Power ShakeHow to Drive New Guests and Lower Guest Acquisition Costs

There are hundreds of recipes for power shakes out there, but they all boil down to a few key ingredients: fruit, yogurt, sometimes juice, maybe some protein powder, and possibly a few leaves of spinach. Presto. A competitive edge with just five ingredients.

Lodging suppliers are in need of every edge to make a profit in the current travel climate. While there continues to be a clear traveler preference for booking directly, OTA share has been steadily increasing. TNooz reports that in Q1 2016 35.3% of guests arrived via Brand.com, while OTAs generated 16%[1]. In 2013, however, that OTA share was just 12%.

OTA visibility is, therefore, essential as third parties continue to capture more of the market, and as other previously viable ways of promoting brands, such as pay-per-click or search engine optimization, become increasingly cost prohibitive.3 Cs

Is it possible to give a power boost to sales and marketing, while also lowering guest acquisition costs? With the five ingredients of this hospitality power shake, it is.

  1. Beef up your direct channel. Of course, you want to drive direct traffic, and OTAs will help do that. Most travelers will visit a vacation rental or hotel website even if they found it on an OTA. Increase your chances of making a direct booking by using the strategies that OTAs thrive on. Offer best rate guarantees, travel reviews, a user experience with no obstacles, and as one industry expert notes, “reassure, reassure, reassure—that’s what the OTAs are really excellent at.”[2]
  2. Focus on rate integrity and promotions. OTAs are often treated with a slash-and-burn attitude—an extreme measure used to cultivate guests only for a short time. When OTAs are reserved only for the times when occupancy is lower than expected or when they are given just a smidgen of inventory, it undermines your success. Rankings will be lower, and often rates will be too low. Keep your prices healthy and in line with your competition, offer all of your inventory across all of your channels (for some this requires technology to sync with the PMS, and it is more than worth it) and craft value-added promotions to drive the highest possible ADR.
  3. Don’t hold back. Distribute widely. Expansive reach is one of the benefits of distribution technology and will make a difference in how many travelers see your property. Remember, availability on OTAs doesn’t automatically mean your guest acquisition costs are doomed. It does mean exposure and increased occupancy, and some of those guests, likely a good percentage, will end up booking on your website.
  4. Dynamic Pricing. Do it! Flat, seasonal rates are a thing of the past. To stay competitive and earn the best possible rate across all channels—direct included—put revenue-management strategies into place. Prices should shift based on forecasts and occupancy in order for you to achieve the most competitive rate at any given time.
  5. Loyalty is where the revenue is. Though we understand why it’s tempting, rather than approaching your strategies as a war on commissions, approach guest acquisition costs from the perspective that every new guest is worthwhile, especially if you’ve maintained rate integrity (see above). Instead, focus on creating out-of-this-world loyalty with guests so that they’ll return again and again. Many properties are taking advantage of personalized loyalty programs that track guest preferences and create programs specifically geared to their interests.

With these tools on hand, you can out-compete much of your market and simultaneously go head-to-head with big brands like never before. Liberal OTA distribution has a perception of risk—risk of OTAs stealing too many direct reservations, risk of OTAs owning your guests—but in reality, these issues can be handled. You can always adjust your inventory availability if your rooms are filling up and promote through direct channels to bring in higher profit guests. Moreover, it should be standard practice to collect guest information upon check in. The guest certainly is yours, after all.

Right now, to hold back has a much greater risk than to distribute widely—risk of effectively disappearing from the travel planning radar buried under too many other brands, risk of cutting prices unsustainably to fill rooms. When all five ingredients are added, the distribution power shake will increase new guest volume in these healthy spending conditions and set you up to decrease guest acquisition costs in the long-term.

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Sources:

[1] Online and Mobile Bookings Continue to Strengthen Hotel Performance. TNooz. May 2016.

[2] Fox, Linda. Broken down, how OTAs are eating hotel business. Tnooz. Feb 2014.

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