Newsletter - February 7, 2003
Website Optimization
The
blueprints for a robust direct-to-consumer online distribution strategy
By Jason Price and Max Starkov
Direct-to-consumer online distribution should become the
foundation, the main focus of any hotelier's online distribution strategy.
In the offline world, hoteliers are the best direct salesmen with an
estimated 75% of all reservations sold directly to consumers. Online, the
industry direct sales average 52% (PhoCusWright, 2002) with many hoteliers
reporting less than 5%. As a result, many hoteliers cede control of their
inventory and pricing to online intermediaries, at an enormous
cost financially and to brand integrity.
Website optimization is the first step toward building a robust direct
online distribution strategy.
This year over 13% of all revenues
in hospitality will be generated from the Internet. Three years from now
the Internet will generate over 20% of all hotel bookings (PhoCusWright).
Roughly 52% of all online bookings
in 2002-2003 will be completed directly through hotel-sponsored websites.
Forrester Research confirms that people who book online prefer to use a
supplier website over intermediaries.
Forrester Research:
“Which of the following types of websites
have you used to book
travel in the past year?”
Response
2000
2001
Travel Supplier (e.g. Hotel website): 45%
63%
Online agency (e.g. Travelocity): 57%
51%
Consolidator (e.g. Hotels.com): 7%
24%
Portal (e.g. CVB website):
32%
20%
(Forrester Research 2002,
multiple responses accepted)
If your hotel is not generating at
least 53% of its online bookings directly from the hotel website, but from
intermediaries, then you are not competitive on the Web and run the risk
of long term price and brand erosion.
The Internet is the ultimate “Direct Distribution
Medium”. It provides the hotel with long-term competitive advantages by
lessening dependence on intermediaries, online discounters and traditional
channels that may soon become obsolete. Any promising, sustainable, and
defensible distribution strategy must start locally at the hotel website.
Direct-to-consumer online
distribution has the following benefits:
Puts the hotel in control of its Internet
presence and exposure
Prevents brand and price erosion
Lessens dependence on online discounters and
intermediaries
Is the shortest path to establishing interactive
relationships with customers
Provides long-term opportunities to benefit from
the lifetime customer value
Is the least expensive way to distribute hotel
inventory--direct to consumer!
The foundation of a hotel's direct online distribution
strategy begins with the website. A well functioning, fully optimized
hotel website is a real asset that serves as the chief instrument to
capture new markets and facilitate transactions.
Unfortunately a majority of today’s hotel websites and web
strategies in hospitality suffer from two common flaws:
Websites built with no online distribution strategy
Most
hotel websites are performing poorly as far as online distribution and
search engine strategy are concerned. Why? Most hotel websites have been developed by web
designers who know nothing about the hospitality industry, based on input
and concepts by hoteliers who
are not experts on Internet strategy, online distribution, and eMarketing.
And many of them were designed as online brochures without taking into
account fundamental online distribution principles.
Using a “quick
fix” approach to undo what’s fundamentally wrong
Such
hotel websites, built without clear online distribution concepts and
principles, inevitably produce poor results and few bookings. Hoteliers
then turn to Search
Engine Optimization (SEO) vendors for a quick fix of the hotel website to
boost search engine rankings and increase online revenues. In reality,
“slapping” meta tags to a stale, user-unfriendly website and
submitting it to the search engines can achieve few sustainable results.
Only
a fully optimized website can produce the desired online revenues and
position your hotel company ahead of the competition. Website optimization
takes a comprehensive look at the website and prepares it for optimal
performance (maximum user experience, bookability and conversion rates)
and yes, for the search engines. Especially in hospitality, regaining
control of distribution from the online discounters and building a
presence over the web directly to consumers is increasingly important.
Website optimization is an imperative in today’s marketplace.
Hoteliers who have instituted website optimization
strategies are ahead of the curve with their own direct distribution
strategies. They have higher placement on the search engines and are able
to convert more lookers into booker. These hoteliers understand that
online consumers prefer to buy directly from the hotel. They recognize the
hotel website is a source to
control room inventory, hotel descriptions and content, room pricing and
availability, group-bookings, and corporate rate programs, something
completely unachievable on any third-party channel.
