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Archive for the ‘HeBS Articles & Publications’ Category
Friday, August 27th, 2010
Revenue Leaked from Hotels to the OTAs in the Form of Abnormally High Merchant Commissions Will Reach $5.4 billion in 2010
By Max Starkov
Background:
Back in December 2003, Smith Travel Research published a much discussed article titled, “The Billion Dollar Leak – The Impact of The Merchant Model on US Hotel Profits.” In this article the authors attempted to quantify the financial impact of third party sites on U.S. hotel industry room revenues and profits. To describe this loss, they coined the term “leakage”: i.e. revenue “leaked” from the hotel industry to third party sites in the form of abnormally high merchant commissions of 25% and higher.
Smith Travel Research estimated that the leakage would hit $1 billion back in 2003, and grow to reach $1.3 billion in 2004.
Estimated Total Merchant Model Leakage:
| Year (in Millions of U.S. Dollars) |
2001
|
2002
|
2003E
|
2004E
|
| Gross Merchant Model Sales |
$917
|
$2,315
|
$3,375
|
$4,875
|
| Total Leakage from the Merchant Model |
$296
|
$676
|
$1,013
|
$1,314
|
Source: Smith Travel Research
As we will prove below, this billion dollar leak turned into a multi-billion dollar drain reaching a staggering $5.4 billion in 2010!
Why did the hospitality industry, in these turbulent post 9/11 times, allow the third party sites (today known as Online Travel Agencies-OTAs) to earn billions of dollars in the form of merchant commissions? There are many reasons for that; here are just a few of them:
- At the time (2001-2003) hoteliers still treated OTAs as wholesalers and typically gave OTAs wholesale/group rates, similar to the rates given to traditional tour operators. These discounted rates instantly became public across the Web, thus undermining the hotel’s other distribution channels and leading to serious price and brand erosion.
Case in point: back in early 2003 we conducted a Top 10 Market Comp Analysis Study for a major hotel brand. The results? In all markets, this hotel brand properties’ rates were consistently $150-$200 per night lower (no kidding!) on OTA sites like hotels.com than on the brand own website.
- As pure-bred Internet players, the OTAs were much smarter eMarketers, compared to most hoteliers at the time.
- The Best Rate Guarantee was not adopted by the major hotel brands until May of 2002 (IHG), followed by the rest of the brands in 2003. In contrast, OTAs have had best rate guarantees since 1995 (e.g. HotelDiscounts.com, today known as Hotels.com).
- Rate Parity across all distribution channels was a very novel term back in 2002 and 2003.
- The OTAs had a “field day” dealing directly with the franchised hotels without the scrutiny of the major brands.
- The Independent hotels were literally at the mercy of the OTAs.
2004 – 2007: The “Golden Years”, or When the Industry Came Back to Its Senses
With the establishment of the Internet as a serious online marketing and distribution channel, hoteliers began to understand that overdependence on the indirect online channel (OTAs) hurts the bottom line and leads to brand erosion and loss of customer loyalty. All major hotel brands and many smart independent hotel companies undertook a series of measures to limit the impact of the OTAs and steer customers to book via the direct online channel i.e. via the hotel’s own website.
Some of the best practices implemented during this period led to a complete reversal of the distribution landscape at the expense of the OTAs:
- Best Rate Guarantees became common practice in the industry.
- Rate Parity across all distribution channels became the industry norm.
- All major hotel brands, boutique, and luxury hotel and resort brands negotiated corporate agreements with the OTAs, thus exploiting “collective bargaining” to negotiate better terms with the OTAs and disallow the OTAs from dealing directly with their franchisees or branded hotels.
Case in point: InterContinental Hotel Group exemplified the industry’s determination to take back control from the OTAs by severing its relationship with Expedia and Hotels.com in August of 2004 and pulling all of its hotels from these OTA websites. The main reasons cited were merchant commission levels, circumventing the brand and working directly with IHG franchisees, lack of clear marketing practices, not honoring IHG trademarks, etc. It took more than three years – until November 2007 – for IHG and Expedia to sign a distribution agreement.
- Most hotel companies established internal E-Commerce Departments to deal with their websites, the direct online channel and various Internet marketing campaigns and initiatives.
- Many hotel companies developed Internet marketing proficiencies and expertise at par with the OTAs.
- Many hotel companies shifted the bulk of their advertising budgets from the offline to the online space.
- Many best practices were created and perfected during these “Golden Years” and the direct online channel in hospitality was firmly established and embraced by the industry.
As a result of the above strategic steps, the hospitality industry dramatically increased direct channel bookings (i.e. via hotel branded websites), and decreased the reliance on merchant and opaque OTA sites such as Expedia.com and Priceline.com.
Case Study: Internet Hotel Bookings by Channel for the Top 30 Hotel Brands
In 2006 and 2007, the top 30 hotel brands and the industry as a whole increased the hotel brand website booking contribution to as high as 76.1% and decreased reliance on merchant and opaque OTA sites to as low as 18.4% from all online bookings.
Here is a summary of Internet bookings by channel for 2006 and 2007:
| Top 30 Hotel Brands: CRS Hotel Bookings |
2007
|
2006
|
‘07 vs. ’06
|
| Internet Bookings: percent from total CRS bookings |
42.02%
|
37.6%
|
+4.4%
|
| * via Brand Website |
75.9%
|
76.1%
|
|
| * viaThird-Party/OTAs |
24.1%
|
23.9%
|
|
|
Incl. Merchant Sites (e.g. Expedia)
|
10.4%
|
10.6%
|
|
|
Opaque Sites (e.g. Priceline)
|
8.0%
|
8.0%
|
|
|
Agency/Retail Sites e.g. HRS, Booking.com, etc
|
5.7%
|
5.4%
|
|
Source: eTRAK Report
2008-2010: The Years of Industry-Wide Amnesia
When the recession hit the industry back in 2008, I truly believed the hospitality industry would not allow a repetition of the shameful post- 9/11 years. Why did the industry allow the OTAs (again) to have a field day at the expense of the industry, and another “billion dollar leakage” to go to the OTAs in the form of abnormally high markups and commissions?
I was convinced that during the “Golden Years,” hoteliers had become seasoned eMarketers, had fully embraced the direct online channel and instituted measures and processes in place to disallow OTAs from taking advantage of the industry in an economic downturn.
Was I dead wrong or what?
The hospitality industry suffered from some kind of industry-wide amnesia and had completely forgotten the tremendous damage done to the industry by the OTAs in the months and years after 9/11.
Many hotel companies (including a number of major hotel brands) exhibited a typical “knee-jerk” reaction to the deteriorating economic environment, forgot everything they learned in the post- 9/11 period, and “succumbed to the devil” by embracing the indirect online channel (OTAs) to compensate for decreasing business. These hotel companies have been accommodating the OTAs with bigger discounts, unique promotions, etc., thus jeopardizing their direct online channel and destroying years-worth of achievements such as rate parity, best rate guarantees and more.
In other words, some hotel companies literally betrayed the industry by surrendering to the temptations of the indirect channel and demands of Expedia.com, and some of them did this in a particularly unintelligent way.
The following clearly illustrates how within a very short period of time, hoteliers became susceptible to discounting and working with the OTAs, resulting in a significant shift from the direct online channel to the indirect online channel:
| Top 30 Hotel Brands: CRS Hotel Bookings |
2007
|
2008
|
2009
|
Q1 2010
|
| Internet Bookings: Percent of total CRS Internet Bookings |
|
|
|
|
| * via Brand Website |
75.9%
|
75.2%
|
70.9%
|
71.7%
|
| * viaThird-Party/OTAs |
24.1%
|
24.8%
|
29.1%
|
28.3%
|
|
Incl. Merchant Sites (e.g. Expedia)
|
10.4%
|
10.7%
|
14.2%
|
14.6%
|
|
Opaque Sites (e.g. Priceline)
|
8.0%
|
8.7%
|
11.1%
|
10.2%
|
|
Agency/Retail Sites e.g. HRS, Booking.com, etc
|
5.7%
|
5.4%
|
3.7%
|
3.5%
|
Source: eTRAK Report
In a few short years the industry leaders – the top 30 hotel brands – lost 5% market share to the OTAs, which represents millions of dollars in bottom line revenue. The rest of the industry: smaller hotel brands, independents, resorts, etc. did not fare much better. Though concrete data is simply not available, it is logical to expect these smaller industry players lost a much bigger market share to the OTAs compared to the major brands.
There is no doubt that Expedia.com and the other OTAs have gained new market clout in this economic downturn. How did the OTAs achieve that?
- Major hotel brands and the industry as a whole have been slow to develop a counter-strategy of their own and as a result have lost “momentum” and market share.
- Emboldened by the industry’s desperation and slow travel demand, Expedia demanded new terms and conditions that were against everything the hospitality industry stood for: last room availability, guarantees that the best rates are only found on Expedia/Hotels.com sites, penalties to properties that do not use these OTAs 100% of the time, etc. Some major brands succumbed to Expedia’s demand for access to last room availability and made other major concessions contrary to business logic and accepted best practices.
- Back in October 2009 Choice Hotels was the only major brand who stood firm against the damaging, unreasonable demands by Expedia, and told Expedia they wouldn’t sign an agreement that would allow Expedia to become the de facto “Rate Police” of the whole industry and dictate its inventory distribution and revenue management decisions to the industry.
- Expedia’s 24 and 48-hour sales, as well as city-wide sales offered by hotels on Expedia and other OTAs (in breach of established rate parity principles and best rate guarantees on the hotel’s own site), have convinced the traveling public that Expedia offers the best hotel deals today.
- Expedia has taken on the role of the industry’s “rate police”, punishing hotels that dare not to offer this OTA all of the hotel’s available rates, special promotions and even packages.
- Expedia has been playing hotels against each other by extracting concessions which would be unthinkable in any other situation. We have seen this happen over the past two years all over the industry:
- On the Independent hotel level, where one hotel is being played against another. Typically competing hotels in the same destination are invited to participate in a “24-hour sale” or “48-hour sale” on Expedia sites and “suggested” what the discount should be. Hotels that ignore these “sales opportunities” risk losing their “preferred status” with Expedia.
- Expedia’s approach is similar to smaller and midsize hotel chains and boutique and luxury hotel brands.
- Especially interesting is the approach towards whole destinations, where the “threat of exclusion” motivates hotels to participate in destination-wide or city-wide promotions that demand 25%-30% discounts on top of the existing margin discounts of 25%-30%.
Back in October of 2009, in my article “The Prisoner’s Dilemma, the Stockholm Syndrome, or a Case of Both?” I argued that Expedia had become the “market bully” and was taking advantage of the hospitality industry, which was struggling to survive as a result of the worst recession in modern times.
I argued further that since the removal of airline booking fees in 2008, which was the only substantial revenue source outside of hospitality, Expedia and the OTAs could survive only at the expense of the hospitality industry. Exploiting the desperation among hoteliers, Expedia and some of the OTAs adopted increasingly aggressive market behavior toward the hospitality sector. The results were more than damaging for the hospitality industry and resulted in years of multi-billion dollar “leakages”.
The Billion Dollar Leak: Experiencing an Unbearable Industry Drain All Over Again
The OTAs heavily rely on the hotel industry for the bulk of their revenues. For example, hotel bookings contribute to a little over 30% of the OTA global gross booking volume. At the same time, hotel bookings contribute to more than 60% of OTAs commissions/booking fees!
In its SEC filings, Expedia acknowledges that over 60% of its revenue comes from transactions involving the booking of hotel reservations, with less than 15% of its worldwide revenue derived from the sale of airline tickets. To clarify, over 54% of the OTAs’ U.S. domestic reservation volume (44% of the OTA global gross booking volume) comes from selling airline tickets, and yet airline ticket sales produce a paltry 15% of Expedia’s revenues.
In other words, hotel reservations are financing the OTAs’ operations and allowing the OTAs to “make a killing” by reaping billions of dollars of abnormally high merchant (wholesale) commissions, and to survive after they stopped charging airline ticket booking fees.
In its 2007-2010 SEC filings, Expedia provides a crystal-clear confirmation that the billion dollar “leakage”, first discussed by STR back in 2003, continues in full force and at much higher levels.
