According to Geoffrey Moore in his book Living on the Fault Line: Managing for Shareholder Value in the Age of the Internet, stock price is a measure of future potential based on present competitive advantage. Competitive advantage consists of two components, GAP and CAP. The first, GAP, is the distance between your hotel offerings and your nearest competitors or the competitive advantage gap. The second is CAP, the competitive advantage period, that is the projected period a company can maintain its differentiated position. In other words if a hotel company has superior products and significant barriers to entry, it has both a competitive gap (product differentiation) and a competitive cap (time lag for competitor entry).
When developing a cohesive marketing strategy, both CAP and GAP should be incorporated to achieve success for sustained periods. With that in mind, here are some guiding principles to help you achieve a competitive advantage in your market.
Distribution Dilemma and Marketing Dollars
Many hotels receive reservations from third party sources, most notably online travel agencies (OTAs). It is important to understand the OTA booking process and what its impact is on the hotel. OTAs buy keywords that allow them to dominate the search process. This is largely due to their ability and willingness to spend marketing dollars. For example, if a guest attempts a search with the keywords “hotels in Scottsdale, Arizona,” a search engine results page (SERP) on a non-mobile device will appear as follows:
As you can see, the top four results are Google Ads and not surprisingly, these four ads are all for OTAs. While the results will vary based on the time of day and the number of people bidding on certain keywords, OTAs dominate the broadest searched terms.
After scrolling past the four ad placements, you will see a Google Maps listing with three locations. These Google Local rankings are the results of a great search engine optimization (SEO) campaign as well as Google’s local algorithm. Once past the map we get into the organic search results, as follows:
This example is from the same search query, “hotels in Scottsdale, Arizona.” The top three results are a great example of content marketing, i.e., these “Top 10” type posts are extremely engaging and useful for guests, which is why Google has given them such high priority in their organic ranking. If you take note of the websites these links are for, you will not be surprised to find out they are all OTAs and metasearch engines. Metasearch engines (defined as a search tool that uses another search engine’s data to produce their own results from the Internet, think Kayak, Trivago or another aggregator) further demonstrate how OTAs control key real estate on SERPs because Kayak is owned by Priceline and Trivago is owned by Expedia. As an aside, Trivago has been climbing Google’s ranks in related searches to hotels over the past 5 years.
The Perfect Mix – Channel Management
More than ever it will be vital for hotel owners and operators to stay on top of the distribution landscape that is expanding beyond OTAs including popular sales vehicles such as meta-search, flash sales and mobile channels. Beyond simple awareness of the different mediums available to sell hotel rooms, hoteliers must know the cost and expected return of each distribution channel. Hoteliers must preserve rate parity and their brand by utilizing the most cost-effective distribution channels instead of using desperate measures to sell inventory.
One option to consider is to search for a cheaper OTA. For example, why not use Airbnb? At 3 percent they are a much cheaper choice than the others. Sure, they are not a traditional OTA because they have non-hotels as their core business. Look for Facebook, Google, Amazon and Apple to join in on the fun in 2017 and beyond. Let’s hope these new competitors in the OTA world price their commissions at levels closer to Airbnb.
When creating a strategic distribution channel plan, direct to hotel and voice tend to be the most overlooked channels representing almost 40 percent of our business. Direct to hotel and voice includes walk-ins, calls directly to the property, groups and any other booking handled on property. These channels also happen to be the most cost effective for hotels by avoiding commission charges while having a higher conversion rate. To optimize profits the property needs to utilize guest service agents (GSAs) as an extension of the sales team. Give the GSAs tools to “close the sale” by training them to answer questions and provide guests with the information they are seeking.
5-Point Plan to Book Direct
The best answer to improve the distribution dilemma is to get as many customers as possible to book directly with you. The chains have launched aggressive campaigns and Kalibri Labs has come up with a 5-point plan that will help hoteliers. Cindy Estes Green, the most articulate consultant I have heard on this subject, has determined five benefits that direct bookings via brand.com will have to make you more profitable:
- Lower the cost of initial customer acquisition. COPE (contribution to operating profit and expenses) is revenue after transaction related costs.
- Increase the knowledge of the guest to personalize his/her experience. Brand.com bookers create 17.9 percent higher net revenue than those coming from OTAs.
- Build on that relationship. The lifetime value of a guest is huge as the cost to acquire a guest for the first time is much higher than that of a repeat guest.
- Diversify your demand streams. It is a very high risk to have limited customer types and clients when a downturn comes.
- Improve guest engagement. When guests get what they expect, they become more loyal.
Adapt or Get Left Behind – Messaging Apps
The industry has only recently adopted chat apps. WhatsApp, Facebook Messenger, Lola Travel and artificial intelligence apps are out there. WeChat, my favorite, is a messaging and calling app that allows you to easily connect with family and friends across countries. It’s the all-in-one communications app for text (SMS/MMS), voice and video calls. Keep your eyes on Chatbots, by definition a type of conversational agent or computer program designed to simulate an intelligent conversation with one or more human users via auditory or textual methods. A number of vendors are trying to break through and become a leader. We use Zingle at a number of our hotels and the feedback from our guests being able to communicate directly with the hotel via text has been nothing but positive!
