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How hotels can stay up in a down market

Today, hotels are battling it out on numerous fronts to keep themselves ahead in a constantly challenging marketplace. Increased industry competition, the growth of the sharing economy, and the need to lower rates to attract price-savvy consumers are all taking their toll.

However, hotel marketers are finding that by investing in their direct booking channel,  it’s more than possible to not only survive, but thrive in the face of these testing market forces.

The following post outlines some of the biggest threats hotels face right now, while diving into a variety of actionable tips that can help boost direct bookings and increase overall profit margins.

Market factors hurting business

Diverse and often complex, the current challenges within the hospitality industry require that hotel marketers are more resourceful than ever.

Competition has been growing rapidly from all corners over the past decade, including a surge in domestic hotel construction projects. In December 2016, the number of properties Under Contract in the US rose by 19.4% year-on-year, while the number of hotel rooms in the US is predicted to rise by 25,000 rooms in 2018.

U.S. hotel room pipeline
(Source: Hotel News Now)

This level of growth puts hotels in an all-out race to the bottom for room rates. Driving down rates represents the easiest way to stay competitive and stave off increased inventory levels. But the trade-off with this approach is a heavy and sustained impact on a hotel’s bottom line.

Pressure has also come from the rise of sharing economy accommodations, most notably Airbnb. While recent figures suggest it isn’t stealing the level of market share many first thought, Airbnb’s presence clearly remains a challenge to hotels.

Beyond these internal industry trends, unpredictable external factors such as the weather, disease, and societal events can cause disruption on a local and regional level.

For instance, the presence of Zika in the Southeastern U.S. had a negative impact on hotel bookings for 12-18 months. Terrorist attacks in Europe, shootings in New Orleans, and the Ebola outbreak in Africa have also had their own impact on the industry, leading to plummeting visitor numbers.

Yet in the face of these distinct challenges, every hotel can thrive by becoming more independent and focusing on pushing more profitable direct bookings.

Escaping the cycle of high commission

One of the biggest challenges many hotels must overcome is a heavy dependency on OTAs. Naturally, such a relationship isn’t without benefits: hotels gain significant exposure they wouldn’t otherwise be able to achieve, bringing in more guests. But a high volume of bookings received through this relationship comes at a big price.

OTA commission fees typically range from between 15-30%, which means an over dependence can seriously squeeze profit margins. Ultimately, hotels need to reduce their reliance on OTAs, FIT wholesalers, and other high commission online channels and focus on promoting their own direct booking channel.

This isn’t easy, of course. The bookings that come from external channels are reliable and don’t require additional work. In contrast, growing the direct channel involves effort and management. However, it also represents the best way to achieve business sustainability and increase profits.

The huge value of the direct booking channel

If your hotel is heavily reliant on OTAs, the most obvious way to grow your revenue and profit is by attracting more guests. But this isn’t necessary when you focus on the direct booking channel.

When a guest books direct with you, the hotel has significantly less cost per booking. Even when your occupancy is stagnant or declining, the same amount of bookings can result in greater revenue and profit.

Despite the ongoing commitment of time and resources, a hotel’s effort in promoting the direct booking channel has short-term and long-term returns as more and more guests have a fantastic direct booking experience. Over time, this may reduce the need to invest so heavily in marketing campaigns and promotional activities intended to bring in additional business.

So with that in mind, what specific strategies can you apply to grow your direct booking channel?

Create a great user experience

Improving the direct booking channel

In the digital age, your website acts as your virtual shop window. So the design and user experience you create has to be optimized to stand out from the competition and incentivize bookings.

The design of your website should involve minimal clutter, large beautiful images, limited text and easy navigation. Information needs to be easy to find, and guests should be able to go from browsing to booking within just a few short clicks.

When it comes to offering choice, less is often more. For instance, showing all your rooms, rates, details, and terms and conditions in one view can feel overwhelming and actually hinder conversion rates. Instead, split the decision-making process into simple steps by letting customers pick a room before revealing details on the various rate options and extras.

Having a responsive design with a simplified mobile experience will also ensure your site is optimized to whatever device it’s being accessed on. Considering travelers frequently switch between desktop and mobile, this step is essential.