Over the last several years, revenue “leaked” from the hotel industry to Expedia in the form of abnormally high merchant commissions has been increasing every single year. This “leakage” exceeded $2 billion in 2007 and reached $2.3 billion dollars in 2009!
| Expedia Merchant Gross Bookings |
2007 |
2008 |
2009 |
First 6 Months 2010 |
Estimated 2010 |
| Gross merchant bookings (in millions of dollars) |
$8,355 |
$9,098 |
$9,254 |
$5,375 |
$10,842 |
| 25% merchant commission (in millions of dollars) |
$2,089 |
$2,275 |
$2,314 |
$1,343 |
$2,710 |
Source: SEC, HeBS
This leakage is estimated to reach $2.7 billion in 2010, based on the results from Expedia’s first six months of this year and the rate of increase of 14.65% over the same period of last year.
To summarize, the $2.7 billion dollar “leakage” in 2010 is only the damage caused by Expedia. Expedia has an approximate 50% market share of the OTA market. If we calculate for the rest of the OTAs (Travelocity, Orbitz, Priceline), the total leakage in 2010 will reach a staggering $5.4 billion dollars!
What Can Hoteliers Do to Overcome this Massive “Leakage”?
Hoteliers must realize that a) the OTAs will not surrender their dominant position voluntarily, without putting up a fight (we repeatedly witnessed this after the end of past economic downturn), and b) increased travel demand, the beginning of which we are starting to notice, does not automatically translate into higher occupancy, ADRs and RevPARs: hoteliers must be more proactive and creative than the OTAs and the competition to get a “bigger piece of the pie” (increase market share and benefit more from the growing demand).
There are a few other important industry developments to be taken under consideration:
- GDS Channel Is in Steady Decline: GDS hotel bookings via the CRS of the top 30 hotel brands declined by 3.7% in 2009 vs. 2008, and constituted only 23.6% of the total brand CRS bookings last year (eTRAK). In Q1 2010 GDS share from total CRS booking dropped to the all-time low of 22.7%.
- The Voice Channel Contribution Is Decreasing: Voice channel hotel bookings via the CRS of the top 30 hotel brands declined by 2.9% in 2009 compared to 2008, and amounted to 22.2% of total brand CRS bookings last year (eTRAK).
In other words, hoteliers do not have many options when considering other non-OTA distribution channels. In our view, the only viable option to drastically reduce reliance on the OTA channel is for the industry to embrace the Direct Online Channel.
Many hoteliers claim they cannot afford to market themselves via the Internet and that is why they resort to the OTAs since their services are “free.” The following case study shows why the OTA channel not only is not “free”, but is far more expensive than the Direct Online Channel and why focusing on the Direct Online Channel provides meaningful savings that go straight to the bottom line:
Case Study: How to Add Half a Million Dollars to the Bottom Line
A hypothetical New York City Hotel with 200 rooms, 77.2% average occupancy rate, an ADR of $215.14 in 2009 (STR), and 45% of bookings being made via the Internet will incur the following distribution costs (using the industry average 60:40 direct vs. indirect online ratio):
- Cost of Direct Online Channel Distribution: 7,608 bookings x $12.92 = $98,295
(Cost per booking via the hotel’s own website, including website hosting and maintenance fees, advertising spend, campaign management fees, and Omniture analytics. Based on 530,000+ bookings in 2009 via hotel websites from HeBS’ full-service hotel client portfolio)
- Cost of Indirect Online Channel Distribution: 5,072 bookings x $107.57 = $545,595
(Calculation based on a hypothetical NYC hotel of 200 rooms @ 77.2% average occupancy rate = 56,356 roomnights/2 nts average stay = 28,178 bookings total, of which 12,680 are Internet bookings (45% of total bookings). Direct online bookings = 7,608 (60%) and Indirect Online Bookings = 5,072 (40%))
If the hypothetical 5,072 OTA bookings are instead made via the direct online channel at $12.92 each, the bulk of the OTA distribution cost, namely $480,065, would go directly to the hotel’s bottom line ($545,595 – $65,530, i.e. 5072 bookings x$12.92=$480,065). This is nearly half a million dollars added to the bottom line. Name one hotelier who would not have liked that in 2009!
Across the industry, in 2010, Direct Online Channel sales will exceed 60% of total online hotel bookings. In Q1 2010, 71.7% of online bookings for the top 30 hotel brands were direct via the brand websites, while 28.3 % were via the indirect online channel i.e. the Online Travel Agencies (OTAs).
The ultimate goal for the industry should be as follows:
- Major hotel brands: OTA contribution (including agency, merchant and opaque model) should be kept below 15%.
- Average for the hospitality industry: OTA contribution (including agency, merchant and opaque model) should be kept below 25% (the level the indirect channel has traditionally had for many years, even before the Internet).
There is no doubt the Direct Online Channel provides hoteliers with immediate results in the current economic environment as well as long-term competitive advantages. The Direct Online Channel must always be at the centerpiece of any hotelier’s Internet marketing and distribution strategy. Travel consumers booking via the hotel website (direct customers), are more loyal, bring in more revenue and tend to travel more often.
What should hoteliers do to improve their direct vs. indirect online channel exposure?
Business Objectives:
- Maintain strict rate parityacross all marketing channels and maintain a best rate guarantee.
- Create unique product offerings and provide unique value proposition via the hotel website.
- Engage your customers directly via social media and mobile initiatives, and Web 2.0 features and functionalities on the hotel website.
Marketing Objectives:
- Focus on direct online channel marketing initiatives with proven ROI to increase market share and generate incremental revenue via the hotel website:
- Website re-design and web 2.0 optimizations
- Search engine marketing (SEM)
- Search engine optimization (SEO)
- Email marketing to the hotel opt-in list
- Multi-channel marketing initiatives, promotions and contests
- Social marketing: Facebook, Twitter, Flickr, YouTube
- Mobile marketing via mobile website, mobile SEO and mobile marketing initiatives
- Strategic linking and online sponsorships
- Launch online marketing initiatives, addressing your top business segments and feeder markets.
Conclusion:
Revenue “leaked” from the hotel industry to the OTAs in the form of abnormally high merchant commissions of 25% and higher will reach $5.4 billion in 2010. This leakage must be stopped and reversed as it drains the hospitality industry’s bottom line and threatens the mere survival of the industry.
With GDS and voice channels in perpetual decline, hoteliers do not have many options when considering non-OTA distribution channels. The only viable option to drastically reduce reliance on the OTA channel is for the industry to embrace the Direct Online Channel.
Hoteliers need a robust Direct Online Channel Strategy, accompanied by adequate marketing funds, to be able to take advantage of the steady growth in the Internet channel and shift from offline to online bookings in hospitality due to declining GDS and voice channels. Hoteliers must carefully employ ROI-centric initiatives, including website redesign, website optimization and SEO, paid search, email marketing, online display advertising, and proven social media and mobile marketing initiatives.
Posted in HeBS Articles & Publications, Online Travel Agencies (OTAs) | 2 Comments »
Thursday, August 12th, 2010
Part 4 of 4 from the Hotels Magazine Blog Article: “Hoteliers’ Action Plan to Capitalize on Rising Travel Demand.”
HeBS President and CEO Max Starkov has been invited to lead the “Successful eMarketing” blog on HOTELS magazine’s website. The following is an excerpt from Part 4 of 4 of Starkov’s article: “Hoteliers’ Action Plan to Capitalize on Rising Travel Demand.”
Action Plan: Measure your return on investment (ROI)
Take a hard look at what you are doing: are you taking chances with new and unproven marketing formats? Is your Internet marketing budget ROI-centric? Are you a smart marketer, or are you advertising blindly, distributing limited marketing dollars in unproven or incalculable areas? Are you measuring conversions and ROIs from your marketing campaigns?
- Focus on marketing formats that generate above industry-average returns.
- Implement the latest website analytics+ campaign tracking technology:
- Track post-impression and post-click activity
- Track bookings, roomnights, revenues from every campaign
- Adjust marketing spend instantaneously based on ROIs
- Don’t fall for “free” analytical tools–they simply do not work
- Remember, no matter which channels you use, make sure you are tracking results and conversions (e.g. Omniture, DART, etc). Phone tracking is now easier than ever (e.g. a unique 1-800 number to be used for calls resulting from your Google AdWords, another from Yahoo, etc.), and even with print you can send people to private landing pages or use promo codes.
Action Plan: Establish achievable objectives for the remainder of the year and 2011
The sky is the limit when hotel internet marketing is concerned. There are so many formats and initiatives, “hot news” and sensational claims that the industry is justifiably confused as to where to start and what the priorities should be.
The litmus test for any marketing initiatives hoteliers do should be a.) revenue generated, and b.) return on investment (ROI). In other words, before budgeting for or embarking on any marketing initiative, hoteliers must answer a simple question: “Which initiative will generate the most revenues and the best ROI?”
Here are a few objectives achievable in the remaining months of 2010 and early 2011 with re-allocation of funds in the existing hotel budgets or included in the 2011 budget:
Website re-design:
Time and again this has proven to be the single most effective initiative to boost hotel bookings and engage your customers via Web 2.0 enhancements on the site. This is a 90-120 day process so you can start it in 2010 and complete it in early 2011.
Direct online channel:
There is no doubt this is the most cost-effective distribution channel. The hotel budget should be especially generous to any direct marketing initiative: from search engine marketing (SEM) to email marketing, strategic linking and online sponsorships, to the new emerging formats like social and mobile marketing.
Social marketing:
Start by enhancing your hotel’s presence on the social networks. Creating or optimizing your hotel’s Facebook fan page and twitter and LinkedIn profiles is a good start. Engaging your customers on the social networks via interactive contests and sweepstakes, cross-promoted via the hotel website, email and SEM campaigns will make your efforts in social media worthwhile.
Mobile marketing:
Launching a 10-20 page mobile site for the hotel should be a top priority in 2010. Even if your booking engine provider does not have a mobile version of the booking engine, your mobile site will generate a lot of telephone leads and bookings. Start building the mobile opt-in list for customer service alerts and SMS text promotions. Experiment with simple mobile contests, quizzes and sweepstakes as part of the hotel’s multi-channel marketing initiatives to gain experience with this new channel.
Website analytics and campaign tracking:
Measure and re-measure conversions and ROI of every marketing initiative. Before you invest in any marketing campaign or website re-design, make sure you will be able to track conversions and ROIs. State-of-the-art technology like Omniture SiteCatalyst (website analytics) or DART (banner campaign tracking) is easily accessible today. This will not only make you a smarter and better marketer, but enable you to justify current marketing spend and defend future budget increases.
Conclusion:
In this uncertain economic environment, focusing on marketing initiatives with proven ROIs is the hotelier’s most prudent marketing strategy. The Internet is by far the largest and most important marketing and distribution channel in hospitality. By using the step-by-step action plan outlined in this article, smart hoteliers can generate incremental revenues, increase market share, and outsmart the competition with a ROI-centric online marketing strategy.
As you re-evaluate your hotel marketing plans for 2010 and plan for 2011, seek advice from an experienced and ROI-centric Internet marketing firm to help you adopt industry’s best practices, implement latest trends, and utilize the Direct Online Channel to its fullest potential.
Read the full article, including case studies on the Hotels Magazine’s “Successful eMarketing” Blog.
Posted in HeBS Articles & Publications | No Comments »
Wednesday, July 28th, 2010
By Max Starkov
Part 2 of 4 from the Hotels Magazine Blog Article: “Hoteliers’ Action Plan to Capitalize on Rising Travel Demand.”
HeBS President and CEO Max Starkov has been invited to lead the “Successful eMarketing” blog on HOTELS magazine’s website. The following is an excerpt from Part 2 of 4 of Starkov’s article: “Hoteliers’ Action Plan to Capitalize on Rising Travel Demand.”
As the travel and hospitality industry emerges from its recession-induced coma, hoteliers need to develop an action plan to capitalize on resurgent travel demand. Last week, I discussed the importance of unlocking the marketing budget, but doing so smartly and strategically via direct online marketing. This week, we’ll explore multichannel marketing and the need for most operators to reexamine their own website offerings.
