10 Ways to Boost Direct Bookings and Increase RevPAR
By Gino Engels Co-Founder, OTA Insight | April 28, 2019
All revenue is not created equal. Hotels know this more than any other industry. When factoring in the cost of acquisition, each booking has a singular profitability profile that depends on wholesale commissions, retail commissions, transaction fees, discounts, advertising expenses, loyalty investments and technology costs.
The popularity of third-party channels remains high, as customers appreciate the price-shopping nature of OTA sites. OTAs also spend considerable resources making it simple for customers to book online, investing in the technology to deliver a smooth, pleasant shopping experience. And, of course, these channels spend tremendous amounts of money on marketing to pull leads into the funnel.
As intermediaries spend more money, commissions paid out by hotels has also risen. Cost inflation has therefore pushed direct booking to the top spot of most hotels' priority lists. Hotels pursue more business through the lower-cost direct channel, in an all-out effort to preserve the profitability of each booking.
The cost associated with direct bookings is much lower, per Kalibri Labs data.
As your hotel looks to direct bookings to mitigate against rising distribution costs, consider these tips to produce more direct business and increase your hotel's revenue per available room.
1. Segment and Personalize
Each guest segment of your hotel has different needs and expectations. This applies equally to marketing messaging and on-property experience. To segment effectively, train staff to collect emails at check-in and to add any relevant notes on to the guest's profile in the PMS. In addition, keep a close eye on the performance of your marketing campaigns and third-party channels, which are rich sources of insight into which segments perform best for your hotel.
2. Upsells and Ancillaries
Once you've segmented your audience, it's time to get serious about upselling. Basic segmentation should include pre-stay, arrival, and post-stay cohorts. Pre-stay emails include room upsells and advance purchase of in-destination activities; arrival day "welcome" emails feature last-minute promotions related to on-property amenities and in-destination activities, and post-stay emails encourage repeat visits with exclusive rates for past guests.
Advanced segmentation groups people according to shared characteristics, such as those within drive markets, those with spa affinities, or those who have booked with corporate rates in the past. You can mix and match to create micro-segments to target with exclusive deals and relevant messaging.
For all upselling efforts, implement automation to avoid manual delays. After segmenting, creating offers, and crafting messaging, set it and forget it. Then revisit at regular intervals to tweak and optimize according to performance results.
3. Focus on Your Best Guests
Not all hotels have an active loyalty programme. Even if your hotel has a loyalty programme, not all members bring equal value to a hotel. Invest in a hotel-specific CRM with detailed guest profiles that calculates the lifetime value of each guest. Compare and contrast your highest-value guests to identify shared characteristics that guide marketing initiatives. These guests demonstrate a higher proclivity to do business with your hotel, so it's your job to maintain those relationships - and to attract more guests like them.
Another tip: encourage guest referrals. When a guest expresses satisfaction with the experience, whether in person or online, train your staff to respond with thanks - and an invite to the hotel's referral programme. Cultivating a legion of word-of-mouth ambassadors is one of those rare investments that brings more dividends over time.
4. Design Packages and Promotions Creatively
Promotions and packages can be a wonderful draw for direct bookings. These offerings give consumers a reason to visit your website while also showcasing your brand's personality and your property's unique amenities. The key is to be creative while staying on-brand. If a promotion or package seems stale or doesn't appeal to a target demographic, it will fail.
To guide your brainstorms, start with your segmentation. Look at your highest-value segments first to determine the types of promotions that appeal most. Then set up small experiments to test your messaging among specific segments.
"With the right technology, we can understand force of demand, identify demand-generating opportunities, come up with value-added deals to include on OTAs' websites and our own instead of just dropping prices to boost occupancy and revenue and more." - Christelle Tropina, General Manager, Hotel Astor
5. Upgrade Your Booking Experience
Many consumers prefer shopping and booking on OTAs due to the simplicity, speed, and accuracy of the experience. The interface is easy to navigate, results load quickly, and room inventory is up-to-date.
To compete, hotels must invest in modern websites with rich imagery that speaks to target guest demographics, as well as a mobile-optimized booking flow. The website must function equally well, regardless of how the consumer accesses it. Hotels must also optimize websites for conversion, using techniques like A/B testing, landing pages, persuasive messaging, secret deals, abandoned cart recovery, and exit pop-ups to improve look-to-book ratios.
