Seven trending hotel news stories that will impact your hotel Revenue Strategy.
1. Long-term strategy is a key revenue management role
Revenue management has morphed in recent years from a mundane day-to-day function to one in which automated systems do most of the work, leaving revenue management time to focus on “revenue strategy … and much broader performance management,” said speakers during a recent panel discussion.
The speakers also said the role of revenue managements is widening to include increased awareness in total hotel profitability and a focus on maximizing revenues other than from the rooms department.
2. Hotels are losing the cost-of-acquisition battle
No matter how you slice it, third-party distribution platforms are taking a hefty chunk of the hotel industry’s revenues and profitability, according to data from Kalibri Labs. During a recent presentation at the AAHOA conference, Kalibri executive Mark Lomanno outlined the ways OTAs are getting into the pockets of the hotel industry:
- Hotels pay on average 16% to 18% to acquire customers, with some properties paying 25% to 35%.
- In 2016, guests paid $146.9 billion on hotel rooms, but just $143.4 billion was reflected on hotel profit-and-loss statements.
- In the 12 months ending June 2016, the hotel industry only captured 83.9% of total guest-paid revenue, down from 84.4% the previous year.
3. Put the focus on customer retention, not acquisition
Everyone agrees online travel agencies do a great job in casting a wide net of potential guests for any given hotel. But once an OTA acquires a guest for a hotel, it’s the job of that property’s marketing team to make sure that guest returns using a direct channel, not an OTA.
The author presents a long blueprint on how that can be accomplished. If done correctly, the hotel can realize significant cost savings: less than 10% of costs for a direct booking versus 20%-25% or higher through an OTA.
4. OTAs are marketing companies, not distributors
The secondary advantage (after producing bookings) online travel agencies provide to the hotel industry is their massive ad campaigns designed to spur consumers to travel—and presumably book through their networks. And while hotel brand companies have attempted to fight back with their own marketing campaigns generally designed to promote direct bookings, their firepower is at a serious disadvantage.
This report reinforces the belief that OTAs are really marketing companies fueled by technology and data. Their annual budgets for advertising and marketing are staggering.
5. Airbnb continues to steal hotel share
The threat to hotels from Airbnb and other sharing economy accommodations sites continues to grow, and should be alarming to hotel owners, operators, marketers and revenue managers. According to new data, in 2017 16.9% of U.S. adult internet users, about 37 million people, are expected to use their Airbnb account at least once. That’s a lot of roomnights funneled away from the traditional hotel industry.
Trust is still one of the biggest barriers to sharing economy adoption, particularly when it comes to lodging services. An April 2017 report found 31% of U.S. consumers didn’t consider home-sharing platforms like Airbnb to be safe. That’s a fact the hotel industry needs to exploit.
6. ADRs stabilize amid occupancy slump
Average daily rates rising even slightly in an environment of falling occupancies. That’s what’s happening, according to TravelClick’s June North American Hospitality Review. Except for transient leisure, other segments of the business are showing slight increases in ADR along with nearly equal drops in occupancy.
The forecast isn’t very rosy, either. As one TravelClick executive said, “Our latest data predicts a prolonged decline across many North American markets, indicating that this bleak outlook may not ease up soon.”
7. Expedia reports higher ADR growth for independents
Expedia, Inc. says independent hotels have shown a higher growth rate in ADR than have branded properties. Of course, the OTA is in a pitched battle with hotel brand companies who are trying to wean consumers away from OTAs and toward direct bookings.
That said, according to the research, in the first quarter independents continued to excel in ADR growth versus branded properties, and travelers spent more per night at independent hotels than at branded properties. Independent properties not only averaged higher ADRs than branded properties, but the ADR growth for independents has also doubled the pace of branded ADRs since Q1 2014.
Stay up on hotel Revenue Strategy news and discuss industry tech trends in the Hotel Revenue Strategy Leaders Group on LinkedIn.
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Tags: ADR, Airbnb, cost of acquisition, customer retention, Duetto, expedia, hotel distribution, hotel pricing, Hotel Revenue Management, hotel revenue strategy, hotel revenue strategy leaders, hotel sales and marketing, hotel technology, hotel yielding, Independent Hotels, Kalibri Labs, ota marketing, performance management, revenue management profitability, RMS, TravelClick