Action Plan: Embrace multichannel marketing—the whole is bigger than the sum of its parts
Today’s hyper-interactive travel consumers are seeing your marketing messages across a variety of different channels. Now more than ever, there is a convergence of new and traditional digital formats, of interactive and offline marketing channels such as social media and print, hotel websites and social media initiatives, mobile and email, etc. Hoteliers need to reach future and current customers at multiple touch-points. For instance, if you launch an email campaign to the hotel’s own opt-in list, combine it with a tweet on Twitter, a posting on Facebook, a promotion on your website (this is a must), and a paid search campaign on Google.
At the same time, some marketing initiatives, if judged on their own merits, generate disappointing ROIs. For example, many hoteliers are struggling to justify returns from social marketing initiatives. The same applies to display advertising and online sponsorships which rarely produce significant ROIs as stand-alone marketing formats. But unleashing a marketing promotional campaign simultaneously across all available marketing channels produces compounded effect and far greater returns than each individual marketing format.
Action Plan: Take a hard look at the hotel website
Due to economic considerations, many hotel websites have been practically abandoned during the past 2 years. Many hotel websites offer old photos and stale content and read more like an online brochure than a vibrant and engaging digital presence of the hotel. When there is practically no Web 2.0 functionality on the website, there is nothing to stimulate interactivity with the user. This is contrary to the mere nature of today’s hyper-interactive Internet user who is tweeting, texting, emailing, communicating with friends and commenting on hotel and restaurant review sites.
Hotel Internet marketing starts and ends with the hotel website. The hotel website has become the first, the only, and in many cases, the last point of contact with the travel consumer. It is only natural that re-designing, enhancing and optimizing the hotel website should be the top priority. A website re-design is typically a 90-120 day project. Our experience shows that any website optimizations, enhancements or re-designs pay for themselves within 3-4 months.
Here are some important items to consider:
- Maximize the value of the site. It is the hotel’s most important marketing asset today.
- Make the site reflect 2010-2011 industry’s best practices: user-friendly, search engine-friendly, travel booker-friendly, and Web 2.0 friendly.
- Optimize, enhance, and re-design if necessary.
- If the site is over 12 months old, Web 2.0 and SEO optimizations are now due in order to take full advantage of the much cheaper organic search related visitors to your site.
- If the site is over two years old, a website re-design is a must and should be considered in Q3 or Q4 of 2010, or at least budgeted for early 2011. Typical ROI (Return on investment) from a website re-design is 10-15 times within the first 12 months of post-launch operations.
Read the full article, including case studies and a website re-design ROI analysis on the Hotels Magazine’s “Successful eMarketing” Blog. I look forward to our continued dialogue. Next week, we’ll tackle the exponentially growing importance of social and mobile media.
Posted in HeBS Articles & Publications | No Comments »
Thursday, July 22nd, 2010
By Max Starkov
Part 1 of 4 from the Hotels Magazine Blog Article: “Hoteliers’ Action Plan to Capitalize on Rising Travel Demand.”
HeBS President and CEO Max Starkov has been invited to lead a blog on HOTELS magazine’s website. The following is an excerpt from Part 1 of 4 of Starkov’s article: “Hoteliers’ Action Plan to Capitalize on Rising Travel Demand.”
Things are looking up for the hotel industry and this comes as great news after a long and brutal recession. The industry projects to end 2010 with important increases in two of the three key performance measurements, according to the latest forecast of Smith Travel Research (STR). Occupancy is expected to increase by 3.6% and RevPAR by 3.0%, while ADR is expected to end the year flat. In addition, demand is projected to grow by 5.7%, while supply is expected to increase by only a modest 2.0%.
This is excellent news for the industry as a whole and hoteliers are justifiably enthusiastic after enduring the long and brutal recession.
What does all of the good news mean to hoteliers?
First of all, hoteliers must realize that increased demand does not automatically translate into higher occupancy. Hoteliers must be more proactive and creative than the competition to get a “bigger piece of the pie” i.e. increase market share and benefit more from the growing demand.
Secondly, over the past two years i.e. approximately the duration of the recession, a number of very important developments occurred that profoundly changed inventory distribution and marketing in hospitality:
- Social Media: engaging your customers via social marketing has become not only the norm, but is expected by past, current and future hotel guests.
- Mobile Web: the mobile channel has already become an important travel planning and transaction channel in the U.S. and worldwide. Hotel guests and travel consumers in general are already mobile-ready, and hoteliers and travel suppliers have to respond adequately to this growing demand for mobile travel services.
- The emergence of the Hyper-Interactive Travel Consumer who is tweeting, texting, emailing, communicating with friends via Facebook, and commenting, often in real-time, on restaurants and hotels via review sites like Yelp and TripAdvisor. Most hotel websites are not equipped to handle the hyper-interactive consumer and read like a static online brochure.
- The Online Travel Agencies (OTAs) gained market and channel share during the recession. Example: in 2009 the OTA share of the CRS bookings for the top 30 hotel brands was 29.1% vs. 24.8% in 2008. Direct online channel helps higher ADRs and RevPARs as opposed to OTAs, which drag ADRs down.
What action steps should hoteliers implement to take full advantage of the growing travel demand? Over the next several weeks, we’ll discuss eight action steps that will help hoteliers rethink their online marketing strategies, outsmart the competition and increase online market share and bookings.
Here are the first two action plans:
Action Plan: Time to Un-Shrink the Hotel Marketing Budget!
Hotel marketing budgets have shrunk considerably over the past 18 months. Now is the time to perform a mid-year review of the hotel Internet marketing budget:
- Review and update budget to meet growing travel demand and increase market share.
- Hold off on advertising where you cannot measure results (e.g. print) and ROAS (Return on ad spend) or those that have not resulted in good ROIs in the past.
- Shift funds to advertising formats with proven, direct, serious ROIs, e.g. SEO, SEM, email marketing, and initiatives that help the hotel engage customers and produce great indirect ROI, such as social and mobile marketing initiatives, etc.
- Re-evaluate the importance of each key customer segment and feeder market in the marketing mix. For example, if fly-in guests’ share has decreased due to airline capacity cuts and declines in corporate travel, focus on drive-in feeder markets.
Action Plan: Focus on the Direct Online Channel
The Direct Online Channel must always be at the centerpiece of any hotelier’s Internet marketing and distribution strategy. Travel consumers booking via the hotel website, i.e. direct customers, are more loyal, bring in more revenue and tend to travel more often.
The Direct Online Channel provides hoteliers with immediate results in the current economic environment as well as long-term competitive advantages. What should hoteliers do to improve their direct vs. indirect online channel ratio?
Business Objectives:
- Maintain strict rate parity across all marketing channels and maintain a best rate guarantee.
- Create unique product offerings and provide unique value proposition via the hotel website.
- Engage your customers directly via social media and mobile initiatives, and Web 2.0 features and functionality on the hotel website.
Marketing Objectives:
- Focus on marketing initiatives with proven ROI to increase market share and generate incremental revenue via the hotel website:
- Search Engine Marketing (SEM)
- Search Engine Optimization (SEO)
- Email marketing to the hotel opt-in list
- Multi-channel marketing initiatives, promotions and contests
- Social Marketing: hotel fan page and profile on Facebook, Twitter, Flickr, YouTube
- Mobile Marketing via mobile website, mobile SEO and mobile search marketing
- Strategic linking and online sponsorships.
- Launch online marketing initiatives, addressing your top business segments and feeder markets
Consider this case study scenario comparing cost per booking in the Direct vs. Indirect Online Channels:
- Direct Online Channel (Hotel Website): $12.92 per booking(Cost per booking via the hotel’s own website, including website hosting and maintenance fees, marketing spend, campaign management fees, and Omniture analytics. Based on 530,000+ bookings in 2009 via hotel websites from HeBS’ hotel client portfolio)
- Indirect Online Channel (Online Travel Agency-OTA): $107.57 per booking (Based on average 2009 ADR in NYC = $215.14 and 2 night LOS = $430.28 x 25% OTA commission)
The difference between the cost of a Direct Online Channel and Indirect Online Channel booking is 8.3 times!
Read the full article, including case studies and concrete action steps hoteliers should implement to take full advantage of this pivotal moment in the hotel industry in the “Successful eMarketing” blog on Hotels Magazine website.
Tags: hotel internet marketing
Posted in HeBS Articles & Publications | No Comments »
Tuesday, July 13th, 2010
By Max Starkov and Mariana Mechoso Safer
Today’s travel consumer is tweeting, texting, emailing, communicating with friends via Facebook, and commenting, often in real-time, on restaurants and hotels via review sites like Yelp and TripAdvisor. How will you reach these hyper-interactive consumers at multiple touch points during the research process? And once your hotel has their attention, what should you do to encourage loyalty to your brand, increase site stickiness, create buzz around your hotel, and ultimately increase bookings?
Many hoteliers believe they do not have the resources to dedicate to Web 2.0 and Social Media, or in other words, they are unable to meet the needs of today’s hyper-interactive traveler . With more than 400 million users on Facebook, an average of 50 million tweets sent a day, and consumers expecting interactive and engaging hotel websites, the bottom line is that your hotel cannot afford to ignore Web 2.0, Social Media, or the hyper-interactive traveler.
Why a Sound Web 2.0 & Social Media Strategy Is Critical to Your Hotel Business
Numerous articles have been published that discuss the magnitude of participation on social media channels. Nothing exemplifies this more than the fact that recently, Facebook traffic surpassed that of Google’s .
By encouraging interaction on your hotel website and on social media channels, joining in on the conversation, and making changes to your business based on feedback, you are showing your current and potential guests that you are listening to them. This is invaluable for building brand loyalty and encouraging positive reviews.
As stated in the Social Media Revolution video on YouTube, “We don’t have a choice on whether we do social media; the question is how well we do it.” If you are not interacting with your guests via your hotel website and on the social media channels, your competitors surely are (more than 700,000 local businesses have active pages on Facebook).
Connecting with your Website Visitors Using Web 2.0 & Social Media Strategies
An integral part of the de-commoditization strategy, there are multiple cost-efficient ways to connect with current and future guests via Web 2.0 initiatives and Social Media. You may even find that in addition to further connecting with your key customer segments by utilizing the initiatives below, you are able to engage additional market segments, thereby increasing your market share. All of these initiatives to be discussed also serve to provide visibility and increase your web presence: essential for SEO.
Hoteliers must align the interactivity of the hotel website with the hyper-interactive behavior of today’s travel consumer both on the hotel website and on the social web. Create multiple opportunities for your website visitors to communicate with your hotel. If you do decide to engage your hotel website visitors with any of the Web 2.0 tactics described below, make sure to allow those participants to share their experience via all their social networks (i.e. if a website visitor enters a sweepstakes, make it easy for them to share that they entered with their friends on Facebook and to tweet the contest).
Before you launch your own strategy, start by assessing what your competition is doing. How many of your competitors have a Facebook page, a Twitter account, a YouTube channel, a Flickr account? How many of them have Web 2.0 functionality on their websites? Do their websites accommodate and encourage feedback? Many hotels do not have a solid, unified strategy, allowing your hotel to stand out and capture an audience that your competition is leaving in the dark.
When it’s time to work on your own strategy, it is important to remember that it’s not just about having a Web 2.0 and Social Media presence. It’s how you execute that strategy that determines your success.
Using Web.20 Initiatives to Engage your Website Visitors
Most websites are not equipped to handle the hyper-interactive travel consumer of today and offer dead, stale visual and textual content. There is minimal interaction with the user; all he/she can do is sit back and read what is on the website, as if reading a novel in a library. Many hotel websites offer dead, stale textual and visual content. There are no interactive Web-2.0 features engaging the travel consumer and soliciting his/her participation and input.
This is contrary to the mere nature of today’s hyper-interactive Internet user, who is tweeting, texting, emailing, communicating with friends via Facebook, and commenting, often in real-time, on restaurants and hotels via review sites like Yelp and TripAdvisor.
How can you add engaging content to your website that will solicit the participation of your website visitors?
1.) Initiative: Blog on the Hotel Website
42% of consumers accessed travel information on a blog, and 40% of consumers actually posted a review themselves (PhoCusWright 2009). Update your blog at least twice a week, and sprinkle keywords in your posts. Blogs are extremely SEO-friendly and the search engines index blogs almost immediately after a post is made. A well-developed hotel blog strategy could provide visibility to unique aspects of your hotel product and destination, and a differentiated approach to reach key customer segments.
