Overwhelmed by big data coming from various sources, today’s hoteliers face the challenge of uncovering meaningful insights to craft the best strategy for the coming year.
To help hoteliers create a cross-channel, data-driven strategy with ease, Travel Tripper hosted a webinar that boiled down this complex process into three simple steps:
- Firstly, understand where you are in the process by learning how to measure your channel mix to optimize revenue and profitability
- Secondly, figure out where you want to go by understanding how to evaluate and select partners that will drive success
- Lastly, you can get to your destination faster by finding digital marketing performance gaps and identifying quick wins
Click here to watch a full recording of the webinar and read on to see a list of the top takeaways from our discussion.
Section 1: How to measure your channel mix to optimize revenue and profitability
Every hotel has its own unique distribution mix. To optimize performance, it’s important to use data to segment business based on factors specific to your hotels, such as your target demographic, booking windows, length of stay, and weekday and weekend staying patterns.
When you select the optimal channel mix and pull the right demand levers for your property, you can effectively reduce intermediary fees and increase profitability — without negatively affecting revenue, occupancy, and market share.
To compare how different channel segments can impact revenue and profitability, let’s imagine a hotel is selling the same rooms at $250.
In the graphic below, we can see how different distribution channels impact the bottom line of this hotel:
In this scenario, this hotel’s ‘Booked Revenue’ is the same for every channel — $250. However, the ‘Net Revenue’ generated by these channels is significantly different.
The hotel booking engine generates $245 in net revenue. However, distributing through a GDS agency results in $210 net revenue. And net revenue with an OTA is only $187.50. Over time, these third-party booking and commission fees can make a huge dent in a hotel’s bottom line.
The main takeaway here is obvious but vital to remember: the most profitable online channel is the direct channel.
Note: ‘Opaque’ channels (such as Priceline and Hotwire) allow hotels to sell unsold rooms at discounted rates. However, these channels only reveal the name of the hotel to its customer after the transaction. In the scenario above, the OTA is charging a 40% commission fee. Combined with low rates, the hit to a hotel’s net revenue here is substantial.
Leveraging hotel data to optimize channel mix
Hotels process millions of bookings each year, which enables them to collect valuable guest shopping and reservation data. When that data is leveraged successfully, it can significantly move the needle on business strategy and guest satisfaction.
However, the process of retrieving, collecting, and synthesizing all of that data is no easy task. That’s where automated solutions like a Business Intelligence platform come in. The graphic below shows how these tools can leverage hotel data to optimize channel mix:
Through a single dashboard, it’s possible to access a host of vital information. As outlined by the image above, this includes:
Rate & Segment Performance
Travel Agent Bookers / Consortia
For a hotel, this bird’s-eye perspective can prove invaluable to spot opportunities and risks, and make more informed data-driven decisions.
Section 2: Evaluate and select partners who will drive success
After a deep analysis of your property’s performance, you’ll probably notice a few areas that need improvement. This is where you need to choose a partner that can help you make those improvements and drive success.
Evaluating and selecting a partner can be broken down into three stages:
- Establish a procurement process
- Take the right questions to the right vendor
- Ensure you’re picking the right person for the job
Let’s look at these stages in more detail.
1. Establish a procurement process
There is not a one-size-fits-all procurement process. You need to build a process that works for your own hotel, taking into account a variety of criteria.
When establishing a procurement process, bear in mind the following steps:
- Who or what will you choose? Will you use an external consultant, internal team, or online resources to choose which vendors to reach out to?
- What tools will you use? What tools will you use to make decisions? Potential options include a formal RFP document, demos, or a question and answer document.
- How will you evaluate? Will you use a scoring system/self-scoring for an RFP document? Will you review internally based on presentations? Whatever the case, be sure to create a template.
- How will you decide? Is the decision based on score, price, capabilities? How are each of these weighed on a final decision?
2. Ask your vendors the right questions
After addressing the procurement process, it’s time to start asking your vendors a few critical questions. While it’s obviously important to understand how the vendor’s actual product works and its main benefits, there’s a bigger picture to consider.
Here are some of the key questions to ask your vendor:
- Product integration: How will this new product integrate with our existing systems and help us meet our goals? Can you confirm this new product won’t negatively impact our existing capabilities.
- Service: Does your company have a service-level agreement (SLA) in place? Do you offer both phone and email support, and is this support available 24/7 every day of the year?
- Reliability: What is your product’s annual uptime? How many outages have you had in the past few years? What is your recovery time/process?
- Key features: What makes your product different from your competitors?
- In-house vs. outsourced: Is everything done in-house, or do you rely on specialist outsourced technologies? (There are pros and cons to both of these approaches, but you should know if your provider is effectively acting as a middle man).
- Case studies and referrals: Do you have proof of performance, testimonials, case studies, and referrals? Also, don’t be afraid to contact existing clients of your prospective vendor to see if they’re happy with the product.
3. Make them prove it
You’ve specifically selected a vendor to assist with a problem(s). So you need to be sure they’re helping you work towards your goals. Use the following guide to keep things on track:
Section 3: Find paid media performance gaps for quick wins
In the previous two sections, we’ve discussed how to get your house in order from a revenue management and vendor perspective. Next, it’s time to look at digital marketing. Specifically, we’ll be looking at paid media since this is the most flexible segment of digital marketing.
We can’t tell you how much to spend on paid media, but the following tips offer a framework to identify the purpose of each kind of paid media effort, what data you (or your digital partner) should have access to, and how to prioritize your budget.
Understanding the conversion trajectory
In theory, the booking journey of a hotel guest is often represented as a search funnel. This shows their progression through a series of stages involving changes in search behavior and buying intent. However, the search funnel can imply a form of passivity.
In reality, the travel booking journey is very active, so it can be helpful to think of it instead as a ‘conversion trajectory’. This trajectory can be broken down into three stages: Awareness, Consideration, and Intent.
Below, we’ve included a description of each stage and the appropriate initiatives you can take related to paid media.
Awareness: Characterized by high-volume awareness tactics that serve to drive traffic, generate new users, and amplify public perception of your property.
Awareness initiatives: Metasearch advertising, brand and non-brand RLSA (Remarketing Lists for Search Ads), brand paid search.
Consideration: Efforts in this stage reignite interest in your property. They bring users back into the fold after they’ve been made aware of your brand but maybe haven’t booked yet.
Consideration initiatives: Display remarketing, paid social remarketing.
Intent: Targeted and highly efficient, efforts in this stage capture relevant potential guests who have been nurtured through the previous stages.
Intent initiatives: Display prospecting, paid social prospecting, non-brand paid search.
Ultimately, a strong paid media strategy would cover each of these stages, but that’s not feasible for most hotels. So the best approach is to focus on intent-driven campaigns since these provide the quickest wins.
Why brand paid search?
As far as search engine marketing is concerned, brand paid search plays a key role. It allows you to protect your brand experience and tailor your message in a way that isn’t available with organic search.
It also lets you own more real estate in the search engine results pages. Rather than seeing this as part of a strategy to compete with your OTA partners, brand paid search can be seen as another way to find parity with them in terms of your overall coverage.
Finally, a brand paid search enables you to establish a baseline to understand demand in the market. If you’ve invested in paid media awareness in the past, you can use this data to confirm whether the timing of your initiative resulted in “brand lift” — a term that refers to an increase in interaction with your brand resulting from an ad campaign.
By applying the three steps outlined above, you can optimize your hotel’s data-driven strategy for 2020. Want to gain more in-depth advice for each of these steps? Be sure to click here to watch a full recording of our webinar.
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