|By Max Starkov and Jason Price, June 2007
What will happen to traditional and online distribution channels in
hospitality in the next few years? How will the direct web channel outpace
competitors and third-party intermediaries? With online travel growing,
how do hoteliers get their fair share? These questions reflect important
trends in the marketplace. Consider how these trends will impact your hotel,
resort, and brand.
An estimated 1/3 of all hotel bookings will be done online this year,
and another 1/3 will be directly influenced by online research and planning,
but booked offline. By understanding current Internet marketing trends
in hospitality, including travel consumer expectations and perceptions,
hoteliers can enhance their web presence, and utilize the Internet as the
most cost effective and up-to-date sales and marketing channel.
In the past several years, we have all watched the remarkable growth
of the online travel marketplace. With an increasing number of travel consumers
doing travel research online (75% of adults in the US - TIA), gaining broadband
Internet access at home and becoming more and more accustomed to doing
business and transacting on the web, we will continue to see this growth
across market segments at an ever increasing rate.
Here is the online travel adoption rate in 2005 and 2008:
(Merrill Lynch, PhoCusWright, HeBS)
|Hospitality: (USA, % of all bookings):
This year, 40% of all leisure and 35% of business travel bookings will
be done online. By 2010 over 50% of leisure bookings are expected to be
online. The percentage of meeting planners researching and booking online
is also growing at a rapid pace. An estimated 89% of planners are researching
event locations on the web, and by 2008, 41% of all groups and meetings
travel revenues will come from the Internet.
Direct vs. Indirect Online Distribution
The direct online channel will continue to be the main focus for hoteliers.
The industry as a whole has realized that not only has the Internet become
the preferred channel for travel consumers to plan and book lodging, but
the direct online channel is the cheapest form of distribution. The shift
from indirect to direct online distribution will continue to be a major
trend in the next several years:
(Merrill Lynch, HeBS)
|Overall for the industry (USA):
|Hotel Branded Websites:
In 2006 the major hotel brands enjoyed an above the average direct vs.
indirect online ratio of 81.4% vs. 18.6%.
The Indirect Online Channel
What are the most important trends in the indirect online channel?
To begin with, now is the time to start working with fewer third party
intermediaries (TPI’s), and at drastically lower margins (e.g. 15%-18%).
Smart hoteliers deal only with TPI’s that can access the hotel inventory
electronically (through the hotel PMS, brand CRS, Pegasus or the GDS),
and not via manual extranets. These hoteliers work in strict rate parity,
use dynamic TPI margins (higher when you need the TPI’s, lower when you
don’t), and prohibit TPI’s from using trademarked property names for their
PPC and search engine marketing campaigns.
Other ways to shift consumers from TPI’s to the hotel website include
unique product offerings found only on the hotel site (e.g. romantic getaways,
bed and breakfast packages, etc.), and launching or enhancing the hotel
Consumer Generated Media
Consumer Generated Media (CGM) continues to grow in importance and
popularity. Discussion boards and forums, blogs, social networks like MySpace
and LinkedIn, customer review sites like TripAdvisor, and hotel-specific
blogs like HotelChatter.com dominate the Internet today and have become
an integral part of the travel planning process. In 2006, 28% of travel
planners researched CGM sites vs. 4% in 2005.
Consumers, while becoming increasingly dependent on customer testimonials
and reviews, will still need to read an official hotel description. While
hoteliers need to monitor and react quickly to CGM postings, and must establish
a corporate policy regarding CGM, it is still important to make sure the
hotel’s website is up to date, informative, optimized, and user friendly.
The Internet and Travel Consumer Perceptions
The Internet has changed forever the way consumers plan and purchase
travel and access travel information. The credibility of information
on a website is no longer automatically accepted. There is an “ideological
clash” between “official” content (the hotel’s own website, brochures,
descriptions, traditional star rating, etc.) and CGM-related content (blogs,
customer review sites, etc.). What do customers believe? The overly enthusiastic
hotel descriptions on a hotel’s own website, or the customer testimonials
on TripAdvisor which aren’t always so flattering?
Food for Thought: Credibility of hotel accreditation (star rating)
Campton Place Hotel: hotel class 5 stars
||(out of 5)
||(out of 5)
||(out of 3)
||4 ½ stars
||(out of 5)
||(out of 5)
||(out of 5)
The Internet, and especially CGM, has introduced a new level of confusion
as far as the star rating for any hotel is concerned. Which accreditation
is more important? The standard 5-star hotel class rating? The 4-diamond
AAA accreditation? Or the 4 star TripAdvisor CGM rating? For many savvy
travel consumers, the most credible would be the hotel star rating they
find on their favorite online service, the one they trust and regularly
use. Not what the “official” hotel accreditation is.
eCRM and Building Interactive Relationships with Customers
eCRM must be a vital component of a hotel’s Internet marketing strategy,
as the majority of hotel customers are planning and booking their stays
online. It is increasingly important to understand customer needs and their
lifestyles, and build a marketing strategy based on those needs.