2.) Initiative: Customer Feedback on the Site
By offering a comprehensive customer feedback form where customers can leave comments and complaints, you are communicating to your guests that their feedback is valuable to you. Make sure to include questions about the usability of your website. If possible, offer an incentive for people to fill out your feedback form, such as a free amenity or upgrade during their next stay, to encourage participation.
In addition to the positive SEO benefits (many customer reviews include keywords i.e. “We were looking for a Boston hotel that fit our budget and found the perfect fit!”), testimonials accompanied by photos if possible, make your hotel come to life for your website visitors. Also make sure that you are monitoring and responding to customer reviews on the major review websites.
3) Initiative: Interactive Sweepstakes
Contests and promotions are great for getting people excited about your brand and for building buzz. Additionally, contests offer a way to build your opt-in email and mobile list. An interactive sweepstakes on the hotel website will encourage daily visits to your website and significantly grow your opt-in email list. By offering an incentive for people to enter on a daily basis, people will become more familiar with your hotel and website.
Case Study: CVB in Southern California
A CVB client wanted to increase their social media following as well as launch a campaign on their website that would generate buzz for the destination. HeBS recommended an interactive sweepstakes that would reach consumers at every online touch point, a way to connect with consumers via mobile, email, and social media.
HeBS built an interactive sweepstakes on the website and participants were entered in a drawing to win a $1,000 free vacation. A second, third, fourth, and fifth place prize of a free hotel room was also rewarded. Lastly, an additional prize of a $250 Gift Card was awarded to the person who referred the contest to the most friends to promote viral marketing.
Results:
- 1,200 Unique Registrants
- + 300 Facebook fans in 5 days
- + 250 Twitter Followers in 5 days
- Over 800 mobile numbers added to mobile marketing list
- Over 500 new emails added to the email opt-in list
- Over 30 comments on the Facebook fan page regarding the contest
- Winner of a Major Award for Outstanding Integrated Campaign
4) Initiative: Interactive Calendar of Events
An interactive calendar of events is a great way to keep your website visitors updated on all the latest events happening at and around the hotel. It’s also a recommended way to keep your website content fresh, with a constant flow of new information to encourage repeat website visits. If your hotel has a) popular events such as dining events, tastings, leisure activities, etc. at the property, and b) events close or near the property, such as museum exhibitions, theater performances, sporting events, concerts, and more, a calendar of events is a must. The goal is that it become the go-to for website visitors that want to be kept in the loop of all happenings at your hotel.
Web 2.0 functionalities on the website have multiple benefits in addition to engaging your customer segments. They help overshadow any negative presence in organic search, build a stronger brand relationship, and they bring your brand to life for members and customer segments tying these initiatives into your social media presence.
Using Social Media Initiatives to Build Loyalty and Increase Traffic to Your Website
Four in five travelers read reviews on social media and 95% of those indicated such reviews were influential on the decision making process. (PhoCusWright 2009). There is no doubt that Internet users are increasingly influenced by social media sites and peer reviews. By utilizing a comprehensive social media strategy, hoteliers can create social media “buzz” around the hotel, target receptive audiences, and ultimately stimulate hotel website visits, interactions and bookings.
HeBS’ 2010 Benchmark Survey on Hotel Internet Marketing Budget Planning and Best Practices showed that half of hoteliers surveyed (50% exactly) responded that in 2010 they are planning to create profiles for their hotels on the social networks.
Social marketing should become an important component of any hotel’s marketing mix and part of the comprehensive Direct Online Channel Strategy for any hotel company. Naturally, it is important to use the right ROI metrics to measure the success of social marketing efforts of the hotel.
Create a positive presence and exude brand voice on the following high-traffic social media networks:
1) Initiative: Facebook
Create a Facebook page for your business. Make sure to respond as often as possible to posts, as it is easy to tell when a hotel is not listening to its audience, a sure way to start losing your fan base. Consider a ‘Reviews’ or ‘Discussions’ Facebook tab, where you may respond to customer feedback in a professional manner and show that you care about customer support. Include events, at least one photo album of the hotel, and videos when possible. Add value to your Facebook page with an email sign up form, a booking engine widget, and a customized tab describing the benefits of following your hotel.
Post about upcoming deals and promotions, area events and happenings, announcements such as new amenities, questions for soliciting feedback (“What is your favorite thing to do in San Francisco?”) and exclusive offers only available on Facebook. Always include a link in posts to a relevant landing page to create move value to followers who want more information (make sure this is often your own website), and choose a thumbnail photo for the URL to attract attention to the post.
2) Initiative: Twitter
Use Twitter to monitor what is being said about your hotel, to engage an audience that is talking about your hotel and/or its location, and to speak directly to your current and future guests. Make sure you are not only tweeting but actively engaging and responding to tweets. It you are only concerned with posting content, you are not listening.
Tweet about discounts, upcoming events in the area, general news about your hotel, and offer exclusive discounts for your followers. Always include a brief call to action and a link. Your following on Twitter should be based around your target market; however, if there are special events that you wish to push via Twitter, you should also build the following around those who might be interested in those events (and who are located in that area). The majority of your followers should be local if you’re looking to concentrate on last-minute events or special offers. To build your follower list, decide who your main audience is and who would be interested in your brand, and follow them (hopefully they will follow you back).
Case Study: Boutique Hotel in Boston
HeBS created, customized, and launched a twitter profile for a boutique hotel in Boston in September 2009. We began to build a following by tweeting and hinting about the launch of the new hotel website. We also did branded and informational tweets about the property—its reputation, its services, its location, etc.
By mid-December, we built a loyal following and were an established presence in the Boston-based “twitterverse.” We had already generated revenue from Twitter and established a reputation as a good place to check for upcoming Boston events. We also introduced “{Hotel Name} Chirps”—last-minute deals for Twitter followers.
Having made the most of its smaller following, HeBS saw that the hotel needed more followers to expand its reach and capitalize on its Twitter successes. In order to increase followers, generate buzz about the property, and strengthen relationships with current followers, HeBS launched a one-day free-room giveaway exclusively on Twitter. Over 120 people entered the Hotel free-room giveaway on 12/18/09 between 10 AM – 5 PM. The week of the contest, Twitter generated almost 12% of the click to the site and over 2% of bookings initiated.
3) Initiative: YouTube
Why is YouTube so important? YouTube serviced over 6.6 billion streams in Oct 2009 alone, followed by Hulu (632 million) and Facebook with over 217 million streams. YouTube is the second largest search engine–second only to Google.
Create a YouTube channel, with a look and feel customized to your brand and hotel website. On this channel, feature videos that highlight your destination, your hotel, and any positive news or press coverage. By including optimized tags on videos to increase your presence in organic search you will help overshadow any negative videos that may be present on YouTube, and ultimately increase your brand presence.
4) Initiative: Flickr
Create a Flickr account and upload albums that highlight your hotel and destination. If possible, include photos of your guests enjoying themselves at your property. All photos may include an optimized description. A Flickr account that is well organized with optimized descriptions of photos is sure to stand out in the search engine results, and an account in Flickr helps your official photos show up in image results –making the threat of non flattering photos showing up at the top of search results much less likely.
Once you have established these profiles and accounts, find a highly visible place to link to these from your hotel website. Also make sure to pay special attention to how you set up the profiles – always include photos and marketing messages and maintain a consistent image that represents your brand.
Measuring Results of your Web 2.0 & Social Media Efforts
In a world where we now have the tools to measure the return on investment of every dollar, the big question remains: How do you measure the results of your Web 2.0 & Social Media efforts? Web 2.0 initiatives on the website need to be budgeted for, and is it worth it to devote a significant amount of time (or even hire someone) on Social Media?
What is the Payoff of Having Web 2.0 Initiatives on Your Website?
Here are some of the positive, concrete results of having Web 2.0 Initiatives in your hotel website:
- Increased time spent on site: a sweepstakes, blog, calendar of events and even a customer comment form encourage your website visitors to spend more time on your website. The more time they spend on your website, the more familiar and invested they become with your hotel—and the more likely they are to make a reservation.
- SEO: fresh, new content on the site in the form of blogs, calendar of events, and a sweepstakes provides original content on the hotel site for customers and for the search engines.
- Email capture for future promotions: a sweepstakes on the hotel website is a great way to build your email opt-in list. Case in point: A HeBS client recently hosted a sweepstakes on their website, and when the sweepstakes was over they had 12,000 new email addresses to add to their opt-in list. In addition, over 3,000 people forwarded the sweepstakes to their friends.
- Pathing towards a booking: use analytics to study where your visitors are going after they interact with a Web 2.0 initiative. Are they on their way to make a reservation? Many times they are. Case in point: in 2010, one HeBS client had 21.1% of its visitors attempt to make a reservation after visiting the calendar of events page.
How do you Measure the Success of Your Social Media Efforts?
Social marketing initiatives, if judged on their own merits, rarely generate outstanding ROIs if measured in bookings and revenue. Social media and social marketing initiatives should be reviewed with “sober eyes” and within the context of the impact of the multi-channel marketing strategy of the hotel. Instead of only focusing on bookings and revenue when measuring results from social media marketing, remember that currently the best uses of social media are:
- An important component of hotel’s multi-channel marketing
- Buzz-building
- Brand-building
- Interacting with and engaging customers
- Keeping up with the times, making the hotel look current, cool and up-to-date
- Driving engaged and relevant traffic to the property’s own website
Unleashing a multi-channel marketing campaign simultaneously across all available marketing channels such as social media, mobile Web, search engines (SEM and SEO), display advertising, email marketing, etc produces compounded effect and far greater returns than each individual marketing format. In other words: The Whole is Bigger than the Sum of its Parts.
Social Media efforts may certainly result in bookings, yet direct revenue should not be the only metric in which you measure results. If you solely focus on bookings then you are ignoring other valuable metrics such as increased visits to the website, brand loyalty, and SEO. Here are some of the ways you should be measuring the results of your Social Media efforts:
- Brand loyalty/engagement: If people are following your brand and commenting on Facebook and Twitter, then they are interested in what you have to say and are more likely to book your hotel over the competition. You are in fact building stronger relationships with current and future guests.
- Real-time search: the search engines have started integrating tweets into their search results. Google even offers the ability to search by ‘Updates,’ which are really just tweets. Case in point: recently, a HeBS client showed up second on the first page of search results for the very competitive term of ‘Boston Hotel’ because of a recent tweet containing that keyword.
- Customer service improvements: are you using feedback about your hotel from Facebook and Twitter to better your business? Are you monitoring for disgruntled guests and potential guests with questions, and answering them quickly? If you are truly listening to your audience, you will find ways in which your customer service is lacking and work to improve in these areas.
- Increased traffic to your site: while social media is still not a major revenue generator, HeBS clients have seen significant traffic to their website driven by social media. Case in point: for a HeBS client located in Northern California, visits from Twitter accounted for 4.5% of total traffic generated to their website in Q1 2010.
Measuring the results of your Web 2.0 & Social Media efforts should not be based strictly on direct revenues. Have you been successful in creating more awareness about your hotel and its value proposition? Are you generating more positive buzz about your hotel? Are you listening and engaging with your audience? If the answer is yes, then you have begun to harness the power of Web 2.0 & Social Media.
Conclusion
Every web savvy hotelier knows that the Internet, especially Web 2.0 and Social Media, has changed the way in which customers plan and purchase travel. Hoteliers need to tailor their hotel Internet marketing strategy to include these initiatives and evolve with these changes in the travel purchase process.
It is no longer a question of whether your target markets are engaging with Web 2.0 initiatives or active on Facebook and Twitter. Social media is popular even among the mature generation (63-75): 36% of them had a social network profile in 2009 vs. 10% in 2007 (eMarketer). If you are not reaching the hyper-Interactive traveler using Web 2.0 and Social Media initiatives, then you are going to quickly lose market share as your competitors gain.
Consider partnering with a full-service hotel website development and Internet marketing firm to build a strong and cohesive Web 2.0 and Social Media strategy.
Margaret Mastrogiacomo and Lauren DeGeorge, Account Executives at Hospitality eBusiness Strategies, contributed to this article.
