Five trending hotel news stories and Duetto’s Take on how they will impact your hotel Revenue Strategy.
1. Dimming strategies could backfire on OTAs
Are online travel agencies bullies, or are they running scared of hotel companies that continue to push their direct-booking strategies? The author seems to think it is the former, and the OTAs’ “dimming” tactics might end up backfiring on them.
Dimming is a form of punishment OTAs levy on branded hotels that are aggressive in their direct-booking initiatives. It means the OTAs push down search results for hotels from such brands, or they eliminate photos in the listings, or they engage in other petulant activities meant to punish the properties.
But as the author from Hotel News Now suggests, these tactics hurt the OTAs as much as they hurt the hotels. Dimmed hotels are less likely to be booked, meaning OTAs lose out on the commissions, and consumers start to doubt the comprehensive nature of the OTAs’ listings.
Duetto’s Take: If one side of the hotel-OTA disagreement is going to cut off its nose to spite its face, let it be the OTAs. Most likely, distributors will realize the commissions they sacrifice to punish quality hotels with dimmed listings aren’t worth it. Pulling inventory you’ve already considered for the OTA channel isn’t advisable; a major tenet of Open Pricing is always leaving every channel open and selling, but at a price that’s optimal for the hotel.
Like Duetto has stated in its whitepaper, “How to Manage OTA Channels More Profitably,” no hotel is immune from having to negotiate with OTAs, especially during periods of weak demand.
The trick is to minimize how reliant your hotel is on OTAs in the course of normal revenue management. Living well is the best revenge. The goal should be to encourage more direct bookings through a differentiated loyalty program and smart rate adjustments that reflect your guests’ price sensitivity, which can be learned and tested using web shopping data. When the time comes to use an OTA, such as an opaque or last-minute channel, work closely with your market manager.
2. Airbnb stifles compression pricing for hotels
Compression is a beautiful thing for revenue managers. On those nights when a market has occupancies above 95%, they can set rates at 50% or higher than normal. That luxury might be fading in cities with strong presence by Airbnb and other sharing economy sites, says a new report from UBS, reported in Quartz.
The report shows how Airbnb’s strength in two markets, New York and San Francisco, has significantly cut the number of compression days in those cities and put a crimp in rate growth. The reason is self-evident: When hotel rates are higher than normal, consumers are more likely to look for a better deal, often at Airbnb.
The problem is not likely to go away, given Airbnb’s continued growth trajectory. Phocuswright estimates the company is on pace to become the world’s fourth-largest online travel company, trailing only Expedia Inc., Priceline Group and China-based Ctrip in annual gross bookings.
Duetto’s Take: The issue was also one of several front-burner topics at the recent Revenue Strategy Summit in Washington, D.C. Hoteliers don’t necessarily feel threatened by the increased supply of sharing economy rooms in their market — until those rented spaces defuse the compression ADR hotels typically enjoyed on high-demand dates in years past.
The trend will put more pressure on hotels to do their homework as it relates to competitor rate shopping and reading all available lost-business data, like web shopping regrets and denials. If your market is seeing fewer compressed dates, you’ll need to know exactly how your pricing affects how many potential guests your converting from looking on your website to booking that room. By refining your prices that way, you can confidently hold rate if your comp set is slashing prices to chase occupancy — or yield rates up on that compressed night even if your competitors are too timid.
3. U.S. consumers would rather travel than buy electronics
That might not be the case in all households, but new government and private data show what the author in Skift calls a “seismic shift” in spending habits by American consumers. Here’s the gist: While overall consumer spending is flat thanks to a jittery economy, spending on travel in the United States is up, at least in July, when spending rose 8.6%.
It’s difficult to pinpoint the reasons for the travel splurge. Moderating gas prices help, as does generally lower unemployment and a few other economic data points. Security concerns in Europe also probably mean American consumers are staying closer to home.
The real reason, to paraphrase travel researcher Peter Yesawich, is that Americans feel they have an innate right to travel, and very little — even an economic downturn — will keep them from this birthright.
Duetto’s Take: That’s nice for revenue managers to hear, but there are just as many conflicting stories in the travel industry that make it hard to know if we’re in a “Golden Age” of travel or headed for a more severe slowdown than a typical industry cycle would suggest.
It’s hard to know which customer groups will be able to carry the day when so much of the near future is uncertain. It puts the onus on revenue managers to have a solid segmentation strategy, so they can take advantage of appealing to ascendant customer groups.
4. Leading loyalty scheme skews toward everyday traveler
Has Big Red, the vaunted Marriott Rewards program, become passé? Apparently so, at least in one ranking of hotel loyalty programs. According to the latest from U.S. News & World Report, Wyndham Rewards has surpassed Marriott Rewards as the top loyalty program in the hotel industry. (Marriott keeps its top spot in other rankings, such as the Freddie Awards and J.D. Power.)
In recent years, Wyndham has revamped its program, making it simpler and more straightforward for guests to earn and redeem points for free stays. Since relaunching the program in 2015, Wyndham Rewards has added 7 million members for a total of 46 million.
Wyndham’s loyalty club reflects those from Choice Hotels and Red Lion, which make it easier for the everyday traveler to gain rewards, while the Marriott program tends to favor elite road warriors who travel more and spend more, the report said.
Duetto’s Take: We continue to believe that the most impactful loyalty reward is the instant gratification of getting the best possible rate from a hotel — and that the loyalty offer reflects that individual guest’s spending behavior with that hotel brand or property. A loyalty program set up this way would certainly be differentiated than those built upon points and static discounts, and it would entice more guests to book direct on brand.com rather than an OTA.
Duetto will host a free webinar and live demonstration of its Personalized Loyalty Pricing feature Sept. 1 to show this philosophy in action. Co-founder Marco Benvenuti will lead the discussion.
5. How will the Starwood-Marriott merger affect you?
When (or if) Marriott International’s blockbuster acquisition of Starwood Hotels & Resorts becomes final, revenue strategists not part of this new lodging giant (30 brands, 5,500 hotels and 1.1 million rooms) will need to contemplate how to effectively compete with a hotel company of this unprecedented size.
According to the author in Skift, the combined company “will have nearly one-third — and in some cases half — of the corporate-travel hotel spend in 14 of the world’s top 20 cities, including Chicago, Dallas, Mexico City, Minneapolis, New York and Shanghai.” That’s a lot of competitive rate-setting power that revenue managers not part of the system would need to address.
Quoting hotel guru Dr. Bjorn Hanson, the author points to the raft of data this combined company would have at its disposal to inform rate-setting strategies and decisions.
Duetto’s Take: As Duetto CEO Patrick Bosworth has recently opined, more and more hotels will be rolled up into large brands, but remember that mega brands have some disadvantages as well as advantages.
Certainly greater leverage in hotels’ negotiations with OTAs are a net positive for the industry. On the other hand, giant corporate hotel brands might be battleships that take longer to turn around, and so some may fall behind their smaller competitors and independents in terms of adopting breakthrough hotel technologies.
For an unflagged hotel or a small chain, the post-consolidation landscape could be a huge opportunity to outperform the market, so long as that nimble property has a unique property and customer experience to offer and is able to embrace technology solutions that let it know exactly who its customers are and how best to reach them.
Big brands getting bigger won’t necessarily make them better, especially if they’re beholden to clunky legacy technology or undifferentiated loyalty programs.
Stay up on hotel Revenue Strategy news and discuss industry tech trends in the Hotel Revenue Strategy Leaders Group on LinkedIn.
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