What
is Website Optimization?
To begin with, a hotel
website is not an online brochure. It is not meant to serve as reference
material secondary to a sales pitch. The website is a 24/7 sales and
marketing tool, a hotel’s top producing “virtual” sales office. The
website is a “living organism” with descriptive copy, images and
keyword updates, special packages, email capture, and overall fresh and
locally relevant information--all meant to enhance the user experience and
all easily achievable at minimal cost.
Therefore, website optimization addresses eDistribution, revenue
management, and overall marketing—well outside the role of web designers
and more closely associated with eBusiness experts.
Website optimization consists of several core
components that combined reflect best practices. These are: user-friendly
website, search engine readiness, website bookability, and eCRM. The first
two components are further addressed in the remainder of this article.
Several features that characterize a user-friendly website and search
engine readiness are identified underneath the headings below.
User-friendly website
-
Introduce credible and optimized body copy
-
Address the “trust” issue to boost consumer
confidence (e.g. Privacy Policy)
-
Streamline navigation by introducing well defined, easy-to-use comfortabltiered
navigation
-
Increase conversion rates by introducing a robust
real-time booking engine
-
Consider offering lowest price guarantee
-
Set up search/availability box right on Home Page
-
Make all promos and packages bookable in real
time
-
Optimize images to improve download speeds
-
Improve download speeds to less than 15 seconds
at 56K (“AOL Benchmark”)
-
Introduce rich media features: virtual tours,
photo shows, floor plans, etc
-
Develop sections/pages to target specific
customer segments
-
Introduce foreign languages to attract foreign
clientele
-
Utilize low-cost customer support and FAQ
-
Offer customer email capture
Search engine readiness
-
Implement domain name strategy – does the
domain name include all three required components for a searchable and
descriptive hotel URL?
-
Introduce credible and optimized body copy
-
Permeate relevant and destination-focused target
words and phrases throughout copy
-
Leverage the popularity of the local destination
-
Ensure the website consists of static HTML pages
-
Convert essential copy from .gif or .jpeg to HTML
-
Remove all frames, splash pages, Flash intro
pages
Introduce unique page titles, description tags
and meta tags throughout the website
As you may suspect the
above may or may not dramatically change the look and feel of the website
but it will definitely optimize the guts of the website. Once the website
is optimized it operates at peak performance, much like a car running on
all pistons.
A fully optimized
website achieves
between 3 to 5 times more online
transactions than its
competitive set. From the list above, only the meta and
description tags are addressed by SEO (search engine optimization)
vendors.
Slow download speed results in low
look-to-book ratio.
Before realizing the need for a website optimization, a
popular global hotel brand paid attention only to the number of website
visitors and spared no expense for online advertising, pay-per-click
marketing and email campaigns. Such barriers to success identified
included the nearly 70 seconds to download the Home page on a 56k modem.
This hotel did not achieve the 15 second "AOL Benchmark"-the
maximum time people tolerate for a website download. This slowness alone
alienated over 35 million AOL users who dial up using a 56k modem.
Struggling from low conversion rates (look-to-book ratio) underwent
website optimization which included: optimizing download speed,
introducing eCRM models, optimizing body copy, and streamlining navigation
into a 4-tier navigation structure. Hotel reports conversion rates and
online bookings tripled within three months.
Website Optimization vs. Search Engine Optimization (SEO)
Did you that know 85% of Internet users rely on search
engines to locate information over the Web? (e.g. Yahoo, Google, MSN,
AltaVista, etc). Independent hotels, branded hotels, hotel management
companies and lodging companies not part of a major brand must rely even
more on search engines for referrals.
A cottage industry of SEO vendors has risen in recent years
to take advantage of businesses’ lack of knowledge on how to build a web
presence. Unsuspecting hoteliers turn to SEO vendors for a “miracle
cure” to boost search engine rankings and increase search engine
submissions. In reality, “slapping” meta tags to a stale,
user-unfriendly website will achieve minimal sustainable results.
