Why Offering Local Tours and Activities Is a Huge Revenue Opportunity for Hotels
August 7, 2018 1:33pm
By Max Starkov, President & CEO at HEBS Digital
Offering local tours and activities - i.e. experiences in the destination - is a multibillion dollar business, with the OTAs having shown a growing interest in this sector. Expedia alone is looking to grow its local tours and activities sales fivefold - from approximately $400 million a year to over $2 billion. Expedia currently has 4,000 suppliers providing 27,000 tours and activities worldwide. Airbnb, through its Experiences offering, has been rolling out tours and activities in many of its key destinations with the goal of bringing its offerings to 1,000 cities. Recently, Booking.com acquired Fairharbor.com and TripAdvisor acquired Bokun.com, both cloud-based software platforms that enable local tour and activities operators to make their services bookable online.
Yet, in spite of all the industry buzz and its huge potential, less than 20% of local tours and activities are bookable online. Why is that? There are two main reasons: the highly fragmented nature of this sector and travel consumer preferences.
This sector is greatly fragmented, consisting of millions of small, independently-owned operators. This explains the lack of businesses offering bookings online. They simply do not have the resources available for online booking systems and website technology.
Another reason is travel consumer preferences. According to a new consumer report from Arival, which surveyed U.S. adults planning a trip this summer, only 24% of travel consumers will book most of their activities before departure. The rest book while in their destination. Travel consumers are not fully convinced that booking tours and activities in advance brings any value in the form of better choice, better service, unique offerings, meaningful savings, etc. It is no surprise that 85% of activities are booked while on location - many of the best local tours and activities are simply not available online!
Why should hoteliers consider offering local tours and activities?
The commoditization of the hotel product, in which hotels are forced to compete with the OTAs strictly based on rate, leaves the hotel little opportunity to communicate the value of the hotel product to potential guests. To combat this and "sell on value" as opposed to "sell on rate," hoteliers need an effective merchandising strategy, including offering a vast range of experiences as part of the property website offerings, in multichannel and seasonal campaigns.
Travelers are fully onboard: 98% of survey respondents (tnooz) said having "local experiences" in a new city was important.
The direct online channel offers limitless opportunities for the hotelier to present the hotel as the "hero of the destination" and the perfect choice to stay while exploring all the destination has to offer such as museums, galleries, family attractions, shopping, dining, nightlife, entertainment, and more. Combine this with a strong website merchandising program, focused on the uniqueness of the hotel product and its value proposition, and you have a successful strategy!
Hotels are local businesses and this is a major advantage over the OTAs when selecting and contracting local tour and activity operators, monitoring their performance and customer service, and ensuring timely payments.
So, what makes hoteliers best suited to offer their guests local tours and activities?
How can hoteliers make money from local tours and activities?
By positioning the property as the "hero of the destination", hotel marketers will make the hotel more attractive thus increasing occupancy, an indirect revenue effect.
In the same time, there is a strong direct revenue benefit for hoteliers:
Action plan for hotels to launch local tours and activities:
Hoteliers are uniquely positioned to offer tours and activities and work closely with fellow local business operators. So, where should they start?
Based on property specifics such as location, bandwidth, and richness of the local destination, create both:
In both cases the packages and special offers around activities and attractions in the destination should be tailored to fit the demographics and preferences of the hotel guests.
Case Study: Local Tours and Activities Offered by a Full-Service Hotel in New York City:
This property is one of the very few hotels among the 600 plus hotels in New York City to offer this extensive range of local tours and activities. Partnering with local tours and activities operators could easily solve all the logistics of delivering the local tours and activities product to the hotel guests.
It is also important to make the service delivery of tours and activities convenient and attractive to the hotel guests:
Hotels are uniquely suited to proactively offer local tours and activities throughout the hotel guest lifecycle, at all touchpoints in the Dreaming, Planning and Booking Phases, as well as during the In-Stay and Post-Stay Phases:
In the Dreaming Phase:
In the Planning Phase:
Case Study: Travel Guide on an Independent Hotel Website
Here at HEBS Digital, we include a comprehensive Local Travel Guide on every website we launch for our clients. HEBS Digital worked with an independent hotel to create comprehensive neighborhood guides surrounding the hotel, and after just 30 days live, 57% of visitors came to the guide from search engines. But this Local Travel Guide played an even greater role in the planning phase with 60 bookings initiated in the same timeframe inspiring travel planners to consider booking the accommodations.
In the Booking Phase:
In the In-Stay Phase:
In the Post-Stay Phase:
The overall growth in room revenue, occupancy, and RevPAR that many hoteliers have been enjoying in recent years cannot possibly compensate for "the loss of wealth" in the form of steadily increasing distribution costs via the OTA. Revenue capture — net room revenue that remained with the hotels after distribution costs — declined from 84.9% in 2015 to an estimated 83.5% in 2018 (Kalibri Labs).
By positioning the property as the "hero of the destination," offering local tours and activities by the hotel - bundled with hotel accommodations or offered as add-ons - hoteliers will not only increase occupancy, but also provide proactive hoteliers with much needed incremental revenues and significant competitive advantages over their competitive set and the OTAs.
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Founded in 2001, the firm is headquartered in New York City and has global offices in Las Vegas and Asia-Pacific. Through its Smart Guest Acquisition Suite, including the smartCMS®, Smart Personalization Engine, Smart Data Marketing, and full-service digital consulting and marketing solutions, HEBS Digital helps hoteliers drastically boost direct bookings, lower distribution costs, and increase the lifetime value of guests. Its diverse client portfolio consists of top-tier luxury and boutique hotel chains, independent hotels, resorts and casinos, franchised properties and hotel management companies, convention centers, spas, restaurants, DMO and tourist offices.
Part of NextGuest Technologies, HEBS Digital and Serenata CRM, the most comprehensive Hotel CRM Suite today, are the creators of the hospitality industry's first Fully-Integrated Guest Engagement & Acquisition Platform.
Contact HEBS Digital's consultants at 1 (800) 649-5076 (North America), +64 (0) 9 889 8489 (Asia Pacific) or email@example.com.
Contact: Garrick Lee
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August 7, 2018 4:53pm
It is worth to underline that the solution provided by Our.Guide also gives significant advantages for the hotel employees. By providing an easier option of finding information online, the time spent assisting hotel guests is reduced by the receptionists and concierges. As a result, those employees may place more focus on meeting their guests’ needs. Moreover, the online information about local sights and the hotel may attract more customers. The professional description of sights may also encourage people to arrive at the hotel and stay there long enough to visit the most worthwhile sights.
Every hotel owner and manager should know that a great location of a hotel is its most valuable and essential feature. Therefore, it is important to underline and present it to the potential guests before they click the “book a room” button. In the majority of cases, when the hotel guests are well informed about nearby attractions, they become convinced that the decision to choose a particular vacation spot was the right one.