Leading hotels also leverage chatbots as extensions to the existing customer service options. Automated messaging bots boost brand consistency and accessibility not just on a hotel's website but also on platforms where consumers regularly engage, such as Facebook Messenger and WeChat. Social media platforms can be significant sources of bookings for certain hotels.
Transparency also helps: the boldest hotels show potential guests relevant room prices on other channels. These OTA comparison pop-ups give guests the confidence to stop shopping and book direct.
6. Develop Relationships Online and Face-to-Face
A little hustle never hurts: strive to find ambitious staff and then provide the training and cultural support to help each team member become sales-orientated. That's not to say that everyone becomes a pushy salesperson. On the contrary, it's about training staff to listen to guest needs and respond accordingly.
For example, in-person interactions at the front desk can be less transactional and more conversational. At check-in, guests could be presented with lightly personalized offers in-person: a free breakfast voucher for corporate travellers or a spa voucher for a weekender. At check-out, staff could be trained to say: "Thank you for staying with us! For your next visit, we'd like to extend a token of our appreciation. here's 10% off your next stay via our website."
"Hotels that receive a higher share of bookings through brand.com tend to have higher online customer review rankings." - 2017 Study by the Cornell University School of Hotel Administration
As part of a reputation management strategy, a hotel could respond to online reviews not just with a "thank you" but also with relevant information about the hotel. For example, positive feedback about the hotel spa could be accompanied by a non-salesy sentence about a spa package available on the hotel's website. These types of online interactions show potential guests that your hotel is responsive and eager to offer guests with exceptional service and value.
7. Optimize Your Hotel's Channel Mix
Direct bookings aren't free. Even if the reservation comes without any marketing expense, there's almost always an associated cost. Whether it's the cost of offering a loyalty programme, discounted rates through corporate contracts, or your website's booking engine technology, each booking has its own profitability profile.
For today's hotelier, "channel mix mastery" is a key differentiator that separates mediocre hotel performance from the superstars. The proper balance of direct, wholesale, and intermediary business gives the hotel more control and agility to respond dynamically to daily market conditions. Non-direct business increases your reach and fills rooms, and gives you more control to optimize sales across all of your channels with an eye to ever-improving RevPAR.
8. Focus on Rate Parity
As OTAs drop rate parity clauses, hotels have more leverage to use pricing as an enticement to book direct. Best Available Rates and Member Rates have strong appeal to consumers who want the best price possible.
This strategy loses some of its power when wholesale rates appear on non-contracted OTAs. These rates are often lower than a hotel's current Best Available Rate, which is priced dynamically in accordance with the current demand trends. When a guest books via that OTA, the hotel loses the higher-priced direct booking and also pays a higher cost of acquiring that booking. It's a double hit to the profitability of that booking, reducing revenue and increasing cost.
That's why rate parity is essential for direct booking: when hotel revenue management goals fall prey to disparity, direct booking and RevPAR targets are harder to reach. Invest in the right tools to help you monitor and enforce rate parity across channels.
9. Properly Forecast Demand
Hotels with inaccurate forecasting perform more poorly than hotels with robust demand forecasting tools. By leveraging a pricing optimisation tool that relies on both hotel- and market-level data, rates can be dynamically adjusted based on current trends.
In addition, rates and availability should be synced across all booking channels in real-time. A lost booking, or a booking at a lower rate than expected, has a negative effect on RevPAR.
10. Exceed Guest Expectations
The most straightforward way to increase direct bookings is to give guests a strong reason to return. Hoteliers don't need technology to exceed guest expectations with a memorable experience. For some guests, a memorable experience means a stay without any issues or unnecessary interactions. For others, a memorable experience involves hotel staff that went above and beyond.
Certainly, a hotel's share of direct bookings and its RevPAR are only two parts of a comprehensive revenue management strategy. Growth in either of these two metrics does not necessarily mean growth in profitability. For instance, high occupancy at lower-than-expected rates may be less profitable than lower occupancy at expected rates. It all comes down to pricing power and rate optimisation that maintains the ideal blend of occupancy and average daily rate across all channels.
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