Establishing mutually beneficial interactive relationships with your
customers is the ultimate goal of any eCRM initiative. Building interactive
relationships with the customer consists of three critical lifecycle stages:
Nurture -- Grow -- Retain.
To build a robust eCRM strategy in travel and hospitality hoteliers
need to embrace new sophisticated tools and business practices in the following
areas: increasing the knowledge they have about their customers, improving
customer service at the online research/planning/booking phase, personalization
of the marketing and service delivery, developing new and more efficient
customer needs-based marketing, and building customer loyalty.
Building Customer Loyalty on the Internet
Why does customer retention online matter? It costs 4-6 times more
to attract a new customer than to retain a current customer. Existing customers
are not only less costly to retain, but they also respond 4-5 times more
readily to promotions and e-mail campaigns than new customers. It is important
to extract more wealth out of your existing customer base by understanding
customer needs and their lifestyles, and building a marketing strategy
based on those needs. Knowing the customer, sending personalized messages,
being there at every touch-point (planning, purchasing, service consumption
and post-stay), and providing a unique value proposition leads to increased
Contrary to some opinions, reward programs do matter. 80% of online
bookers belong to a travel reward program and more than 60% belong to a
supplier-sponsored program (Forrester Research). The ability to earn
rewards is the reason why 55% of online hotel bookers prefer to book on
the hotel’s own website vs. a third party.
The Internet allows an unprecedented level of behavioral marketing.
We can now monitor consumer behavior in all stages of the life cycle and
personalize the brand message based on this behavior. Hoteliers can now
target their marketing messages according to specific customer behavior,
specific demographics, specific customer locations, and specific feeder
markets. With the ability to target marketing messages, hoteliers can stop
spending valuable dollars on those markets or campaigns that do not produce.
This year eMarketers will spend over $2 billion in behavioral marketing
in the U.S. alone.
Not only creating mobile friendly hotel websites, but sending marketing
messages via mobile technology is becoming more and more important in hospitality.
1 billion mobile devices were shipped in 2006. The majority of these new
devices provide broadband Internet access. The ability to instantly identify
a user’s geographic location allows marketers to provide a highly personalized
marketing message and experience.
Airlines already use this technology to provide travel alerts concerning
weather changes and flight schedules. Mobile mapping capabilities,
mobile search engines, and mobile advertising are just some of the areas
of growth. Hoteliers need to monitor this trend and provide mobile
hotel reservations and customer service.
Broadband and Rich Media
75% of active Internet users in the US use broadband at home and almost
100% of Internet users access broadband at work. This means faster download
times, faster searches, more sites and pages viewed, and more rich media
and applications possible.
Hotel websites must offer better imagery, higher display resolutions,
and rich media more than ever. 80% of Internet users have 1024x768 or higher
displays. To stay current, hotel websites must offer functionalities such
as mapping, weather, event calendars, and CGM initiatives such as blogs
and photo sharing.
New technology is making it possible to break down barriers between
technologies in hospitality. New, smarter technologies are available for
revenue management, website analytical tools, reward programs, personalization,
data-mining, eCRM, and interfacing to disparate technologies. Many
web-based applications are increasing secure, user-friendly, and are dropping
in cost. It will depend on the hotel’s strategy and what it wishes to achieve.
The Internet and Hotel Valuations
A direct online distribution strategy is a measurable asset to the
hotel. Cash flows influenced by the online channel will be scrutinized
more closely in the upcoming years as asset managers, developers, and hotel
buyers and sellers seek to build, grow, sell, and flip properties. For
those with winning strategies on the web, the valuation can be influenced
upwards of 10 to 20 percent, while those with a weak web presence can expect
a steep discount in their valuation in years to come.
Forecasting trends is a tricky business – especially in hospitality.
Our goal here is to simply point out a collection of trends and best practices
that seem to resonate across many hotel companies. Either these companies
have inquired about these practices, or have begun addressing some of the
trends described above, some even turning into meaningful results.
At your next strategy session for your hotel, resort, lodge, collection
of hotels, or hotel brand, consider how these trends may influence your
marketing efforts and grow the online channel. Start by applying the trends
identified and seek an experienced consulting firm to help you along the
Note: Mariana Mechoso, Manager eMarketing Services at HeBS, also contributed
to this article.
About the Authors:
Starkov is Chief eBusiness Strategist and Jason Price is EVP at Hospitality
eBusiness Strategies (HeBS), the industry’s leading Internet marketing
strategy consulting firm for the hospitality vertical, based in New York
HeBS has pioneered many of the "best practices" in hotel Internet marketing
and direct online distribution. The firm specializes in helping hoteliers
build their direct Internet marketing and distribution strategy, boost
the hotel Internet marketing presence, establish interactive relationships
with their customers, and significantly increase direct online bookings
and ADRs. A diverse client portfolio of over 400 top tier major hotel brands,
multinational hospitality corporations, hotel management and representation
companies, franchisees and independents, resorts, casinos and CVB’s and
has sought and successfully taken advantage of the firm hospitality Internet
marketing expertise. Contact HeBS consultants at (212)752-8186 or firstname.lastname@example.org.