Hospitality

increase your ADR

Your online reputation can increase your ADR

What could be more powerful than your neighbor or friend giving you a recommendation. It’s unbiased, it’s trustworthy. And this is worth a premium price. Wouldn’t you pay a slightly higher price and in return minimize the risk of an unknown hotel?

This is exactly how most of the population thinks. Replace your neighbor or trusted friend with unbiased customer reviews and you’re right in the middle of social reputation management.

According to a study by Cornell University

“if a hotel increases its review scores by 1 point on a 5-point scale (e.g., from 3.3 to 4.3), the hotel can increase its price by 11.2 percent and still maintain the same occupancy or market share.”

And for those that get a bit intimidated thinking that a 1 point jump is hard to manage, here is another statistic:

A 1% increase in a hotel’s online reputation score leads up to a 0.89% increase in ADR, a 0.54% increase in occupancy and a 1.42% increase in RevPAR. 

manage reputation and increase revPAR

That’s no surprise as online reputation is long known as a demand generator. According to Tripadvisor, 93% of the people find reviews important when determining which Hotel they want to stay at. 53% of the people surveyed would not book a Hotel without having a guest opinion about it.

Reputation management is often sitting somewhere between social media, Ecommerce and the executive office with little ownership, strategy or proactivity.

The ironic thing is that once you’re on a downward trend you easily get caught in a downward spiral. Bad review management leads to lower rating leads to less demand. Less demand leads to lower rates and lower occupancy, ultimately a lower RevPar. Less money in the bank means cost cuttings means more bad reviews. Eventually the value of your hotel will diminish – not only in the customers’ eyes but also in the owners’ eyes.

This makes it very clear that the simple act of doing nothing can already have harmful effects on your public reputation.

increase ADR with reputation management

The last thing you want is to purely manage your demand through price. Building and maintaining a good public reputation is key to building up the value proposition that will create trust and also allow for bigger margins.

Online reputation doesn’t happen overnight, and it is also an ongoing process. Updating and optimizing your profile once on Tripadvisor and OTAs is not enough!

Here are a few things to keep in mind when working on your online reputation.

1.Know the importance of online reputation management

I’ll go ahead and say we got this point covered just now.

2.Set up a tracking system

Get a clear understanding of the current perception of your property and set up mechanics to analyse the ongoing conversation and feedback. It’s impossible to have your eyes everywhere and spot every comment and reaction, so it’s important to set up a tool to help you  manage and monitor the market and your progress.

There are little things worse than publicly open comments and questions that go unanswered by hotels. Got a comment on Instagram? Make sure to respond! Got a mixed review on Tripadvisor? Monitor if there are patterns (and if so of course do something about it) and let the guest know they’re heard!

And while you’re at it, keep an eye on what the competition is doing, how they are rated and how they are ranking on OTAs.

3.Strategy and accountability

Set up clear ownership of online reputation. If it is split between different teams, make clear that the responsibilities are clearly divided and expectations are clear. Set goals of how you want to be perceived, what feedback you want and make sure to clearly communicate this vision with your staff who is in guest contact day in and day out and brings your vision to life.

You might find that staff will be following closely as online reviews often name specific individuals for their good (or bad) experience. Use this to manage and motivate your staff.

4.Get going now!

The good news here is that you can take part in shaping the public reputation and image of your property. While it is a big task to work and keep working on it, the results definitely speak for themselves!

Understand your market with OTA data

We have been talking a lot about the impact OTAs are having on the hospitality industry – their impact on your brand value, what you can do to win some of those bookings back if you can. In this article, we will explore a different angle to OTAs and look at them as a resource – a window into your market and your competitors. We will look at the most solid approach to setting your property’s comp set and setting you up for success by truly understanding your market with OTA data.

Of course no property exists in isolation. To get a comparable view of performance and be able to make accurate forecasts, one of the first things to do for any hotel is to set a comp set, maybe even a few. Traditionally, comp sets have often been based on subjective opinions – Opinions of the owner. Opinions of the management group. Opinions of the GM. As with anything else, “subjective opinions” aren’t the safest way to set something as crucial as your comp set.

 

Why is it so important to get your comp set right?

First things first. We probably don’t have to tell you about the importance of your comp set. In a nutshell it’s what gives you understanding of your market – it drives your rate strategy, marketing activities and even helps to define your product and service offering. Furthermore having the right comp set helps you evaluate your property’s true performance, make accurate forecasts based on trends and market reactions and steer business development activities. In short: It is a great tool to further maximize revenue and profitability.