Optimizing a website takes a comprehensive approach and goes far deeper in
the analysis, as illustrated by the list above, than just by tweaking meta
tags.
The problem worsens for hotels with artsy websites built in
Flash. SEO vendors sell their expensive service well-knowing search
engines cannot read Flash. Similar
problems arise when unwitting hoteliers contract with SEOs to optimize
dynamically generated websites and websites with complicated navigational
structures. These structures further inhibit search engine “spiders”
from indexing and cataloging websites.
Rather than address the core components of website
optimization, sadly, SEOs focus primarily on the meta tags of the website,
a fraction of what represents best practices. Even internally driven
hotel-based SEO efforts are a waste of resources. meta tags are no longer
supported by most search engines as this is the easiest place to spam.
Improving an existing website requires a closer look at best practices and
this comes in the form of website optimization—a comprehensive approach
to building a sustainable, competitive, and defensible website.
Not to belabor the
point mentioned earlier, but SEO vendors are only too eager to promise you
top positioning on the search engines. Many "burnt" hotel
clients may tell you to save money considering the negligible results
achieved. In reality, no one can guarantee a website will appear on the
top search engine results of Yahoo or Google—no one. Only a
comprehensive website optimization strategy can assure that your website
will be considered seriously by the search engines. The right eBusiness
experts will advise you to steer clear of SEO vendors.
The following quick guide on search engines helps dispel
myths espoused by the SEO industry.
A Quick Guide on How Search Engines Work Today
The latest generation of search engines has made many of the
SEO’s services irrelevant.
Search engines use major computational analysis to index and
catalog websites. They have grown increasingly intelligent and specific to
each search conducted.
·
Today’s
search engines are extremely smart. They serve the “Best of the Web”
and deliver the most relevant results to the user. Long gone are the years
when a little tweaking in the meta tags could influence search engine
rankings. As a result meta tags are increasingly less important and
germane to the search engine process. In fact, only one major search
engine- Inktomi- officially claims to support meta tags while a few others
will take snippets.
·
Today’s
search engines value the descriptive body copy found on the web page. The
body copy must contain relevant target keywords and phrases (destination
and product related) that permeate throughout the website. Search engines
rate body copy as the only truthful source to pull descriptive data on the
website for indexing. Search engine executives constantly reiterate, the
body copy is the most important factor for getting high rankings.
·
Today’s
search engines evaluate popularity measured in the amount of activity on
the site as well as links from other sites. When the user cannot navigate,
trust, or understand the website does it really matter how it ranks on the
search engines? If the room cannot be easily booked, if room descriptions
are missing, photos unclear, if overall body copy is barren of keywords,
and navigation cumbersome, ranking does not matter-- no one will visit,
revisit, explore, and book hotel rooms.
·
Lastly,
today’s search engines draw on the aggregation of destination specific
content. The relevancy and depth of content works to the advantage of the
website and is rewarded by the search engines. Pulling off this exercise
requires involvement of the hotel manager, marketing team, and outside
hospitality experts. SEO vendors are not hospitality experts but offer
their services across all industries to any willing buyer including those
in banking, medicine, pornography, technology, and virtually any other
business with a website.
The Website
Optimization Blueprint
With
general theory out of the way, let's get to work creating a website
optimization blueprint. The blueprint drives the entire website
optimization strategy and serves as the vehicle to communicate to the
team, including web designer, exactly what goes into the website. A well
developed blueprint serves as the backbone for the entire
direct-to-consumer distribution strategy.
The
blueprint, built by professionals schooled in online distribution, revenue
management, and eMarketing
strategies, creates a comfort zone in forming the clarity hoteliers
so desperately need. The blueprint nicely bridges the gap between web
designers who will eventually implement the blueprint and hoteliers who
don't know how to use the Internet as a distribution channel.
From
a feasibility standpoint, a website optimization blueprint serves a number
of purposes:
Focus on Core
Competence
Working
off a website optimization blueprint allows the web designer to focus on
core skills: the look-and-feel, overall website design, HTML code and
website functionality. Building marketing messages, learning online
distribution models, and understanding ASP booking engine technologies are
left to eBusiness experts.