Finally, your website needs to have an e-commerce integration with a hassle-free booking process. By asking for the minimal amount of information in the early stages (such as name, contact and card details), potential guests will be less likely to get frustrated and abandon their booking during the checkout process—the direct booking experience should be easier than booking with an OTA, not harder.

Ongoing SEO for technical and content driven optimization

Adhering to solid SEO principles remains a vital step in driving traffic to your site. While the rules of SEO often seem to be in flux, there are certain reliable tactics worth focusing on, as illustrated in the below hotel SEO Slideshare.

Start by building your “NAP consistency.” This involves ensuring that your name, address, and phone number are consistently listed on your website and across the internet on sites such as Google Business, Yelp, Yahoo Business, and the Better Business Bureau. Crucially, your listing needs to be identical wherever it appears. Even a minor difference in your address or hotel name can harm your SEO.

Encouraging lots of reviews is another highly effective way to strengthen your SEO. Google’s algorithm gives ranking preference to those hotels with a greater number of reviews—even the reviews that aren’t perfect can elevate you in the search results page.

Having a well-maintained blog and obtaining backlinks from legitimate sites also alerts the search engines that you’re posting quality content, which can boost your domain authority and ranking position.

Paid search on branded and non-branded search terms

When travelers look for a hotel, the vast majority turn to Google and other search engines. So it’s hugely important to have visibility here. Bidding on your own brand search terms might not seem essential, but if you don’t, OTAs almost certainly will do. And when that happens, you’re effectively handing your direct business to them on a silver platter.

In reality, your hotel really needs to be in the top three or four search results, which more often than not are paid listings. Anything lower than that, and you’re fighting a losing battle: most people simply won’t scroll down the results page to specifically hunt for a link to your website.

hotel serp areas where users click first chart
More than half of first clicks on hotel search results pages go to paid results. For more information, read our eye-tracking study on Google SERPs.

Bidding on non-brand search terms is also important to gain visibility higher up the conversion funnel and to grow your retargeting pool. This is the stage when travelers are starting their search but maybe haven’t heard of your hotel brand. Conversion rates will be lower with these new audiences, but prospecting and audience growth is important for long-term success.

At the most basic level, a non-branded search term will involve a simple destination-based term such as “hotel in Chicago” or “hotel in downtown Chicago.” Obviously, you’ll face a lot of competition for broad terms like these, which is why it can be worth using long tail variations on your keywords.

Using this approach, you can bid on more unique phrases that might include specific amenities or features (e.g. “Chicago hotels with free Wi-Fi” or “family-friendly Chicago hotels”). These niche terms will be less competitive, allowing you to target a smaller but more focused audience that are specifically interested in your kind of hotel.

Targeted and timely promotions

The fight for consumer attention is more fierce than ever, which is why generic deals and offers just won’t cut it. Instead, it’s important to build and market special offers that are timely and targeted at different segments of your audience.

First, dive into your past booking data to gain an understanding of who your audience is. Once established, you can start building customer personas based on factors such as spending patterns, booking history and personal preferences. This data can then be used to devise tailored promotions that inspire and incentivize guests to visit your website.

Delivering content in the right place and the right time also requires careful planning. For instance, platforms such as Facebook and YouTube are used heavily when people are looking for travel inspiration, while Google becomes the go-to resource when it comes to more considered research and planning.

Based on understanding how, where, and when decisions are formed, hotel marketers can deliver relevant content on the right platforms to engage consumers at distinct phases in the travel journey.

Rising above challenges and competition

Hoteliers undoubtedly find themselves in challenging times right now, but investing in the direct booking channel represents arguably the most important way to maximize profits.

This approach involves creating a great user experience that incentives people to book. It also requires driving traffic to the hotel website by considering a variety of options including blogging, inbound marketing, paid search, SEO and PR.

Without doubt, increasing the contribution of the direct booking channel vs. other online booking options requires effort and a shift in focus and strategy. But long-term, the potential benefits can be transformative and significantly reduce the costly over reliance on OTAs. You, the hotel, should build your direct audience, promote loyalty and repeat bookings through service and experience, and be in full control of the success, profitability, and growth of your business.

Nate Lane

Nate Lane

Nate Lane is a senior global director of business development, product development, and agency operations with 10+ years of experience driving growth and innovation as an "intrapreneur." He's an avid mountain biker, a coffee and craft beer enthusiast, and a proud family man. Contact him at nate.lane@pegs.com.

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