Understanding of the Online Marketing
|by Miriam Allenson, September 2004
Consider this scenario: business traveler to New York wants to book a room close to the Javits Center where she will be attending a show. She’s unfamiliar with Manhattan but knows she’ll want to stay at a nearby hotel. So she goes online to a search engine like Google and keys in ‘hotels near Javits Center.’ Her results page will list dozens of nearby hotels from which she can choose. Will she then make a reservation online? Will she choose a hotel through one of the intermediaries like Expedia or Hotels.com? Perhaps she will scan through various hotel websites, pick one and then try to book online. Or, perhaps, when she finds the process too difficult, she’ll pick up the phone, call a chain CRS and be done with it.
Hoteliers at independent properties near the Javits Center ought to cringe at the way that scenario plays out. Especially if theirs is one of those websites on which it’s problematic to book a reservation. What do we mean by problematic? A website that doesn’t come up on a search page for starters. One that doesn’t reflect the quality and type of its accommodations for another. And last, but in no way least problematic, is the website with a booking engine that’s confusing, or better yet, one with none at all.
“Up until recently management by and large let the hotel website be controlled more by technical staff,” says Ilan Blum of Isis Design Group, an online marketing firm that specializes in the hospitality industry. Blum works primarily with independently owned hotels on marketing, website design and booking engine issues. “Now the marketing and sales staff has taken over, which is the way it should be,” he says, “because more and more people are booking their hotel reservations online.”
Which is one of the points made in a 2003 report issued by UCD, a London/Southampton based company that focuses on user interface, design and evaluation within the online travel and hospitality sector. In an article published at www.internetnews.com, UCD’s Alex Bainbridge says, “Online hotel reservations [are] predicted to reach 20% of all online travel bookings by 2005.”
With numbers like these, it’s a good thing that independent hoteliers are starting to think of ways to make their websites more usable and efficient. But still, as UCD’s Bainbridge says, “Many [web]sites do not meet the usability needs of their customers, despite the keenness of consumers to book on the web.” On this point Bainbridge speaks not only of the independents but also of the chains.
To their credit, the latter have begun to deal with this reality. To understand how to capture more reservations, make their sites more usable, and increase bottom line business is a challenge chains, with their access to technical know-how, man-hour availability, and budget are well positioned to accomplish.
Not so the independents. The advantages that accrue to larger operations are not available to them. Independent hoteliers already have enough on their plates running the day-to-day operations. By and large, they don’t have the dollars it takes to find someone who understands both the technical quirks of the online reservations process and the marketing applications that make a website work at its optimum level.
“Traditionally online marketers, website designers and companies that provide booking engines don’t come cheap,” says Blum. “Beyond original setup, designers charge for any changes the hotel wants to make. And marketers charge fees regardless of the number of reservations made or even if reservations are made.” Which is why the Isis Design model has been working so well for their clients at independently owned hotels.
Blum says that Isis Design Group is one of the few online marketing companies working in the hospitality industry that provides services in all three areas. Isis does not charge for the marketing efforts they expend for their hotel clients. Nor do they charge for website design, or for the construction and management of the booking engine. Instead Isis charges commission, a fraction of that charged by the intermediaries on each reservation made at the website. “We have a vested interest in our hotel clients being successful, because when they are, we are. We only make money when they do.” Isis currently manages the online booking process for well over 3,000 hotel rooms in New York City.
“Obviously the first thing we at Isis look at when we begin to work with a hotel is their website,” Blum says. “Sometimes an hotelier will commission a designer to build them a site filled with clever copy and all kinds of bells and whistles. What they end up with is a website that is no more a true reflection of what accommodations the hotel offers than the home page of a fine arts museum.” His point is that knowing what looks good and what is good are two very different things.
A website, to be effective, must be user friendly. “Menus should be
clearly marked. They should send you, as the customer, to the next page,
the page where you want to be. There has to be a natural progression, a
stickiness,” continues Blum, “from where the customer starts their exploration
to the final step where the reservation is asked for and confirmed. If
at any point in the process the website doesn’t satisfy the customer’s
needs, they will leave the site, the hotel loses the reservation, and in
all likelihood, the customer.”
“When we sat down with Renato to discuss how we would re-do the Jolly Madison website, we knew we would have a unique challenge. Yes, it was important for guests to see the two different room types and how beautiful they are. But more importantly, while the Jolly is a very popular and well-known brand in Italy, it is not so well known in the United States.
“We saw immediately that we would have to mount two different advertising campaigns. The first would be directed at Italian visitors to New York, and be based upon the concept that the Jolly Madison is “your home away from home.” And the second part of the campaign was to be aimed at Americans, ” continues Blum, “who would need a good, solid introduction to all that the hotel offers. We based that part of the campaign on the concept, ‘enjoy Italian hospitality in New York City’.”
“It took no time, once the website was up and running before there was an up tick in reservations,” says Grussu. “We immediately saw an increase of 200% more in room night bookings per month.”
As important as the look and feel of the website is for these clients, equally important, if not more so is the structure of the booking engine. “Until we found out about Isis and Ilan came to talk to us about our website, we had no booking engine,” says Tina Roseman, Reservations Manager at the Radio City Apartments. Radio City Apartments is a small hotel in midtown Manhattan, typical of many independents in that its staff must wear many hats, some of which fit better than others.
The fact that there was a disconnect between their website and how reservations were made was a huge problem for Roseman. In an article on the website www.lansa.com, Criss Chrestman, e-business practice manager at Agilysis speaks specifically to that point. “It is very important that a web-based reservation system has real time access to data. An Internet reservation system that is not online can cost money and cause inconvenience by not being in sync with the inventory availability, rating strategy and credit card authorization.”