It is a strategic tool. And as such it’s very important to use it correctly and to set your comp set right. Otherwise you are likely leaving money on the table.

 

Working with the wrong comp set means you are likely leaving money on the table.

Question is: how do you know whether you are optimized or not?

 

OTA and comp set

 

There are numerous reasons your comp set might be wrong. Maybe it was the right comp set for you a few months ago and the market has changed with new competitors coming in or other environmental factors. This might be especially true for still developing or versatile markets. Or maybe the comp set was wrong from the start as it was based on subjective opinions of the owners, management group, GM or other stakeholders.

In some cases it can be helpful to work with more than one comp set. Maybe you set up an aspirational comp set if you’re going through some changes in your property set up. Or you are in a very seasonal location and it makes sense to change the comp set based on the season. Or maybe you want to look at two comp sets – one for group and another for transient. Or you simply have a comp set you work with the owners and one for daily operations. There are numerous reasons to set up several comp sets.

In the U.S., 92% of hotels have one comp set, while 6% have two and 2% have three or more comp sets. Those numbers change when looking at upper-tier hotels, where 48% have one comp set; 36% have two; and 16% have three or more*.

 

The true definition of competition

The basis of the comp set is that you want to compare your property against the other options that the booker is considering. Not how other properties in your market view it. Not which hotels consider your property to be in their comp set, too. These things don’t matter to the booker. What matters is: what option are they weighing when making the purchasing decision. That is the true definition of comp set. Who are you competing against for the bookers’ business?

 

true-def-comp-set

 

Understand your market with OTA data

Unfortunately it is very difficult to ask the bookers directly, take record and pull an analysis from there. Ideally even do this every week or bi-weekly to keep on track of changing conditions in the market. The next best thing is to look at the sources that bookers use to shop for their stay – Google, Tripadvisor and OTAs.

Things you want to add to the equation are pricing, ranking and positioning. For example you might be on page 1 and your major traditional competitor is on page 3. It is questionable whether you are true competitors in the booker’s view. Of course it depends on whether this is a one-off or a consistent trend. Or you might actually be surprised by who is competing in your price range, e.g. due to renovation works or a more aggressive pricing strategy.

Thoroughly monitoring your market and identifying changes and trends is exactly what we do here at BPS. Contact us here to learn more!

 

Consistently monitoring your market from the bookers’ perspective is invaluable in determining your true comp set. 

Add this as a pillar to regular SWOT analysis and rate comparison and you have a reliable approach to setting and reviewing your comp set for maximum performance.

 

 

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*http://hotelnewsnow.com/Articles/23616/5-things-to-know-to-ensure-comp-set-success

 

Are OTA bookings incremental?

A question that keeps Revenue Management, Business Development, Sales and Marketing wondering is is this: are OTA bookings incremental or is this displaced from other booking channels? If you closed out OTA channels, would your hotel be empty? Or could you instead get the same business with lower cost of sale?

And most likely there is no blank slate answer that is universally true. It will depend on a hotel’s location, brand, age, competitors, market conditions etc.  But the question is there. If the booking didn’t come through e.g. Booking.com – would it have come through directly??

 

Is the OTA booking incremental or would the same booking come through via a different channel?

To explore the question further, we have to start with this:

Who books via OTA and why?

are OTA bookings incremental

Generally speaking, OTA bookings tend to come in with a shorter lead time than non-OTA bookings. A study* shows OTA bookings with an average of 20 days shorter booking window than non OTA bookings (sample of 200,000 reservations across 13 destinations). So what does this mean for your hotel? OTA bookings short-term fill in the gaps that you have in your inventory. On the flipside it also means that there is an opportunity to fill the hotel with more profitable business further in advance.

Another interesting facet to look at is booking channel. OTA bookings tend to come in with a higher percentage of mobile users (mobile site, mobile app) vs desktop. In Q1 2016 40% of mobile bookings came via OTA vs 18% via hotel suppliers*. Many hotel chains were slow in adapting to mobile.

Leisure and Business travelers alike are relying on OTAs. As a research conducted by google states: One in three leisure travelers and one in two business travelers select an OTA for its superior site tools and options with ‘lower price/best deals’ being in the top three reasons for using an OTA.

The study* also shows that 84% of bookers go into planning without having a hotel brand preference with 65% of leisure travelers being unclear about the differences among brands. Even business travelers are less driven by loyalty schemes with 41% less likely to plan business travel based on loyalty programs or points in 2014 (a rise from 38% in 2013*).