Posted in HeBS Articles & Publications, Social Media & Web 2.0 | No Comments »
Thursday, April 15th, 2010
Proof in Numbers that Hoteliers Should Invest in the Direct Online Channel
by Max Starkov
Dramatic Shift from Offline to Online Distribution
The Internet distribution channel has undoubtedly become the most important distribution channel in hospitality. Last year, 54.2% of overall CRS bookings for the top 30 hotel brands came from the Internet channel, which constituted a remarkable increase of 6.6% vs. 2008. HeBS estimates that 45% of hotel bookings in 2010 will be via the Internet (direct + indirect online channels).
The other two traditional distribution channels, GDS and Voice, have experienced steady declines over a number of years. Here is the eTRAK data for hotel bookings via the CRS of the top 30 hotel brands:
- GDS hotel bookings declined by 3.7% vs. 2008, and constitute 23.6% of total CRS bookings in 2009 vs. 27.3% in 2008. Back in 2006, GDS CRS reservations constituted 31.3% of total CRS bookings for the top 30 brands. GDS share has decreased by 24.6% from 2006 to 2009, when it was reported at the 23.6% level.
- Voice channel hotel bookings declined by 2.9% in 2009 vs. 2008, and now constitute 22.2% of total CRS booking in 2009. The Voice Channel is in decline for the 6th consecutive year (HeBS). Back in 2006, voice reservations constituted 31.3% of total CRS bookings for the top 30 brands. Voice Reservation share decreased to 25.1% in 2008 and 22.2% in 2009.
Direct vs. Indirect Online Channel Dynamics
HeBS estimates that for the hospitality industry in North America, direct online channel contribution in 2010 will be 60% vs. 40% for the indirect online channel.
How did the top 30 hotel brands do in the direct online channel in 2009? eTRAK reports that 70.9% of online CRS bookings came from the direct online channel (i.e. the major hotel brands’ own websites), while 29.1% came from the indirect online channel (the Online Travel Agencies—OTAs like Expedia, Orbitz, Priceline, etc).
This constitutes an increase of the contribution from the OTAs compared to 2008, when 75.2% of online bookings came from the direct online channel, while 24.8% came from the OTAs. Compare this to 2007, when the direct channel contributed 76% of CRS Internet bookings.
In other words, since 2007 we have witnessed a significant shift from the direct to the indirect online channel and an increase in the OTAs’ market share. This is a serious setback for the hospitality industry and a return to the old bad practices of the post 9/11 era.
Typical of economic times such as the present, the hotel industry (similar to post 9/11) has again “succumbed to the devil” in the face of the major OTAs. Since mid-2008 travel supply has outweighed demand and hoteliers have been more susceptible to panic, resulting in deep discounting and embracing of the OTAs.
How are the other travel sectors fairing in Internet distribution?
Here is an overview of the Direct vs. Indirect Online Channel utilization in the main travel sectors:
|
Direct |
Indirect |
Hospitality: Top 30 Hotel Chains
Source: eTRAK |
70.9% |
29.1% |
Hospitality: Overall for the Industry
Source: HeBS |
60.0% |
40.0% |
| Airlines: Jet Blue |
95.0% |
5.0% |
| Airlines: Overall for the Industry |
68.0% |
32.0% |
| Car Rental |
68.0% |
32.0% |
Cruse Lines
Source: PhoCusWright |
39.0% |
61.0% |
It becomes obvious from the above table that hospitality is lagging behind the airline and car rental sectors as far as direct online channel practices are concerned. Please read more our detailed analysis on why OTAs need hotels for their survival more than ever in my recent blog article: Online Travel Agencies (OTAs): Will They Survive the Removal of Airline Ticket Booking Fees?
Not All Internet Bookings are Created Equal
Why should hoteliers care where their Internet bookings come from? The following case study clearly illustrates the cost effectiveness of the direct online channel:
Case Study 1: Cost per Booking in the Direct vs. Indirect Online Channel
- Direct Online Channel (Hotel Website): $12.92 per booking
(Cost per booking via the hotel’s own website, including website hosting and maintenance fees, marketing spend, campaign management fees, and Omniture analytics. Based on 530,000+ bookings in 2009 via hotel websites from HeBS’ hotel client portfolio)
- Indirect Online Channel (Online Travel Agency-OTA): $107.57 per booking
(Based on average 2009 ADR in NYC = $215.14 and 2 night LOS = $430.28 x 25% OTA commission)
Difference between the cost of a Direct Online Channel and Indirect Online Channel booking = 8.3 times!
It is far more cost effective to sell your rooms via the direct online channel compared to the OTA channel (indirect online channel). On an annualized basis, just imagine what this difference in distribution cost constitutes for a typical New York City 200+ room hotel:
Case Study 2: How to Add Half a Million Dollars to the Bottom Line
With a 77.2% average occupancy rate, an ADR of $215.14 in 2009 (STR), and 45% of bookings being made via the Internet (industry average 60:40 direct vs. indirect online ratio):
- Cost of Direct Online Channel Distribution: 7,608 bookings x $12.92 = $98,295
- Cost of Indirect Online Channel Distribution: 5,072 bookings x $107.57 = $545,595
(Calculation based on a hypothetical NYC hotel of 200 rooms @ 77.2% average occupancy rate = 56,356 roomnights/2 nts average stay = 28,178 bookings total, of which 12,680 are Internet bookings (45% of total bookings). Direct online bookings = 7,608 (60%) and Indirect Online Bookings = 5,072 (40%) )
If the hypothetical 5,072 OTA bookings are instead made via the direct online channel at $12.92 each, the bulk of the OTA distribution cost, namely $480,065, would go directly to the hotel’s bottom line ($545,595 – $65,530, i.e. 5072 bookings x$12.92). This is nearly half a million dollars added to the bottom line. Name one hotelier who would not have liked that in 2009!
Naturally, we do not envision a scenario where 100% of Internet bookings are made via the direct online channel. The OTAs and other players in the indirect online channel do play a needed role in certain areas of the travel planning and purchasing process e.g. dynamic packaging (air+hotel+car+tour) for leisure destinations. Even in pre-Internet years, approximately 25% of all hotel bookings in the U.S. came via the indirect channel (travel agents, tour operators, etc)
Now, 15 years after the advent of the Internet distribution channel, the most cost efficient distribution and marketing channel ever, the indirect channel contribution should not be higher than 25%. On the contrary, due to dramatic changes in travel consumer behavior, and the inherent demand to deal with the “manufacturer” of hotel and travel products (i.e. travel suppliers like hotels, airlines, car rental companies, etc.), we should be witnessing a decline in the indirect channel contribution. What we should not be seeing is the current industry average of a 40% OTA contribution.
Just imagine the cost savings if 5%, 10%, 15%, 20% or more bookings are shifted from the indirect to the direct online channel!
In addition to being the most cost effective distribution channel, the direct online channel provides long term benefits and competitive advantages:
- Reduces dependence on OTAs and expensive traditional distribution channels
- Prevents brand and price erosion
- Cross-Channel / Multi-Channel marketing and customer engagement
- Allows the hotel to “own” the customer
- Builds brand loyalty
- Engages customers pre-, during, and post-stay
Why Don’t Hoteliers Invest More in the Direct Online Channel?
Having completed the above cost analysis, we should all ask ourselves: why aren’t hoteliers investing more in the direct online channel?
There are many reasons for that, including the obviously erroneous one that selling through the OTAs is “free”. Our analysis proves that is not the case.
Independent hotels are overwhelmed by this rapid shift from offline to online distribution and often fail to compete for their fair share of the market. The main reason is the lack of understanding that Internet marketing is not an expense, but an investment with immediate returns at very high ROIs (Return on Investment). Another reason is the perception that cutting-edge Internet marketing services and technologies are out of reach and accessible only to large hotel chains.
Franchised properties believe that the major hotel brands “take care of the Internet” for them, thus they miss serious local revenue generating opportunities.
The following case study, based on HeBS’ hotel client portfolio for which HeBS provides full-service Internet marketing services and direct online channel strategy advice, clearly shows that investments in the direct online channel pay off handsomely:
Case Study 3: Return on Investment (ROI) from the Direct Online Channel in 2009
Total Room Nights Booked: 530,605
Total Revenue Generated: $63,900,305
Total Marketing Spend: $2,004,093
Return on Ad Spent (ROAS): 3088% (31:1)
Cost of Website and Campaign Management: $2,729,893
Return on Investment (ROI): 2,240% (22:1)
Just compare the above ROAS and ROIs to any other return from any other marketing activity!
Hoteliers can successfully compete for their fair share of revenues to be made from the online channel by investing in the direct online channel, and by embracing best practices and new Internet marketing technologies and formats:
- Website Re-Design
- Web 2.0 Optimizations & Applications
- Search Engine Optimization (SEO)
- Search Engine Marketing (SEM)
- Email Marketing
- Strategic Linking
- Display Advertising
- Online Sponsorships
- Social Media + Social Marketing
- Mobile Web + Mobile Marketing
The Bottom Line: Invest in the Direct Online Channel
Hoteliers need a robust Direct Online Channel Strategy, accompanied by adequate marketing funds, to be able to take advantage of the steady growth in the Internet channel and the shift from offline to online bookings in hospitality (due to declining GDS and voice channels). Hoteliers must carefully employ ROI-centric initiatives including website redesign, website optimization and SEO, paid search, email marketing, online display advertising and sponsorships, mobile marketing and proven social media initiatives.
Even in this economy, you should not decrease or eliminate your hotel Internet marketing budget. The Internet, and especially the direct online channel, is the only growth channel for hoteliers and the only “light at the end of the tunnel” in this environment. As indicated above, even in these difficult times we see significant ROAS and ROIs from the Internet marketing campaigns we run for our clients.
Market researchers envision growth rates in online travel as high as 11% in 2010 as projected by eMarketer. The online channel, and especially the direct online channel, provides hoteliers with the only viable option for any growth during these trying economic times.
Any comments? Case Studies? We would appreciate your input.
Posted in Direct Online Channel, HeBS Articles & Publications | 2 Comments »
Tuesday, April 6th, 2010
A commentary on the recent news about Facebook surpassing Google as the most popular website in the U.S.
by Max Starkov
The Buzz
On March 15th, Experian Hitwise reported that Facebook.com has surpassed Google.com as the most popular website in the U.S. Indeed, Facebook accounted for 7.07 percent of all U.S. website visits for the week ending March 13th, compared with Google.com’s 7.03 percent share:
Here is a list of the most popular websites in the U.S as of March 15, 2010:
|
Website
|
Domain
|
Visits (%)
|
|
Facebook
|
www.facebook.com
|
7.07
|
|
Google
|
www.google.com
|
7.03
|
|
Yahoo Mail
|
mail.yahoo.com
|
3.80
|
|
Yahoo
|
www.yahoo.com
|
3.67
|
|
YouTube
|
www.youtube.com
|
2.14
|
|
MySpace
|
www.myspace.com
|
2.00
|
|
msn
|
www.msn.com
|
1.82
|
|
Windows Live Mail
|
mail.live.com
|
1.63
|
|
Yahoo Search
|
search.yahoo.com
|
1.23
|
|
Bing
|
www.bing.com
|
1.09
|
(Source: Experian Hitwise)
Needless to say, last week the industry was abuzz with this exciting news. We heard questions tossed around like: “Is Facebook going to replace Google?” and “Are we missing big revenue opportunities by not advertising on Facebook?”
The Bottom Line
You can relax. Facebook is definitely here to stay and has experienced tremendous growth, but it is not going to replace Google as a travel planning tool anytime soon. Here are the reasons why:
Online Travel Consumer Behavior:
- When consumers want to buy books online, they go to Amazon.com.
- When people want to buy new laptops or PCs online, they go to Dell.com, Apple.com or BestBuy.com.
- When people plan travel they go to:
- Search Engines: Google, Yahoo, Bing
- Meta Search Engines: Kayak.com
- OTAs: Expedia, Orbitz, Priceline, etc.
- Major hotel brand websites: Marriott.com, Hilton.com, etc.
- Independent/boutique/luxury hotel websites
- Consumer review sites: TripAdvisor.com, to check out what their peers think of certain hotels, once they have narrowed down their choices
Eighty-four percent of Americans plan travel online (TIA) using the above approaches. In other words, social networks are not the first options that come to mind when planning a business trip or family vacation. Many travel consumer surveys attest to the above behavior, time and again.
