WORLDWIDE Many independent hotels may be losing significant revenue by continuing to operate with outdated or undeveloped strategies, particularly with regard to their online presence and their use of proprietary websites, according to an analysis by Jones Lang LaSalle Hotels’ strategic advisory experts.
Most of the hotels examined in recent months, which range from ultra-luxury boutiques in major metropolitan areas to large-scale destination resorts, are not maximizing their proprietary websites, negatively affecting bottom-line performance through elevated distribution costs and resulting in decreased revenues.
JLLH advisors suggests three steps that independent boutique hotels can take to enhance performance.
1. Create a strategy for client relationship management. Guests want a personalized experience—this is a key factor driving many customers to choose boutique hotels in the first place. As such, independent hotels need to have a comprehensive plan for client relationship management, loyalty programs and managing customer contacts. “If they did this, their price and revenue recovery could be upwards of 25%, based upon customer retention alone,” says Clay Dickinson, a JLLH executive vice president. “As long as you’re getting them to come back to your website, give them offers that help them build that loyalty. Don’t reacquire customers; keep the ones you have.”
By encouraging clients to book direct through their sites, hotels eliminate expensive booking fees and encourage loyal customers to return. Generally, independent hotels’ highest-rated business is booked directly through their websites, which is also typically the lowest-cost distribution channel. Further, the lowest-rated business tends to be derived from third-party online travel agent sites, a relatively expensive channel after the commissions are paid.
“Not all Internet bookings are created equal,” says Max Starkov, chief e-business srategist at Hospitality eBusiness Strategies (HeBS) in New York. “A recent case study derived from HeBS’ boutique hotel portfolio and over 500,000 online bookings made in 2009 revealed that the difference between the cost of a direct online channel versus an indirect online channel booking is over eight times. It is far more cost-effective to sell rooms via the direct online channel compared to the OTA channel. Therefore, hoteliers can and must compete for their fair share of revenues by investing in the direct online channel and by embracing best practices and new Internet marketing technologies and formats.”
2. Create revenue generation and pricing strategy. Independent hotels need to go beyond revenue management and incorporate yield optimization into their distribution and pricing strategies.
In addition to precise search engine optimization and marketing strategies that drive website bookings, independent hotels also need to take a more enlightened look at revenue management, such that longer-term value of a high-value customer might take precedence over the short-term revenue potential of any given night.
“Irrespective of customer value, traditional revenue management systems can create situations in which loyal customers may be driven away by the high rates displayed based upon a specific moment in time,” Dickinson says. “While the short-term revenue may have been maximized in such situations, the detriment of the hotel longer-term revenue potential may have been compromised.”
The very nature of many independent, boutique hotels positions them to build a loyal base of repeat customers. It follows that a comprehensive, well-conceived online strategy and web presence can enable them to use their proprietary websites to not only increase bookings of these high value customers through a relatively low-cost channel, but also build a sense of community though special promotions, targeted pre-arrival and post stay communications, as well as thoughtful social networking.
3. Dedicate resources to advancing your e-marketing strategy. Maximizing the productivity of a proprietary website is a dynamic process that involves several functions of a hotel that, perhaps, have historically not interacted as much as will be required. Revenue management, sales and marketing and information technology must collaborate to execute this properly.
Website design, search engine optimization, and ongoing website analytics must all be married with intimate customer knowledge and solid revenue management principles and practices in a process of continuous improvement. As requisite skills in all these areas may be a challenge for many independent boutique hotels, they may choose to engage the services of specialist consultants—especially in the determination, design and early execution of the strategy.
Independent hotels are losing revenue through the use of opaque sites and other high-cost distribution channels because of the amount of inventory dedicated to them. Moreover, this distribution strategy appears to be the product of three key factors: habit, desperation and the lack of knowledge of strategic alternatives. In this regard, independent hotels can perhaps take a strategy cue from the larger brands, which have generally been more successful in driving customers to their proprietary websites. Brands continue to leverage third-party sites to sell distressed inventory but use their own sites as the primary distribution channels, as they understand the greater flow through their bottom line by driving customers to book through their proprietary sites.
A variety of demographic and sociological factors bode well for the future of independent, boutique hotels, as the lodging industry generally improves over the next 12 to 24 months. Advances in Internet and telecommunications technologies continue to push the power of mass customization into the hands of increasingly discriminate, tech-savvy consumers at an ever lower cost. Deploying these strategies now will help independent hotels not only weather the final phase of the current storm, but position themselves for competitive advantage in the future.