Now that the first quarter of 2012 is past, trade data shows the hospitality industry is showing definite signs of full recovery from the 2008 slump. However, even with this positive news, RevPAR, ADR and profitability are not necessarily following suit. What is causing this discrepancy?
Perhaps we should look no further than OTAs. In their infancy, OTAs seemed lucrative; you simply transferred your remnant inventory to them, which added instant cash to the bottom line. Sure, the rates were not terrific, yet occupancies improved, and total revenues increased. But a monster was created, and a gluttonous monster it is! Giving these online sites leftover rooms the odd weekend or off-period week was one thing. Now, thanks to those original sales, OTAs have garnered their own loyal customer bases.
Most consumers are no longer loyal to specific hotel brands. They bow (and show commensurate loyalty) to the almighty Expedia, Orbitz, Travelocity, Priceline, Bookings.com and hotels.com. For instance, if you work at a resort in Arizona, don’t plan on seeing too many of the same friendly faces year after year — unless, of course, you are offering the best deals for OTAs. How does that compare to over a decade ago when guests interacted more directly with hotels, many becoming steady customers?
Bridging the gap
How did we allow this to happen? And, more importantly, how do we restore the balance of power? The answer is marketing, or, more correctly, replenishing the dire shortage out there at the moment. The depressed economy of years’ past forced our hand to analyze costs more scrupulously, and advertising dollars were immediately trimmed across the board. At the same time, the traditional 10% travel agent commission was replaced with a 25% (average, or more) markup dictated by OTAs. We accepted this hike as a necessary short-term fix, but better economic forecasts calls for a return to normalcy, or however much is possible in this increasingly online world.
Even in this day and age, television still represents a highly effective mass advertising medium. But when was the last time you saw a hotel ad on TV — and not just on the free, in-room informational channel? The answer is probably never. Compare this with the advertising undertaken by Expedia, Priceline and Travelocity. These corporations have invested heavily to boost their franchises’ mind share through solid broadcast campaigns. While I am not pretending to examine their individual creative merits, I conclude that they are all quite memorable. In short, they are excellent at what they do!
Alas, television is not for everyone, as it is quite expensive on a national network basis. However, chains like Hilton, Sheraton, Marriott and even luxury brands like Ritz-Carlton would likely benefit from a heightened voice share on this medium. And with the advent of targeted local cable channels, television advertising is no longer out of reach for individual properties in their key feeder markets.
On the contrary, you might say hotels are wiser than OTAs by diverting their ad expenditures to more modern media such as Google or Yahoo sponsored links. Well, there certainly has been some hotel presence in this regard. But as a test, check any destination, and you’ll see OTAs are quite pervasive on this front, often holding the top link positions.
Then there’s what I consider middle ground: magazines. Pick up any of the leading travel magazines and you will find some terrific ads for many hotels, both for chains as well as individual properties. By and large, the ads are well done. However, their potential to reach the target audience is a mere drop in the bucket compared to what is needed to maintain — let alone grow — a franchise.
Getting back to marketing basics
How long has it been since you commissioned a real marketing plan, with specific objectives, goals and a budget to make it effective? I’m not talking about the 20 to 30 pages your director of marketing grinds out every season. Rather, I’m talking about a marketing plan that has some teeth — marketing plans that have concepts and programs with both risks and the potential for sizeable returns.
Real marketing campaigns are not measured as a single-digit percentage of operating budget or by carrying forward last year’s paltry allotment. Real marketing — and its respective budget — is based on analysis, target audiences and consumer research. More importantly, however, real marketing involves the development of unique concepts and ideas that will serve to differentiate your property or chain in a unique way.
And that’s the true challenge. Rather than giving your money away to electronic room hawkers, use those funds to create new meaningful advantages for your product. Embrace new technology through the creation of mobile platforms for learning and booking your property; expand your social media presence with online concierge activities; create value by becoming masters of your local scene through a genuine understanding of what’s happening; secure community involvement in the arts, sports or other programs of regional interest; or champion new markets through multi-language communications and outreach. Then sell it through a solid, strategically rationalized advertising campaign.
A fresh example
In 2011, Westin Hotels and Resorts unveiled its new US$30 million ad campaign titled “For a Better You” distributed across popular news and lifestyle websites as well as newspapers and magazines. The objective is to make people feel better throughout their stay, leaving guests restored and revitalized upon checkout. Westin employed the New York firm BBH for this task, creating six intricate sets of imagery for various locations. They strive to convey the message in a sophisticated yet lighthearted manner without relying on computer graphics.
Not using any standard property or room shots, the campaign instead focuses on the various amenities and features at their locales — “Elements of Well Being,” as they are called. Take the Heavenly Bed advertisement, for instance, which offers the insight that a good night’s sleep is vital for your health and memory retention.
All things considered, this is a great brand strategy — making the experience a centerpiece and not relying solely on each property’s physical attributes.
The bottom line
It’s time to bring back real hotel marketing. It’s time to give revenue managers a true marketing partner in their efforts to maximize revenue — not just by building occupancy, but by restoring ADR through significant value with each and every reservation.
This is a job that your director of marketing has to champion, with less of a stranglehold from the budgetary committee. And, this can only be accomplished with guests that are involved directly with the property — not through an independent, electronic intermediary.
If you can work to restore the connection with your consumers and supersede the middleman, then your brand presence — and profitability — will continue to grow, no matter which OTA gets in the way.