Seeking Friends/Family/Peer Advice
There is no doubt that social networks are being used as channels to solicit friends/family/peer opinions about travel experiences—“Have you been to Boston lately?”, “Can you recommend a cool hotel in Miami? You just came back from there.”—in the same manner as people solicit opinions from colleagues by the office water cooler or chatting with friends over the phone.
But these opinion/recommendation solicitations are conducted on Facebook “behind closed doors” (i.e. within the private network of a Facebook user), and have nothing to do with a) hotel Facebook Fan Pages or b) hotel advertising on Facebook.
Case Studies
The following case studies illustrate that Google and the other search engines still rule as revenue generators for hotels, and Facebook’s contribution to hotel revenues is insignificant at best. Obviously, Facebook’s contribution should be measured using a different set of metrics to determine ROI.
Case Study A: Search Engine Contributions to Hotel Website Visits and Revenue
Percentage of Website Revenues and Website Visits Coming from Search Engine Referrals in 2009
| |
% of website revenues |
% of website visitors |
| Hotel Chain (200+ properties) |
48%
|
71%
|
| Resort Brand (22+ resorts) |
41%
|
79%
|
| Boutique Luxury Hotel-W. Hollywood, CA |
57%
|
94%
|
| Full-Service Golf & Spa Resort -FL |
60%
|
82%
|
| Luxury Hotel & Resort -Florida Keys |
41%
|
79%
|
| Hip Luxury Hotel -Santa Monica, CA |
58%
|
82%
|
| Full Service Casino Hotel -Reno, NV |
48%
|
91%
|
| Hotel Company (20+ properties) -Daytona Beach, FL |
40%
|
92%
|
| Full Service Meeting Hotel -Los Angeles, CA |
61%
|
21%
|
Case Study B: Facebook Contributions to Hotel Website Revenues
Hospitality eBusiness Strategies (HeBS) is the industry pioneer in social marketing. HeBS’ first social marketing initiatives, white papers, and workshops on the subject date back to four and a half years ago.
From Facebook Fan Pages to interactive contests and cool promotions for Facebook fans only, we have done it all. Here are some case studies from Facebook Fan Page initiatives we manage for hundreds of our hotel clients:
1) Full-Service Golf & Spa Resort in Florida
- Facebook Fans: 1,703
- Website revenue since January 1, 2009:
- From Facebook referrals: $739
- Total website revenue: $1,252,900
- Facebook as % of total website revenue: 0.06%
2) Full-Service Hotel Casino in Nevada
- Facebook Fans: 3,263
- Website revenue since January 1, 2009:
- From Facebook referrals: $1,216
- Total website revenue: $7,218,916
- Facebook as % of total website revenue: 0.02%
3) Boutique Luxury Hotel in West Hollywood, CA
- Facebook Fans: 641
- Website revenue since January 1, 2009:
- From Facebook referrals: $915
- Total website revenue: $1,695,031
- Facebook as % of total website revenue: 0.05%
Though Facebook initiatives drive traffic to the hotel website, this trackable traffic is not directly responsible for any significant revenue. Obviously social marketing ROI has to be judged with metrics different from bookings and revenue.
Social Marketing ROI
What kind of ROI metrics should hospitality social marketers use to determine the success of their social marketing efforts? Here are some ROI metrics we believe should be used to measure the success of any hotelier’s Facebook initiatives:
User Engagement:
- Reaction:
- Number and quality of fan comments and feedback
- Number of “likes” i.e. how many times fans “liked” your posting
- Demand:
- Number of times fans initiate the conversation
Fan Metrics:
- How many fans/new fans have you acquired last month?
- What is the growth in percentage of new fans?
- Fan demographics: age, gender, location
- Are you engaging the right customer segments?
- Do they reside in your main feeder markets?
Fan Pages Metrics
- Pageviews – Number of visits to the hotel’s Fan page
- Growth in pageviews over time
Facebook Campaign Metrics:
- Growth of new fans as a result of a campaign involving your Fan Page
- Contests, quizzes, sweepstakes, scavenger hunts, etc.
Hotel Website Metrics:
- Number of visitors to the hotel website originating from the hotel Fan Page
- Bookings initiated, bookings, roomnights, revenue
Conclusion:
Social media marketing is an important component of any hotel’s marketing mix and part of the comprehensive Direct Online Channel Strategy for any hotel company. Naturally, as discussed above, it is important to use the right ROI metrics to measure the success of social marketing efforts of the hotel.
The results of HeBS’ recent 4th Benchmark Survey on Hotel Internet Marketing clearly show that half of hoteliers surveyed (50% exactly) responded that in 2010 they were planning to create profiles for their hotels on social networks. The days of just waiting to see how social media will develop seem to be over.
More hoteliers are planning to engage in all types of Web 2.0 and social media initiatives across the board, as you may see in the table below:
| What type of Web 2.0 & Social Media marketing initiatives are you planning for 2010? |
2008
|
2009
|
2010
|
| A blog on the hotel website |
14.5%
|
14%
|
37.9%
|
| ‘Share this site’ and RSS on the website |
N/A
|
N/A
|
24.1%
|
| A photo sharing functionality on the hotel website |
12.7%
|
4.7%
|
32.8%
|
| Sweepstakes and contests on the hotel website |
9%
|
3.5%
|
36.2%
|
| Survey and comment card on the hotel website |
18.4%
|
14%
|
31%
|
| Subscribe to a reputation monitoring service |
8.4%
|
2.3%
|
19%
|
| Create profiles for my hotel(s) on the social networks (Facebook, Twitter, Flckr, etc.) |
13.3%
|
14%
|
50%
|
| Create and post videos on YouTube |
N/A
|
N/A
|
46.6%
|
| Actively participate in blogs that concern my hotel |
12.7%
|
5.8%
|
24.1%
|
| Advertise on social media sites (e.g. TripAdvisor, Facebook, etc.) |
8.1%
|
15.1%
|
39.7%
|
| I am not planning on Web 2.0 and Social Media initiatives for 2010 |
N/A
|
15.1%
|
6.9%
|
But social media and social media marketing initiatives should be reviewed with “sober eyes” and within the context of what really generates revenues for hoteliers today. The hotel Internet marketing basics—website re-design, SEO, SEM (paid search), and email to the hotel’s opt-in list—consistently bring in the most bookings and the highest ROIs in the industry. HeBS estimates that 80%-85% of hotel website bookings originate directly from these four initiatives alone.
In addition, instead of only focusing on bookings and revenue when measuring results from social media marketing, remember that currently the best uses of social media are:
- Buzz-building
- Brand-building
- Interacting with and engaging customers
- Keeping up with the times, making the hotel look current, cool and up-to-date
- Driving traffic to the property’s own website
Though Facebook initiatives drive traffic to the hotel website, this trackable traffic is not directly responsible for any significant revenue. Obviously, social media marketing ROI has to be judged with different metrics – not just bookings and revenue.
Any comments? Case Studies? We would appreciate your input.
Posted in HeBS Articles & Publications, Social Media & Web 2.0 | 2 Comments »
Wednesday, March 31st, 2010
By Jason Price and Mariana Mechoso Safer
Hospitality is an information intensive business. Hotel managers are exposed to numerous reports that touch upon practically every aspect of running a hotel. In addition to reports dealing with hotel operations, today’s hotel managers have another category to consider that has become vital to their property’s success—how their hotel website is performing. Forty-five percent of all hotel bookings in the U.S. will be generated via the Web in 2010. At least 62% of those will come from the direct online channel, i.e. the hotel branded website (71% for the top 30 hotel chains); therefore the “health” of the hotel website is vital to the survival of any hospitality company today, affecting E-Commerce Managers, Revenue Managers, Directors of Sales & Marketing, General Managers, owners, reservations departments and front desk clerks.
This article is designed as an action plan to guide you through solving tough, yet crucial business questions about your website and Internet marketing campaigns. The questions we explore here only represent a snapshot of the insights one could glean from a quality web analytics tool; however, these are the fundamentals to get you started.
Background
Analytics, the practice of using quantitative data to base business decisions, is a science. Basing decisions and predicting future behavior using historical data and statistical modeling, as opposed to just “going with your gut,” typically describes the practice of analytics. Most industries rely on some form of analytics to help plan and forecast, and the hospitality industry is no exception.
The direct online channel is the only growth channel in hospitality, and it has become the single most important source of revenue for hotels. Every single dollar spent online can—and must— be tracked using a web analytics tool like Omniture. If you cannot measure results such as bookings generated and ROI, don’t spend a single precious marketing dollar.
The Internet marketing budget is never final. It is a “work-in-progress” which continuously needs to be reevaluated depending on results and Return-on-Ad-Spend (ROAS). Using state-of-the-art analytics to dissect customer behavior, marketing costs, and revenue returns makes for savvier hotel marketers and budget planners for years to come. An analytics tool also allows for adjustments in Internet marketing strategies as needed—since results may be measured in real time—making it an invaluable, must-have tool in the hotelier’s Internet marketing arsenal.
Selecting the Right Web Analytics Tool
The web analytics industry is a competitive marketplace and there is no shortage of vendors, free and paid. The best web analytic tools are from technology companies that focus on the development and refinement of web analytics. Here at HeBS, we utilize Omniture SiteCatalyst and Omniture SearchCenter for all of our clients. Omniture is by far the market leader and is used by many major hotel brands such as Starwood and Marriott, OTAs like Expedia, and many mid-size hotel chains and full service hotels and resorts.
Free analytical tools like Google Analytics simply cannot compare to the highly sophisticated yet easy-to-use web analytic applications from Omniture. A simple example of why Omniture rises above the competition is its integration of tracking across all aspects of the online channel; the ability to incorporate data from the hotel website, search engines, email and text messages, PMS driven eCRM, media buys, phone call tracking, Web 2.0, Social Media and more. An integrated analytical tool provides more accurate analysis of the results of a marketing plan, as each component is tracked, measured, and viewable on a user-friendly dashboard. Tracking the bottom line –ROAS – is the ultimate goal in a world of limited resources.
The following case study illustrates the integration of tracking across various online channels. Note the detailed information not just on revenue and ROAS, but additional measures that must be taken into account when analyzing the results of a campaign.
Case Study: Measuring Results for a Luxury Midwest Spa ResortMoving Beyond Web Analytics 101
| Midwest Spa Resort (12 months) |
Click-Throughs
(Clicks) |
Bookings Initiated |
Leads Initiated |
Leads Completed |
Bookings |
Room Nights |
Revenue |
ROAS |
| Banners |
240 |
10 |
7 |
5 |
3 |
9 |
$2,700.00 |
27% |
| Strategic Linking |
84 |
22 |
4 |
1 |
2 |
3 |
$891.00 |
700% |
| Emailers |
797 |
47 |
37 |
17 |
21 |
51 |
$16,320.00 |
4000% |
| Email Sponsorships |
232 |
11 |
23 |
11 |
7 |
21 |
$6,970.00 |
120% |
| Cost Per Click Advertising |
1211 |
88 |
35 |
3 |
4 |
11 |
$4,500.00 |
400% |
| Paid Search Engine Marketing |
19784 |
4762 |
1493 |
198 |
108 |
565 |
$76,761.00 |
657% |
| Natural Search |
NA |
28552 |
8007 |
1100 |
899 |
10535 |
$556,482.00 |
2500% |
| Local Search |
14795 |
2775 |
770 |
72 |
72 |
160 |
$51,270.00 |
42500% |
| CRM (confirmations & reminders) |
121 |
7 |
0 |
0 |
13 |
17 |
$5,440.00 |
320% |
| Consumer Deal Releases |
47 |
7 |
44 |
27 |
2 |
4 |
$1,500.00 |
275% |
Move beyond basic visits, page views, and other standard measures and customize your reporting and analytics to generate a deeper understanding of user behavior and revenue generation. For example, are you able to determine which paths on your website generate the most revenues, or which of your Internet marketing initiatives stacked up (i.e. a hotel guest first clicked on a PPC ad, then came back to book a room from an email newsletter offer) to result in the most reservations? Commonly referred to as custom conversions, these reports make analytics not only invaluable but enjoyable. Only a sophisticated and proven analytical tool will provide thorough, customized reporting on this level.
Your web analytics tool must provide a broad range of reporting capabilities that you may tailor to meet your specific needs.