The Science Behind Revenue Management
Revenue management has morphed from the days it was first introduced by the airline industry in the 1970s to being a complex science today. Managers have always lowered prices to stimulate sales when demand is weak and have raised prices during peak demand periods. Hotels are now able to update prices for all future arrival dates to match market demands each day via advanced market intelligence applications. TravelClick has pace reports for transient and group demand that look at bookings one year in advance. STR is now offering intelligence looking at future bookings rather than solely historic figures. Today, it is time for the industry to price based on value perception and not just price relative to a competitor. Understanding the true demand in a marketplace is quite scientific.
The hotels that need help with revenue management are generally focused-service hotels. Full-service hotels typically have a seasoned professional at the helm. One of the interesting things about these properties is that they are able to sell more than rooms and these assets (think spas, golf courses and restaurants) can be sold as well as the meeting facilities by new apps. I was involved in the planning stages of a new app that will sell all of those services as well as rooms by the hour (no, not for the reasons you’re thinking, rather selling rooms when they are needed). Take a look at HotelsByDay or AsYouStay and you will see the opportunities for certain markets.
Search Engine Optimization – Content Marketing
This is where content comes into play. Content that is well-written, includes verbiage that plays well within the search engines and, most importantly, is what users want to consume, will win over potential guests. Optimizing content marketing is different than just having command of the English language. It requires up-to-date knowledge on search algorithms and a vast understanding of what your online audience likes. This may come in the form of an agency or internal professional but basic search engine marketing (SEM) is one of the most effective ways to grow your business in an increasingly competitive marketplace. With millions of businesses out there all vying for the same eyeballs, it’s never been more important to advertise online and SEM is the most effective way to promote your products and grow your business. Companies like Milestone, GCommerce and Screen Pilot can help get you started.
Conversational and Social Marketing
The number of major social platforms has plateaued for the moment and they’ve begun to homogenize, e.g., Instagram Moments, and Snapchat LiveStories. There is limitless content being exchanged by the second all of which is a recipe for shorter-than-normal attention spans or what we call GADD (guest attention deficit disorder). Despite this, the potential is strong for your hotel property to enthrall even the most distracted social media user. Remember that content is king. Travel brands and companies have all discovered that high-quality content is the key to any successful social marketing campaign. One ultra-creative blog post or a string of fun Facebook updates is just a start. Committing to quality content that attracts travelers should happen with every Tweet, LinkedIn comment, Facebook or Instagram update and blog post.
While it’s smart to offer discounts and deals via social media to jumpstart your following from time to time, you shouldn’t post these too often. Instead, your daily strategy should be to provide compelling content that stimulates more interest. This coupled with “wow” customer service that creates positive reviews is what will help you build and retain your reputation.
While social media is not a panacea and does not yet close many deals, travelers clearly rely on the information to help them choose a hotel. Moreover, we are entering a period of time where reputation management is also becoming a science. Studies have shown that 90 percent of travelers trust recommendations from their friends and family more than any other form of advertising. Additionally, 70 percent of travelers make decisions based on reviews and responses on review sites. This field is growing as technology companies work to differentiate themselves.
In 2016 half of the travel industry is using social media as a way of generating revenue and bookings. The majority of hoteliers have jumped onto the digital bandwagon to engage with customers. Social media has become a significant factor in a website’s ability to rank. Content that has a social connection to a user, meaning someone you are linked to via Facebook, Twitter, or any major social network, is prioritized within their SERPs. Hotels can no longer afford to linger over adding social media to their marketing mix. It’s now a necessary element of traffic-driving success.
Hotel guests buy based on a loyalty to your business, not just the price. Loyalty is earned through superior “wow” customer service which creates a spectacular reputation. The content that is provided in your relationships with guests via social media should embody that stellar service and reputation. It’s not about the discount you offer, it’s about the passion for customer service that you provide, the knowledge of the market you have and ultimately the value that you have created both inside your four walls and in cyberspace.
Data and Analytics – What Should You Look For?
Your hotel has access to lots of data but the question is, do you use it? It is very costly to implement a comprehensive data analysis plan, especially across multiple hotel brands where systems cannot be integrated. However, each hotel has more information about its guests than ever before. Prior to being checked in guests can now provide their favorite room types, room temperature, foods, TV shows, pillows and more. This tailored guest experience currently exists in new high-end hotels but it will soon be available at every hotel. Utilizing this information and adapting it to our targeted advertising campaigns on social media and search engines can produce much higher returns on investment.
I use data to understand price sensitivity in each market. When is it better to take the soccer team of young adults four to a room? What market segment is really better for this hotel? With occupancies at peak, it is paramount to our success that we optimize rates to offset the rising costs of labor, healthcare and more. Taking all this data into account when building our marketing strategies will help us attract guests that are perfect for our hotels. In turn, this produces a better guest experience that results in higher reputation scores. It is a win-win!
To Sum Things Up
Marketing is often an afterthought within the hospitality industry and where there is focus, it is pigeonholed to specific buzzword-oriented areas with hopes of creating a temporary boost in traffic translating into a temporary boost in bookings. This reactive nature is, unfortunately, a product of hospitality, an industry that lives and breathes off operations to achieve success. But marketing is meant to be coupled with a long-term strategy that guides the branding, voice and growth of your hotel over the next 10 to 30 years.
The OTAs embraced marketing in today’s Internet age before hotels but that does not make them the enemy. With the proper marketing strategies in place and a good understanding of your channel mix, hotels can work to regain ground on SERPs and be setup for future success thanks to CAP and GAP principles.
To a great 2017!