Add on that OTA’s proactive methods of increasing bookings:

  • Reassuring social proof via reviews
  • Targeted first time buyer offers
  • Paid Search ranking
  • Giving customers a sense of getting a better deal (read more on OTA tactics and what you can do about it in our previous blog post here)
  • marketing budgets

 

Would they come to you directly?

are OTA bookings incremental

One thing is for sure: switching off your OTA channel and just waiting for those same consumers to find your website and make a direct booking instead is not going to work.

Instead you need to be proactive to convert some of those OTA bookers to direct bookers. But you need to actively encourage them. Add value-ons for direct bookings, encourage them during their stay for next time by giving them a great customer experience and offering benefits through your loyalty programs. Ensure they’re not incentivized by the OTA with a lower price.

Replace it with more profitable business

are OTA bookings incremental

Of course OTAs are only one part of your distribution mix, so it makes sense to take a look at your distribution mix, segment and and pricing strategy again. Can you replace the highly transient OTA bookings with lower price and lower cost of sale bookings further out in advance? That would leave less inventory for shorter lead time OTA bookings and give you some confidence and security to be more risky with your pricing strategy closer in.

That way not only do you fill the available rooms with different business but you also give them less availability by the time the OTA business knocks on your door and wants to take up the empty seats.

Finding those other pockets of business might not be easy, it very much depends on the market you’re in. Just don’t stop pursuing it. There is opportunity for it.

 

 


*Sources: 
http://www.ryansolutions.com/blog/2015/ota-behavior-lead-time/
http://www.criteo.com/media/4290/travel-report-q2-2016-pdf.pdf
https://storage.googleapis.com/think/docs/2014-travelers-road-to-decision_research_studies.pdf

 

crumbling brand value

OTAs are challenging your brand value

Well we all know what damaging effect OTAs have on the bottom line with all the commission that is lost. It’s an expensive cost of sale. But looking at it long-term, OTA’s damage reaches much further as they are also questioning your brand value, the very core of your business.

How are OTAs tearing away parts of your brand value to consumers?

On the smallest entity – the hotel level – what is the value of the brand? The value of the brand is to make consumers take a purchasing decision in your favor. That’s the power of the brand. Consumers who don’t even look at other phone alternatives and make objective comparisons based on the specifications and instead are already excited for the new iPhone to come out. Consumers who are willing to pay 10% more for a Fuji camera and who keep raving about it to their friends proud about the purchasing decision they made.

Now let’s take a sample hotel in a new or competitive market, whatever brand is written on top of the building. Likely a small percentage of those bookings is coming direct. And likely a high percentage, especially for transient on weekends, is coming through OTAs. Maybe they booked you this time as you had a seasonal offer going on, or you paid for preferential listing with the OTA. Or maybe you’re in the best location in town. But what if next year a brand new hotel opens next door? Will you keep the flow you are getting from OTA or will they divert into the new shiny building next door with an even better view and a new opening discount?

These are hard questions to ask. The truth is that OTA bookers aren’t loyal to your brand. Instead they make booking decisions based on a combination of value for money, location and rating. In crowded markets it also counts who are listed on the top two pages as frankly very little consumers will click through all of 15 pages of hotel listings to make comparisons.

This makes you dependent on the OTA and this also makes you fight for new bookings each and every time. And these new bookings come at a high cost of sale and low rate. Of course I already hear brand teams scream that brand image and consistency are part of the decision making process. And it’s true. But the question is whether this can trump value, location, rating and positioning.

Brand value for investors

What investors are looking for is ROI. So sure, having a lower cost of sale will be on their radar. But there’s also a whole different string of questions: “Why would I go with you instead of another hotel chain?” and another hotel owners’ favorite: “Why do I have to pay you all these brand fees, what do I get from it? What is the brand doing for me to fill my hotel?” And this is the very point where OTA dependency makes it harder to argue.

how-are-brand-fees-used

To take this to the extreme: Why wouldn’t an investor just bank on business coming through OTAs and go with a lesser known or no-name brand saving a lot of money in marketing fees and brand fees that in the every day don’t make a visible difference to him/her? In the end they’re in the business to make money. The hotel is an investment and they’re looking for the best option to maximize the investment. And at this point it looks like he is paying a high price for bookings and on top of that an additional price (to the brand) that isn’t doing its job of pulling in reservations.

You don’t have hotel investors and owners on board, you stagnate or slow down growth, you bring down the value of your company, you lose brand strength. It’s all connected.