What is the future of web analytics? Real-time visual reporting is the next generation of web analytics, allowing analysts to determine the most valuable touch points on a website and to follow, in real-time, the path of users visiting the site, the amount of time spent per page, and the pages through which they exit the website.
From custom conversions to visual reporting, these tools assist hotel Internet marketers in budget planning and validate the investments being made online.
Hotelier’s Web Analytics Action Plan
Assuming you have direct access to your own web analytics account, and have already received basic training (HeBS provides clients with training and 24/7 access to their Omniture web analytics), it is now time to get the most out of your web analytics.
Here are ten metrics to measure, followed by an action plan based on results:
- Where are my visitors located and of these visitors, which ones are booking?
Situation: Most web analytics will tell you where your customers are located based on IP address, but not all will tell you if they are converting from lookers to bookers. In a world of limited resources, you need to make sure you are spending your dollars where your most valuable and loyal website visitors will find you.
Action Plan: After examining revenue production (not just website traffic) by location, direct marketing dollars to reach the people in those specific geographic locations most likely to purchase from you. If the hotel website’s primary traffic appears to be coming from drive-in markets, marketing campaigns should reach accordingly. If the hotel attracts Spanish speakers from top destinations in South America, but only one country generates meaningful revenues, then that is where you need to dedicate your marketing funds. This may call for a complete overhaul of your Internet marketing budget – but the hotel’s increased ROIs will make the effort well worth it.
- What is the total number of days prior to making a purchase, also referred to as the hotel’s “purchase cycle”?
Situation: The purchase cycle describes how many days it takes a visitor to make a purchase after first visiting the site. Reasons for a delay in purchasing vary. Customers may be simply browsing and shopping rates, or they may find the site too complicated to navigate. We know that when it comes to the hospitality and travel industries, people are searching on average of 22+ travel websites before making a booking (Google).
Action Plan: Put messages on your home page, specials page and reservation pages to motivate buying. Depending on seasonality, try enticing consumers with low availability, extra room nights (i.e. purchase two nights and get the third night free), and advanced purchasing. Figure out ways to motivate faster bookings and minimize the hotel’s purchase cycle. Make sure you are reaching your future and current guests via multiple touch-points so they come across your hotel website and marketing messages a few times during their planning process. Lastly, look at your stacking reports (see #5) before you determine that one of your Internet marketing initiatives isn’t working for you because you aren’t seeing immediate, direct conversions.
- What are the most popular paths journeyed through the site? What are the most revenue generating paths?
Situation: How well do you know your website? Pathing describes the way a website visitor navigates your hotel website and a pathing report aggregates the pages viewed by all visitors over a specific time frame. It is possible that 80% of your revenues come from 20% of your website pages. Do you know which pages these are and how your website visitors are getting there?
Action Plan: Carefully measure how your guests navigate your hotel website before they make a booking. Don’t limit what you measure by only starting from the home page to assess pathing reports. Include interior pages as they will tell you where visitors went next (i.e. specials & packages, private landing pages, campaign landing pages, etc.), or if they just left your website because they did not find what they needed. Try following the path of visitors that come to your website from banners ads or other media to determine the success of those campaigns. Analyzing these reports will also make you think twice before changing the content on a page—or help you realize that a landing page is actually hurting your business.
- Which and how many web pages contribute to my overall revenues?
Situation: As mentioned in the pathing question above, be careful which page(s) you plan to change. Pages that influence customers to book may be of greater value than you think. When evaluating the importance of pages and the general value of the website content, test which pages convert lookers to bookers.
Action Plan: Examine the traffic of interior pages. See how well they performed in influencing a user to book. Would more photos, a more attention-grabbing headline, or other visual element help? If you have pages in multiple languages, are these pages viewed and do they lead to any bookings? If not, you may want to consider whether the translation was done accurately. Multilingual campaign development should not be a direct translation; results are greatly improved by tailoring the SEO and PPC campaigns to the specific culture and language.
- Where in the booking process are we losing customers?
Situation: Where and why are customers abandoning the booking process? Web analytics allows you to answer such questions and from different angles that a booking engine report will not be able to tell you. It is not sufficient to just measure abandonment. Review where in the booking process people are abandoning – does a specific room type or room rate lead to a high abandonment rate?
Action Plan: First identify which steps in the process your website visitors are leaving the booking process. Is it before or after clicking on book now, entering dates, selecting a room, or another step in the process? Perhaps you need to reinforce the sales process or provide assurance that the transaction is secured. Consider comparing abandonment rates based on different room types, specials, and time of year. This analysis will help you improve the booking process and convert more lookers to bookers.
- How do I know which advertising medium(s) contributed to my hotel website revenues?
Situation: Hotel guests who have booked on your website may have been exposed to various forms of marketing initiatives (e.g. email, PPC, banner ads, print, etc.). You want to give credit where credit is due, but results usually give all the credit to only the most recent initiative that lead to a booking.
Action Plan: A campaign tracking report with custom conversions can break out the paths of campaigns (including the multiple keywords that led to a booking when studying the results of paid search) that users took to book. Credit can be given evenly across each channel and/or keyword that influenced a booking, or distributed proportionally based on the marketing spend. Either way you may determine if a specific marketing initiative influenced the hotel guest to learn more about your hotel, to return to the website, to make a booking, or if it made no impact at all.
- How is the hotel pacing over the upcoming weeks and months?
Situation: A hotel that is pacing well over the next 30 days suggests the rooms nights are selling and the hotel is on schedule to meet budget over the next 30 days. Pacing varies due to seasonality and the economy and tends to replicate year after year.
Action Plan: While any booking engine or PMS report may show this information, it will not show you all the bookings initiated or leads initiated which may suggest interest and help predict room reservations if matched with the booking cycle. If the hotel is not showing strong pacing, then consider increasing the budget for search marketing campaigns and launching email campaigns and/or media promotions offering special rates during the time period that shows slow sales. A small window of lead time may move those unsold rooms—and reports showing which campaigns lead to bookings with a short lead time should spur you to increase spending for those respective campaigns.
- What are the most popular types of rooms sold on the site?
Situation: Some types of hotel rooms sell better online than others. Why is this the case? It may be due to the type of room, room rate, floor space, amenities that come with the room, general description and presentation, or even availability.
Action Plan: Use website analytics to determine which room types do not sell. Boost the image and selling power of these types of rooms by incorporating upgrades and offering additional nights at special rates. Evaluate the quality of the presentation and imagery of the rooms on your website. Perhaps even the naming of the room, i.e. “Double-Double Luxury Partial Ocean View,” is too complicated or not enticing.
- What is my CPA (cost per acquisition)? Does it vary by channel?
Situation: Acquiring new hotel guests is often costly and it is crucial to determine the total marketing spend vs. revenue for those who booked. This ratio describes the cost to acquire a customer.
Action Plan: The CPA may help determine what the appropriate budget should be for a marketing campaign, particularly when it comes to paid search budgets. For PPC, the CPA may help determine which ad groups or terms are not producing. Pause them and save your marketing dollars.
For banner ads and sponsorships, take the total cost or the cost for that month and divide by the number of bookings generated. Did you achieve the appropriate return on ad spend? Did your customer acquisition go up or down? Assuming your analytical tool integrates all your paid search marketing programs, reports will display the results of specific ad groups and keywords. The CPA may help determine how much of a cost increase per keyword you are willing to accept to acquire additional customers, rather than relying solely on Google recommendations.
- How did my Bid Rules influence traffic and acquisition from my paid search campaigns?
Situation: Managing your paid search on a micro level (shifting dollars towards where production is anticipated) can be critical during lean times. Knowing which specific keywords generate revenues, and finding more keywords to help increase conversions from paid search campaigns, is extremely handy information. In addition, optimizing the price per click bidding through bid management can lead to incremental gains.
Action Plan: If your web analytics has an automated bid rule functionality (i.e. Omniture’s Search Center), than start with simple adjustments to the budget on certain search terms. Those with higher click-throughs may not yield any revenues, resulting in wasted marketing dollars. If this is the case, set the bid rule to reduce the bid amount each time the keyword is clicked as long as no revenues are generated.
The opposite can be true for terms that do produce. In this case, the bid level may stay constant or increase as the conversion rate moves in the same upwards direction as the click-through rate. Employing a bid rule strategy can save you marketing dollars in the long run by avoiding expenditures on terms that seem popular yet do not generate revenues. HeBS has saved its clients between 30%-40% of their precious advertising dollars by utilizing Omniture SearchCenter and its sophisticated SEM management technology.
A Word about Call Tracking
Phone tracking is now easier than it has ever been. You may assign a unique 1-800 number for calls from each of your Internet marketing campaigns to determine how many more bookings resulted from these campaigns over the phone. This year, with mobile marketing in the spotlight, it is especially important to determine how many of the hotel’s bookings made over the phone resulted from the mobile website or mobile marketing initiatives. For example, if your hotel sees a high percentage of phone bookings resulting from mobile initiatives, it may be worth it to invest in a mobile booking engine.
Conclusion
Take a closer look at your web analytics tool and carefully determine whether it provides the actionable reporting that you need to generate robust revenues from your hotel Internet marketing initiatives. Reviewing reports on website visits, page views, and other basic web traffic stats is simply not enough information to generate truly meaningful data that will help improve the performance of your hotel’s marketing campaigns.
Become comfortable with using sophisticated web analytics, or turn to experts that specialize in web analytics to assist you. Consider working with a hotel Internet marketing company that will map out the steps to get you the necessary data to address the questions outlined above (you should also have access to your analytics 24/7). Start building confidence in your interpretation and analysis, and gain powerful insights along the way.
Posted in HeBS Articles & Publications, Website Analytics | No Comments »
Monday, March 22nd, 2010
by Max Starkov
Background:
Many hoteliers do not realize how important it is to address the significant change in travel consumer behavior over the past several years, namely the emergence of a new breed of hyper-interactive travel consumers.
Most hotel websites are not equipped to handle the hyper-interactive consumer and read like a static online brochure. There is minimal interaction with the user; all he/she can do is sit back and read what is on the website, as if reading a Mark Twain novel in a county library. Many hotel websites offer dead, stale textual and visual content. There are no interactive Web-2.0 features engaging the travel consumer and soliciting his/her participation and input.
This is contrary to the mere nature of today’s hyper-interactive Internet user, who is tweeting, texting, emailing, communicating with friends via Facebook, and commenting, often in real-time, on restaurants and hotels via review sites like Yelp and TripAdvisor.
The New Hyper-Interactive Travel Consumer
The advent of social media and the Mobile Web has accelerated the hyper-interactiveness of Internet users and travel consumers in general. Social media means deep user engagement, content generation by users on a daily, if not hourly basis, multi-channel interactions and opinion sharing. The Mobile Web takes this behavior to an entirely new level and enables it 24/7.
This new breed of hyper-interactive travel consumers can be described with the following three distinct characteristics:
- They are hyper-connected: these consumers are communicating in real-time with friends, network, colleagues, family and peers via text, email, social networks, online content sharing and reviews.
- They are hyperactive: these consumers exhibit short attention spans in an environment of constant information overload. They also exhibit impulsive behavior with no tolerance for dull, static content that is not engaging.
- They are hyper-engaged: these consumers are passionate, opinionated, easily excitable and fully engaged. They love sharing opinions, reviews and “cool stuff”, and really appreciate the opportunity to be able to do that easily.
Sound familiar? Many of us fall into the category of hyper-interactive consumers.
A survey “The NEXTGen Traveler” by Ypartnership and PhoCusWright found this new type of travel consumer to be“heavy users of wireless and digital technology”. Here are just a few industry stats characterizing today’s hyper-interactive consumer:
Social Media Aficionado
- 57% of US Internet users maintained a social networking site profile in 2009 vs. 45% in 2007.
- Social media is popular even among the mature generation (63-75 years): 36% of them had a social network profile in 2009 vs. 10% in 2007 (eMarketer)
Facebook Devotee
- There are more than 400 million active users.
- 50% of active users log on to Facebook in any given day.
- Average user has 130 friends on the site.
- Average user writes 25 comments on Facebook each month.
Twitter Addict
- According to comScore, 75 million people worldwide visited Twitter.com in January 2010. That represents a growth of 1,100% in a year. Compete.com estimates that 23.5 million of those came from the U.S. alone.
