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David vs. Goliath: An Email Marketing Story

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Armed with nothing more than a computer, a Web site and an interactive CRM program, today’s smaller hotels are slaying the larger giants when battling for online reservations, e-marketing visibility and repeat bookings

By Don Hay, October 2005
 
This summer I had the good fortune of sitting with some of the best and brightest minds in hospitality technology, from the smaller hotel chains and management companies to fellow service providers and some of the biggest brands in the industry. What we discussed – or should I say, debated -- was the viability of communicating with guests through email and Web promotions to drive incremental revenues. What I learned was that the “little guy” or small hotel operator/management company is better armed today with online Customer Relationship Management arsenals and strategies than are the “big boys.” 
 
The goal of any good email marketing campaign is to get guests to spend more money at the hotel—whether it’s an incentive to up-sell services or specials for a pending reservation or simply to entice a guest to make a future booking. The No. 1 problem for hotels looking to do email marketing is that most lack the ability to entice guests to provide their email address. In the case of larger hotel chains, I learned that some are driven by corporate CRM initiatives that target the loyalty club members only, while others view email marketing as a privacy violation altogether, concerned that their e-marketing pieces may be viewed as SPAM and simply opt not to market online altogether. 
 
What the smaller hotels have come to realize is that by partnering with a CRM provider, they can not only capture guests’ emails directly from their property-management systems or directly from their Web sites, but they can immediately send email confirmations to guests and up-sell to those guests prior to arrival. The result is an increase in incremental revenue up front and an increase in repeat business and guest loyalty on the back end.
 
Therefore, email marketing is effective when put in front of the right people at the right time.
 
Todd Maxwell, Director of IT at Larkspur Hospitality, said that Larkspur is in favor of email marketing and said the company is currently looking for a CRM partner. Larkspur Hospitality is a rapidly growing hotel company that owns and operates more than 20 hotels comprising three brands in areas of Northern California and the Pacific Northwest. Their largest hotel has 170 rooms. According to Market Metrix, an independent hotel industry guest satisfaction consulting firm, Larkspur Hospitality hotels have consistently exceeded the industry average of the top five percent of U.S. hotels for guest satisfaction.
 
”We are looking for a CRM partner to help us launch our email marketing strategy in order to enhance the relationship we have with our guests,” Maxwell said. “We are eager to see the high conversion rates and increased online bookings generated from these types of campaigns.”
 
Maxwell said he believes that privacy could be a potential issue, but providing an opt-in or -out option shows guests that you respect their privacy.
 
“At Larkspur, email addresses are requested at the time a reservation is made,” Maxwell said. “Guests also have the opportunity to sign up on our websites to receive email marketing promotions. Quality data capture is key to any email marketing strategy.” 
 
Proof is in the numbers

As a provider of e-marketing services for hotels, I can statistically prove what Maxwell is saying, and that is: e-mail campaigns are generating high “open” rates and “click-through” volumes for hotels. On average, 34 percent of all email blast recipients over the past six months have opened the promotional piece sent by Digital Alchemy’s customer hotels. Up to 24 percent of those clicked through to a specific amenity or property feature or to the hotel’s shopping page.  This success rate is more than 5 times the 3 percent to 7 percent rate for similar campaigns reported by industry benchmarks.
 
Most people would call a 34% success rate “unbelievable” for an email blast program. But it’s not unexpected due to the customer-relationship management process that begins the instant a booking is placed at the hotel. First the guest will receive a reservation confirmation email from a hotel.  Then he or she will begin to receive subsequent emails containing pre-visit activity suggestions with property photos and hotel messages. Finally, a guest will receive a post-stay thank-you note with a click-through on-line guest comment card. Therefore, a line of communication and relationship via email between the hotel and the guest already has been established, and the guest feels comfortable opening future messages – and actually looks forward to them.
 
Eve LeGrand, vice president of operations for Luxe Worldwide Hotels in California, said Luxe is currently testing the viability of pre- and post-stay email marketing campaigns for its two company-owned hotels in the Los Angeles area.  Luxe, a premiere representation company of 200 independently owned and operated hotels situated in prominent international locales in 27 countries, provides global sales, reservations, marketing and eBusiness services. Its e-distribution and online marketing services including: central reservations, GDS connectivity, online channel management, Web booking engine and voice reservations. 
 
