By Larry and Adam Mogelonsky
The blinders are on as every hotel looks to cope with a swing back to high occupancies during the upcoming peak summer travel season. But think beyond this travel recovery scenario and you’ll see that the terrain has permanently shifted in favor of short-term rentals as leaders in some markets.
We’ve been forecasting for quite some time that Airbnb, Vrbo and the like would come to not only take travelers from hotels but also influence the direction of the entire accommodations industry. Look no further than the gains seen from Airbnb’s earnings report from Q1 2022 released at the beginning of May. This is now a quarterly read that you should follow religiously because so many travelers are staying at alternate lodgings that they will come to expect similar experiences when choosing hotels.
What can you do to fight back and preserve your topline over the next decade? Start by placing yourself in the shoes of a brand-agnostic (and perhaps destination-agnostic) customer.
Not loyal to one hotel brand or another, what accommodation will offer me the most ‘value’ in terms of rates, spaces, convenience and location? As an exercise, this can help you to think more objectively about the inherent advantages of your short-term rental competitors and what operational changes or promotions would be meaningful to these guests. Here are five prominent elements.
- Rates. Home sharing units have gained the reputation as offering more square footage per dollar over hotels. While we’re all advertising a best rate guarantee to incentivize customers to book direct, it’s now time to conduct an analysis about how your rates stack up with these other accommodations. You may find that an adjustment to your rate strategy is in order.
- Spaces. Home sharing units offer a diverse range of accommodations in terms of configurations, amenities and décor. Hotels can thus work to create unique touchpoints in each room or even subcategories that have different FF&E configurations. One note is that part of the appeal of a traditional hotel is the guarantee of certain features no matter the exact room; this brand standard ‘peace of mind’ should be adhered to and reinforced through marketing.
- Extended stays. Let’s throw the rates and spaces arguments together and look at the growth of extended stays as remote work (and workcations) become a permanent fixture of the world. Alternate lodgings prominently feature kitchenettes to enable hybrid travel while their booking engines typically offer weekly and monthly discounts to the nightly rate.
- Convenience 🡪 Even as the pandemic fades away, guests are increasingly favoring more contactless exchanges built into their hotel stays – mobile check-in, mobile room keys, guest comm apps with digital concierge, in-room voice bots versus calling downstairs, mobile check-out and so on. Yet some guests and managers still prefer not to bypass the front desk as a core aspect of the onsite experience while others are too busy to complete the necessary hardware and software updates to enable this feature. Offering the choice of touchless check-ins and avoiding potential lineups will be key going forward.
- Location 🡪 While your hotel is situated where it is, consider how home sharing platforms have long touted their inventory as being ‘embedded in the community’. Can’t you do the same? Hotels often have some of the best locations in town with immediate access to main sights and transportation options. Start by really embellishing these two, then wax in-depth about all the other hyperlocal (roughly within three blocks) businesses that guests should note, both for convenience (groceries and pharmacies) and experiences (restaurants and shopping).
With these five factors at play, there’s a lot that hotels can do to counteract the continued rise of short-term rentals, but it will require a concerted effort from ops and marketing
- (Marketing) Bundle wherever you can. Besides learning from home sharing providers, another big goal this year should be to focus on increasing total spend per guest and not just RevPAR. Corroborating that, our past work from numerous asset management assignments has shown a direct relationship between property utilization and satisfaction – the more you motivate guests to use your amenities, the more revenue you earn and the more likely they are to revisit or recommend. Bundling and packaging creates added value to optimize that total spend.
- (Operations) Consider kitchenettes. If you want to appeal to digital nomads, you need to offer some form of suitable cooking setup. This undoubtedly will require some capex, or perhaps you already have a suite room category that can be easily converted for this purpose. It doesn’t have to be a full kitchen and you can supplement any deficiencies with great delivery services or additional discounts for onsite F&B outlets.
- (Marketing) Frame it as free. There is something very powerful in the word ‘free’ in terms of drawing eyeballs. Before throwing freebies into your packages or extra nights, consider that many of the services you already offer as brand standards can be reframed as complementary perks, including flexible cancellations and refunds as well as perhaps such features as parking, valet, concierge, business center workspaces, pool access or beach access.
- (Operations) Working from literally anywhere. The remote work crowd is selecting a destination away from home for said workcation because they want to explore, move around and be inspired, all while paying the bills. With these motivations, beyond an incentive for booking a guestroom for the whole month, they aren’t planning on staying in that room for the entire time. Hotels that offer access to business centers, semiprivate office pods or WiFi that extends out to rentable poolside cabanas will do well. Next, remote work also means flexible hours, and said nomads will also be looking to augment their workcations with tours and other interactive activities to enrich their local experiences, giving the hotel yet another cross-sell opportunity as well as more peace of mind.
- (Marketing) Make the numbers simple. What’s easier for your brain to understand: 67% of the time or every two out of three times? Most of us prefer the latter because it’s simpler to visualize, and this same principle applies to your discounts and promotions. If you are trying to build midweek occupancy while the corporate segment is still nascent, consider the reframing of a ‘25% off for four nights or more’ into a ‘stay three nights and get a fourth night free’ type of ad so that the mental math isn’t a barrier.
Yes, you’re busy leading into summer, but you still have to start planning out these adjustments and additions to win over the guests of the future. It’s going to take a lot of hard work and some financing, so begin now for an off-season implementation and to win back market share from all these short-term rental competitors.
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Editor’s note: To discuss business challenges or speaking engagements please contact Larry or Adam directly.