Breaking out

What’s the way out of this circle? Well, start with what the hotel brand and the owner have in common: Both parties would prefer to shift bookings to direct brand channels. They come at a much lower cost of sale meaning more profit on the bottom line.

We talked about methods on decreasing OTA depencency in a previous blog post and the key is to visibly show progress and to show marketing funds being used to address this.

It’s a long-term effort and the conversation will continue over a long period. But you got to start somewhere. OTAs are working on further building out their brand and this only means taking chunks away from you.

OTA

The power of the OTAs

We don’t need to tell you about OTAs’ role in your distribution mix. It probably comes up in every commercial review and you’re getting tired of the never ending discussion. Though they haven’t been in the market for much more than 15 years, OTAs have build up a very strong position in the distribution mix and have dominance in discussions with hotel providers, sometimes even showing behavior that undermines your and your consumers’ interests.

Though it might feel like a dire situation, there are a few things you can do about this. There is no silver bullet but looking at it as a long-term strategy there are definitely things you – as the hotel company – can do.

Let’s quickly reiterate the complex OTA issues so we’re starting off on the same page.

Why the OTA discussion is so relevant

1. It directly impacts your profit

Every dollar you could save on the commission is a dollar saved on Cost of Sale that could go through straight to the bottom line. Easy as that. From the original 5% commission levels have soared to 15-30%, or even more depending on the size of your company.

 

Every single dollar you save on commission goes straight to your bottom line.

2. Wrong consumer perception

In a study of 1,000 consumers in the UK, 75% believed that they get a cheaper rate when booking via an online travel agency. This perception is further strengthened by some OTA practices showing your low demand days as ‘discounts’ when really there are none, only price savings compared to your high demand days.

Furthermore the search results aren’t as objective as the consumers believe they are with ranking and star rating distorted by their own commercial considerations. With consumers rarely clicking beyond page 1 or 2, OTAs have immense power to influence consumer booking behavior without them even noticing.

Pair this with huge advertising budgets and you can see why the consumers go to the OTAs directly.

3. There are no signs of OTAs slowing down

Au contraire! Own loyalty program, penalizing behavior if not abiding to their rules. – dimming.

OTAs are by far outreaching any hotel company’s marketing budget heavily investing in market dominance. According to tnooz, the Expedia group spent around $2.8 billion in marketing offline and online buying search terms in 2015. All the while the Priceline Group was the biggest spender on Google adwords in 2014 with a budget of $1.8 billion.

Some studies go as far as saying that by 2020, Priceline Group and Expedia will control 94% of all online hotel bookings (Red Burn Fundamental Research/Travel and Leisure/2 March 2015).

According to statista, Booking.com had about 166 Million visits on their website in Jan 2014 alone!!

 

What you can do to stand up against OTAs

We have heard it from Marketing and Ecommerce – we need to strengthen our own channel. A lot of resources are invested in optimizing the booking funnel and conversion. But this is only half the battle. The other half is the amount of traffic that you are (not) getting on your own website because it’s going straight to the OTA. Improving the online experience is important, but it doesn’t address the issue of traffic.

The long and short is that unfortunately there is no wonder-weapon that will turn your distribution mix around overnight. But the good news is that there are things you can start doing now to improve direct bookings in the future.

1. Finger pointing (the good kind)

finger pointing

Part of the consumer perception of finding cheaper rates on OTAs is that it can be true. Whatever the reason for lower rates on OTAs – be it a technical connectivity issue, a single hotel going rogue or a violation on the OTA side. Make sure to keep tap on the rates the OTAs are selling online and call them out whenever it happens. Shut down those rate and make it clear that you won’t tolerate it and you are on watch.

This is where BPS partners with you to take some weight off your shoulders. We understand that it’s impossible for your team to scan the net 24/7. Our proprietary software does this for you and keeps you in the loop with regular reporting. Contact us here for more details.

2. Give extra incentives

treat your customers right

Those consumers who do book directly say to do so based on lowest price, ease of booking, better check-in process and a more personal experience. Optimize the booking funnel on your website, work on the check-in experience on property, offer them special add-ons as part of your loyalty program when booking directly with you.

3. Drive more traffic

drive more traffic

You may not be able to compete on adwords but you can work on improving your natural listing.

Work with your Ecommerce team and your online agency to make sure your website is as optimized as possible. For example – Is your site optimized for mobile? Are you targeting long tail key words? Do you offer multiple languages? Do you display good pictures and title them correctly for SEO?