“Maintaining the relationship with our member hotels and their customers is our key to the success and growth of the Luxe Worldwide Hotels,” LeGrand said. “We consider our members to be part of our family, and therefore we do whatever possible to stay in constant contact with them, whether it’s through our Web site, e-newsletters or phone conversations. We also communicate regularly online to travel agents, primarily for destination marketing. Should the email marketing program we are testing prove effective for our two company-owned hotels, we will launch a partnership agreement for our member hotels to take advantage of the customer direct email marketing campaigns through Digital Alchemy – and we expect a great return from the initiative. “
 
Part of the reason the online communications effort is working so well for Luxe, LeGrand said, is because the company provides an ‘opt-out’ option to its members who do not want to receive marketing information and support online. The good news, she said, is that the majority of hotels welcome the online dialog.
 
Sally Kelly, senior manager at hospitality consultancy Bearing Point in Virginia, said she agrees with Luxe and Larkspur Hospitality that an “opt-in” option is the key to any successful email marketing campaign.
 
“We’ve been working with a lot of developers (who are looking towards 2007-2008 hotel openings) to assist them with their online IT strategies,” Kelly said. “We’ve made it very clear to these developers that all the email activity we are proposing should explicitly be ‘opt-in.’ Hotels must put the disclaimer out there: if you want it, you’ll get it. If you don’t want it, let us know now.  By getting customer permission to market to them online, you are protecting them and the reputation of your hotel.”
 
Mark Ozawa, managing director of Accuvia Consulting in Maryland, said that getting everyone on board to support an e-marketing initiative is not as easy as one may think.
 
“For a long time in our industry there’s been a disconnect between what the marketing folks needed and what the reservations or front-desk staff was willing (or able) to provide,” Ozawa said. “The marketing folks’ are looking for ways to put more heads in beds through targeted promotions, be it direct mail or online. The operational staff however has been challenged to get this information. In some cases, systems have not had a place to insert an e-mail address. In other cases, the operational staff has been pushed to reduce the time it takes to process the reservation or check-in as a way of improving the guests’ perception of the service.  An increased focused on the importance of marketing, however, is changing everyone’s thinking.” 
 
Ozawa said the advent of the internet has increased the operational focus and awareness of capturing email addresses to benefit everyone at the hotel. There now are incentives in place at many hotels that encourage the front desk to get email addresses at check-in or at the point of reservations in order to benefit the sales and marketing side of the business, he said.
 
Scott Gibson, senior VP of distribution and CIO of Best Western, said providing incentives to front desk staff to capture emails at the point-of-reservations works very well.
 
"The best source of quality customer address information is the customer," Gibson said. "If a customer has provided it directly through your web site, it's correct. If the customer has provided it verbally to one of your customer contact points, it is wrong. This is pretty consistently true, because capturing quality address information is usually secondary to what those customer contact points are trying to accomplish. Therefore, getting permission to market to your current or prospective guests online via your web site is one of the best things you can do for everyone involved."
 
My advice to hotel operators and/or marketers is that when email addresses are wrong, go to the reservations manager at the hotel so that he or she can bring it to the attention of the reservations agent. These folks may not be aware that they are typing in a “#” sign instead of a “@” sign or entering “.con” instead of “.com” when they are taking a reservation.  Bringing it to their attention may correct a large percentage of the problem.
 
Think of it this way: Email addresses don’t go bad that often and can have a three- to four-year shelf life. Loyal customers are fairly likely to go onto a hotel’s Web site and change their email address. And, more importantly, the next time that guest makes a reservation he or she will update the email address, which then gets transferred to all relative databases. 
 
The consensus among the smaller hotel operators and management companies was this: It’s more effective to keep the guests you have than to try to find new ones. The net effect of email marketing and CRM programs is to position the message coming from a hotel in the guests’ mind as being relevant, interesting and worth reading. From the reports we’ve seen which show the number of emails “opened” and the click-through volumes, email marketing is growing exponentially at the smaller properties. This means, we are certainly doing something right.”
 



Don Hay is CEO of Ft. Worth, Texas-based Digital Alchemy, a customer-relationship management and electronic-marketing company.  For more information, call Don at (817) 249-0757 or e-mail him at dhay@Data2Gold.com.
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Contact:

Don Hay, CEO
Digital Alchemy
(817) 249-0757
dhay@Data2Gold.com

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Also See: Developing an Email Marketing Strategy in Hospitality / Max Starkov & Jason Price / September 2004
The Power of Email Marketing in the Hospitality Industry: Developing a Total Email Marketing Strategy / Jason Price & Max Starkov / June 2002


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