- According to Twitter, some 50 million tweets are sent in one day. Impressive, but what does it mean? Well, tweets in 2009 grew 1,400%. Traffic to Twitter.com grew around 1,100%, and total sent Tweets went up 1,400%.
- According to Alexa, Twitter.com is ranked the 12th most popular website in the world.
Mobile Obsession
- 93.6% Mobile Penetration in the U.S. in 2009 (eMarketer).
- 67% of travelers and 77% of frequent business travelers with Web-enabled mobile devices have already used their devices to find local services (e.g. lodging) and attractions (PhoCusWright).
- 71% of U.S. adults felt it was safe to make a purchase via a mobile phone, 43% are willing to purchase hotel rooms, and 40% tickets for travel via their mobile devices (Harris Interactive Poll April-May 2009).
SMS/Texting Fanatic
- In 2008, over a trillion text messages were sent worldwide.
- On average there were 357 texts vs. 204 phone calls/per month per cell phone subscriber (ITU).
Customer Review Enthusiast
- 89% of US Online Buyers read customer reviews before they buy (eMarketer).
- A recent survey by PhoCusWright revealed the true power of customer reviews in the travel planning process: 84% of respondents read a review of a product or service.
What Are Hoteliers Planning in 2010?
Some hoteliers are beginning to realize that their static, Web 2.0-unfriendly websites are simply not ready to deal with today’s hyper-interactive consumer and are already exploring ways to remedy the situation.
The just released results of the 4th annual Benchmark Survey on Hotel Internet Marketing Budget Planning and Best Practices by Hospitality eBusiness Strategies (HeBS) clearly shows that more hoteliers are planning to engage in Web 2.0 and social media initiatives in 2010:
| What type of Web 2.0 & Social Media marketing initiatives are you planning for 2010? |
2008
|
2009
|
2010
|
| A blog on the hotel website |
14.5%
|
14%
|
37.9%
|
| ‘Share this site’ and RSS on the website |
N/A
|
N/A
|
24.1%
|
| A photo sharing functionality on the hotel website |
12.7%
|
4.7%
|
32.8%
|
| Sweepstakes and contests on the hotel website |
9%
|
3.5%
|
36.2%
|
| Survey and comment card on the hotel website |
18.4%
|
14%
|
31%
|
| Subscribe to a reputation monitoring service |
8.4%
|
2.3%
|
19%
|
| Create profiles for my hotel(s) on the social networks (Facebook, Twitter, Flckr, etc.) |
13.3%
|
14%
|
50%
|
| Create and post videos on YouTube |
N/A
|
N/A
|
46.6%
|
| Actively participate in blogs that concern my hotel |
12.7%
|
5.8%
|
24.1%
|
| Advertise on social media sites (e.g. TripAdvisor, Facebook, etc.) |
8.1%
|
15.1%
|
39.7%
|
| I am not planning on Web 2.0 and Social Media initiatives for 2010 |
N/A
|
15.1%
|
6.9%
|
How Can Hoteliers Make their Websites Web 2.0 Friendly and Engage the Hyper-Interactive Consumer?
The hotel website has become the face of the hotel to the outside world. Hoteliers must understand that engaging the users via a fully interactive, Web 2.0 enabled website not only meets the demands of today’s hyper-interactive consumer, but creates deep and lasting interactive relationships which in turn positively affect conversions and revenues.
Hoteliers must align the interactivity of the hotel website with the hyper-interactive behavior of today’s travel consumer. A Web 2.0-friendly site increases interaction with visitors, engages website users, generates interest, increases site stickiness, and ultimately increases bookings.
In addition, Web 2.0 initiatives on the hotel website are a vital part of the comprehensive de-commoditization strategy of the hotel, a potent tool to provide a unique value proposition to your online customers. A well-developed Web 2.0 strategy on the hotel site could provide visibility to unique aspects of the hotel product and a differentiated approach to reach key customer segments.
Create multiple opportunities for your website visitors to communicate with your hotel. Start a blog so that you can speak to them, and allow them to leave their feedback (this will benefit the hotel’s SEO as well). Launch a sweepstakes (e.g. Free Room Giveaway) that allows your visitors to enter to win a free night’s stay and refer the contest to their friends, spreading it virally. Let them show off their vacation photos by creating a photo sharing contest (always have an approval process before photos go live). Post a fun scavenger hunt on the site and not only generate buzz, but add new hotel fans on Facebook and followers on Twitter, add new users to the opt-in email and text lists, and generate incremental bookings in the process.
Here are two case studies of Web 2.0 initiatives HeBS recently launched for its clients:
Case Study 1: Multi-Channel Interactive Scavenger Hunt for a Resort in Southern California
Description: This multi-channel Interactive Scavenger Hunt required participants to collect 4 clues via Facebook, Twitter, text message and an email marketing piece. They in turn would be entered to win a grand prize of a $1,000 free vacation that included a two-night stay, spa treatment, dinner and a choice of tennis or a round of golf.
Results:
- Unique participants: 1,275
- Increase in Facebook fans: 89%
- Increase in Twitter followers: 25%
- New mobile text list opt-ins: 662
- New email list opt-ins: 650
- Having fun while hunting for clues: priceless
Case Study 2: Interactive Sweepstakes on a Hotel Website in New York City
Description: This 30-Day Free Room Giveaway Interactive Sweepstakes featured on the hotel website allowed participants to enter daily to win a free night’s stay, and an extra incentive of a $250 VISA Cash Card prize was awarded to the person who forwarded the sweepstakes to the most friends.
Results:
- Sweepstakes participants: 8,231
- New email list opt-ins: 1,624
- Sweepstakes forwarded to a friend: 443 times
- Sweepstakes mentioned in various travel publications
- Numerous tweets and re-tweets about the sweepstakes
Many of these Web 2.0 features such as interactive sweepstakes and contests, blogs, event/activity calendars, photo sharing contests, sharing the site with friends, following the hotel via Twitter and Facebook, customer surveys and testimonials, etc. can be implemented even now, in this economy, with or without re-designing the whole website.
Consider seeking advice from a Web 2.0-savvy, full-service hotel website development and Internet marketing firm to actively help you revamp the interactivity of your hotel website. Learn which Web 2.0 and interactive initiatives make the most sense for your hotel, as well as how to implement the latest trends and best practices so you can meet the new demands of today’s hyper-interactive travel consumer.
Posted in HeBS Articles & Publications, Website Design | No Comments »
Tuesday, February 23rd, 2010
The latest eTRAK Full Year 2009 report on hotel bookings by channel yet again confirms that today, the online channel is the only growth channel in hospitality. In the difficult economic environment, when travel supply outweighed travel demand by far, Internet bookings for the top 30 hotel brands increased by a remarkable 6.6% in 2009 vs. 2008 (eTRAK).
This increase in Internet bookings comes at the expense of the GDS and Voice Channels, both of which have been declining for many years now.
The growth of the Internet channel for the top 30 hotel brands is not an isolated phenomenon. HeBS reported steady increases in direct online channel bookings across its hotel client portfolio, even in a difficult year like 2009.
In dire economic times like these, characterized by sharp declines in travel demand, a comprehensive ROI-centric Internet marketing strategy can help hoteliers continue to generate much needed incremental revenues and out-smart their competition.
Here are some of HeBS’ findings based on the latest eTRAK benchmark report, surveys and industry data from PhoCusWright, ARC and our own research.
GDS Channel Is in Steady Decline:
- GDS hotel bookings via the CRS of the top 30 hotel brands declined by 3.7% 2009 vs. 2008, and constitute 23.6% of total CRS bookings in 2009 vs. 27.3% in 2008 (eTRAK).
- Back in 2006, GDS CRS reservations constituted 31.3% of total CRS bookings for the top 30 brands. GDS share has decreased by 24.6% from 2006 to 2009, when it was reported at the 23.6% level.
- Travel Agency Share from Total Travel Market in the U.S. dropped from 41% in 2006 to 33% in 2009 (PhoCusWright).
- U.S. Travel Agency Locations decreased by 7% in 2009 vs. 2008. The number of locations has been decreasing at an average rate of 4% every year since 2001, and the number of travel agencies has declined from as high as 35,000 in 1995 to less than 16,450 in September 2009 (ARC, HeBS).
The Voice Channel Contribution Is Decreasing:
- Voice channel hotel bookings via the CRS of the top 30 hotel brands declined by 2.9% in 2009 vs. 2008, and now constitute 22.2% of total CRS booking in 2009 (eTRAK).
- Last year’s decrease is in addition to a decline of 2.8% for the full 2008 vs. 2007 (eTRAK).
- The Voice Channel is in decline for the 6th consecutive year (HeBS). Back in 2006, voice reservations constituted 31.3% of total CRS bookings for the top 30 brands. Voice Reservation share decreased to 25.1% in 2008 and 22.2% in 2009.
The Shift from Offline to Online Channel is Permanent:
- 54.2% of overall CRS bookings for the top 30 hotel brands come from the online channel, which is an increase of 6.6% vs. 2008 (eTRAK).
- 60% of leisure and 40% of business travel will be booked online in the U.S. this year (PhoCusWright).
- 45% of hotel bookings in 2010 will be via the Internet (direct + indirect online channels) (HeBS).
Direct vs. Indirect Online Channel: Dynamics Follow the Economy:
Typical of economic times such as the present, the hotel industry (similar to post 9/11) has again “succumbed to the devil” in the face of the major OTAs. Since mid-2008 travel supply has outweighed demand and hoteliers have been more susceptible to panic, resulting in deep discounting and embracing of the OTAs. The result is that we have witnessed a significant shift from the direct online to the indirect online channel in 2009:
- In 2009, 70.9% of online bookings came from the direct online channel (i.e. the major hotel brands’ own websites), while 29.1% came from the indirect online channel (the Online Travel Agencies—OTAs) (eTRAK). This constitutes a significant increase of the contribution from the OTAs compared to 2008, when 75.2% of online bookings came from the direct online channel, while 24.8% came from the OTAs.
- Compare this to 2007, when the direct channel contributed 76% of CRS Internet bookings.
Here is a summary of eTRAK’s most recent reports on hotel bookings by channel:
| Top 30 Hotel Brands: CRS Hotel Bookings |
2009
|
2008 |
09 vs. 08
|
2008
|
2007
|
08 vs. 07
|
| Internet Bookings |
54.2% |
47.6%
|
6.6%
|
47.6%
|
42.0%
|
+5.6%
|
| * Brand Website |
70.9% |
75.2%
|
|
75.2%
|
76.0%
|
|
| * Third-Party/OTAs |
29.1% |
24.8%
|
|
24.8%
|
24.0%
|
|
| Brand GDS Bookings |
23.6% |
27.3%
|
-3.7%
|
27.3%
|
29.3%
|
-1.9%
|
| Brand Voice Bookings |
22.2% |
25.1%
|
-2.9%
|
25.1%
|
28.8%
|
-3.7%
|
The Bottom Line: Focus on the Direct Online Channel
Hoteliers need a robust Direct Online Channel Strategy, accompanied by adequate marketing funds to be able to take advantage of the steady growth in the Internet channel and shift from offline to online bookings in hospitality due to declining GDS and voice channels. Hoteliers must carefully employ ROI-centric initiatives, including website redesign, website optimization and SEO, paid search, email marketing, online display advertising and proven social media initiatives.
Even in this economy, you should not decrease or eliminate your hotel Internet marketing budget. The Internet, and especially the direct online channel, is the only growth channel for hoteliers and the only “light at the end of the tunnel” in this environment. Even in these difficult times we see “Return on ad spend” (ROAS) as high as 3500% from Internet marketing campaigns we run for our clients.
Market researchers provide various projections for the growth of the online travel channel in 2010, from a small decline as reported by a travel research company, to growth rates as high as 11% in 2010 as projected by eMarketer. These optimistic projections are supported by the leading e-Commerce research company, which declares that overall U.S. online sales will increase by 9% in 2010. HeBS believes that online travel, having always been the most dynamic and fast-growing segment of the overall online marketplace, will experience similar growth rates. Whatever the case might be, the online travel channel, and especially the direct online channel, provides hoteliers with the only viable option for any growth during this recession.
Posted in HeBS Articles & Publications | No Comments »
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