Before we installed a booking engine for Tina,” says Blum, corroborating Chrestman, “Radio City Apartments had no idea how many customers they lost, no way to judge how many were put off by having to wait 24 hours between the time they attempted to make a reservation and when it could be confirmed. Once we installed the booking engine, not only did the hotel’s customers get immediate confirmation, but the hotel saw an increase in business.”
At this point, most hotels have booking engines of some kind. Having one isn’t the question anymore. What’s important is how well it works for the hotelier and for the prospective guest using it. “What I particularly like about our booking engine,” points out Roseman, “is that Ilan gave us software to go in and modify rates or close a day out if we are near being sold out. Plus he set it up so a customer can cancel or modify his own reservation. This saves us so much time.”
And while most booking engines are passive, Blum has devised methodologies for booking engines he builds for clients that are pro-active. “Many companies are in the business of providing booking engines. But that’s it. They do nothing to help the hotelier figure out how to insure that once the prospective guest is on the site that they will actually make a reservation.”
Blum continues. “The Isis booking engine allows a reservations manager to look at the website and know how many people are on site, even what page they’re on at any given time. We can tell when a customer exits the site, and again which page they’re on. If they exit without making a reservation, maybe there’s something about that page that needs changing. We are always considering the effect of the website’s components.”
Blum sites an example. “Suppose a hotel is running a Columbus Day special. If the manager sees that 200 people have looked at it and only five have booked, then that means there’s something wrong with the package. The red flag being raised, the manager has time to look at the rate to see if it’s too high and then has the ability to change it.”
In some ways, though, the biggest thorn in the hotelier’s side is that of the markup margins demanded by the intermediaries. They can be as high as 35%. Worse is the loss of inventory control that results. In a May 2004 article in HOTELS magazine, a Reed Business Information publication, author Mary Scoviak quotes Stephen Bollenbach, Chairman and CEO of Hilton Hotels Corporation on the subject. “Internet intermediaries are not bad in the biblical sense. They just charge too much.” And get away with it, says Blum. “In the recent past hotels needed the intermediaries. And also, the intermediaries understood keyword auction.”
If an independent hotelier can manipulate the keyword auction process the same way the intermediaries do, they increase their ROI and decrease the number of reservations that they must depend upon coming from intermediaries. The difficulty lies in knowing which keywords, which descriptors get a property to the top of the search page. Even then, it’s not as simple as that.
“Not only do you need to know which keywords will get you into the top position,” says Blum, “but you also need to know how much you should be paying. If a particular keyword package results in a higher reservation rate at a given hotel, I will pay more to guarantee first position on the results page.”
And that’s not easy anymore,” he continues. “I am constantly re-evaluating, adding, deleting, changing and updating. Plus, I always need to be up on what’s going on…like what conventions will be coming to town. I think most hotel general managers and marketing and sales managers have so much on their plates that it’s next to impossible for them to keep up with this information.”
This year, as business has rebounded strongly for the first time since the beginning of the post 9/11 slump, the chains are positioning themselves to rely less than in previous years on intermediaries to move their unsold inventory. They are reworking the deals they have with intermediaries. With their clout they are able to renegotiate margins from the 25-35% range to 18-20% range, according to the Scoviak article.
Unfortunately, according to Blum, independents don’t hold that same sway with Hotels.com, Expedia or Travelocity. They are still suffering through margins in the former range. Thus it is that these days, independent hoteliers find themselves in a classic Catch-22 situation. They still have to do business with the intermediaries. Yet their ability to show a profit is severely limited by the huge commissions they pay. But they can’t opt out, for fear that inventory will go unsold because they don’t have the chains’ long held top-of-mind presence.
But if an independent hotelier understands keyword auction, he cuts heavily into the percentage of bottom line business they must cede to the intermediaries. Before Blum built the booking engine for Radio City Apartments and overhauled their website, 100% of their online reservations came from intermediaries. Now, even though they themselves have no dollars for online advertising, 40% of their online reservations come from their own website. “Ilan gets us to the top of the search page lists using keywords that he has shown will work for us. Plus he provides us with advertising on www.bigapplehotels.com and other sites.”
“How can you argue with such success,” asks Grussu at the Jolly Madison? “We are consistently ahead of the chain (meaning the Jolly) website in bookings. In 2003 we ran 600 room nights ahead of the chain per month. So far in 2004 we are running 1,000 room nights ahead per month. To really put the icing on the cake, the average room night profit gotten from the website Ilan built for us is $30 higher than the average rate from all other channels.”
Blum has made it his business, both figuratively and actually to understand the online marketing process for his clients. Isis’ profitability depends upon it. “I see myself as a partner,” he says. He has monthly meetings with each of the hotels he works with in order to stay on top of any changes they want to make or specials they want to advertise. He constantly looks at how many hits to their websites result in reservations. If the ratio is too low, he analyzes why…and after discussion with hotel management, makes changes accordingly.
Blum thinks it’s important for independent hoteliers to understand marketplace fluidity and how an unexpected turn of events can mean vacant rooms. “Independent hoteliers are often unable to weather a storm created by the unexpected,” he says. He cites as an example late August news that room nights were going unsold to conventioneers who were planning to attend the Republican National Convention in Manhattan – thousands less than forecast - rooms that hoteliers would then, last minute, have to scramble to sell elsewhere.
“Hotel management can minimize the bottom line effect of a problem, even one as big as the shortfall of reservations that led up to the convention – if they utilize the right marketing tools, make sure their website is easy to navigate and is a reflection of what they have to offer their customer, and maintain a booking engine that is user-friendly.”
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