hotel rates climbed in February according to data released today by Pegasus Solutions. Business travel rates rose a remarkable +7% over February 2010, and rates paid by leisure travelers for hotel rooms increased +3.6% over the same period.
Global reservations through the mostly leisure alternative distribution systems (ADS), or online channels, declined from January’s levels due to a variety of factors including regional unrest in the Middle East and North Africa. However, bookings growth still remained above February 2010 by +1.1% as the average daily rate (ADR) set a new growth record for North America at +2.9%, rising for the rest of the world to an almost +5% increase over last year.
“Despite the challenges unfolding at a regional level in the Middle East and North Africa, hoteliers were still able to raise rates enough in February to achieve average rate growth worldwide and capture more bookings than last year,” said Mike Kistner, chief executive officer of Pegasus Solutions. “Consumers are not only traveling, but they are also willing to spend more. Additionally, the corporate market is booking more groups and meetings business from corporations of all sizes as February bookings, rate and revenue growth was coupled with increases in length of stay and booking lead time.”
February global distribution system (GDS) bookings, representing the mostly corporate market, grew a substantial +23.5%, driving revenue up +36.8% over 2010. Both length of stay and booking lead time for this segment also expanded. Forward-looking data shows this segment displaying average monthly growth of more than +20% through July, with accompanying rate, length of stay and booking lead time increases.
While the full impact of the Japan earthquake will be analyzed in a special edition of The Pegasus View, forward-looking data for February’s report displays a continued leisure travel recovery. Bookings made thus far through online channels suggest growth rates strong enough to regain lost momentum during the upcoming spring and summer travel periods.
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