Competitive Bids
Working
from a blueprint, a web designer can easily base an accurate quote on what
exactly goes into the website. Price quotes for website design, re-design,
or simple implementation are much more precise, usually 25%-40% lower in
costs.
Expedited
Implementation Process
Once
the web designer creates the new look-and-feel, the web development
consists of simply cutting and pasting each component of the blueprint
into HTML code. The contents of the blueprint have already received
management approval.
Bridges the
“Knowledge Gap”
A majority of hoteliers are not experts in online
distribution while web designers do not know hospitality. The optimization
blueprint bridges the knowledge gap in best practices as well as prevents
unnecessary up-selling by web designers.
Constructing the
Optimization Blueprint
According to a recent
eMarketer survey,
the top two most important website features sought by Internet users is
the credibility of the content (80%), which suggests not just the body
copy but the extent to which the site promotes its products for building
consumer trust, and the quality of the website navigation for ease of use
(80%).
Adapted from eMarketer
2002:
Most Important Website
Features, according to Internet users:
Being
able to trust the information on the site (80%)
Site
is easy to navigate to find what you want (80%)
Being
able to identify the sources of information (68%)
Knowing
the site is updated frequently (65%)
Being
able to find the facts (50%)
In other words, the
success of turning "lookers into bookers” is: a) consumer
confidence that what you say is for real with provide back-up to support
your claims, and b) consumers are able to navigate their way through a
website to find the information and make a reservation.
Build confidence with credible copy. With the Internet it
is not always clear who is behind the information being sold. For example,
who exactly is Hotels.com? When a third party channel promotes a hotel
better than the actual hotel, you know something is seriously wrong. Ease
of navigation seems simple enough, yet is commonly overlooked. Be sure the
navigation is tiered, buttons appropriately labeled and representative of
the copy. Enough money has been sent drawing consumers to your site, now
don’t drive them away.
The body copy plays an
essential role in promoting the hotel to web customers. It is the ,copy
that describes the hotel
products, features, room services, amenities, and local destination
information. The copy should be truthful and written in short,
declarative, and descriptive sentences. And remember, bullet points were
invented with website copy in mind.
Web readers are
unpredictable. They jump from page to page in no particular order and at
most scan the copy. Because of this tendency in this respec each web page
should be therefore constructed in "chunks" or precise segments
of information for quick reference, referral, and transaction. Therefore
“chunking the copy” is essential when creating the website content. By
chunking content each Main page can act surface as a standalone page fully
optimized with copy, meta tags, description tags, and page titles for the
search engines. Chunking allows the reader to grasp the essence of the
product and click to view, inquire, or simply book a room no matter which
page he selects to scan.
.Recall
the list of key words and phrases for search engines alluded to earlier?
This list must now permeate throughout the copy of the website as well as
serve in the form of “invisible” copy: page titles, meta tags and
description tags, and speak to not just customers, but search engines.
They serve as cues for search engines to index and catalog the website.
The real expertise is to weave the keywords into the copy so that the copy
reads as
credible
promotion and in the same time “speak” to while als the search
engines.
Building the Keyword and Key
Phrase List
Imagine an
army of search spiders, bots, and meta crawlers that sift through the copy
analyzing, indexing, and cataloging each submitted pageto be found on the
website. Leg work goes into researching keywords and key phrases popular
yet relevant to the local destination and then weaving
these keywords throughout the
"visible" and "invisible" copy.
In
hospitality, only a Destination-Focused
Search Engine Strategy works as the product by definition is
destination specific. This strategy
involves optimizing the destination pages within a single or multi-market
website (multi-property lodging company
with presence in several vastly different markets). For example,
within a corporate portal a cluster of hotels in San Francisco and Chicago
should each have its own optimized destination page and search engine
strategy.
Be sure to
include product
related keywords that speak specifically to the product being
sold—in our case hotels and hotel rooms. Developing the destination related keywords
list is much more complex and trickier
because it requires not only identifying the
most popular keywords for the particular destination, but the most popular
relevant keywords.
"Singapore Airline" and "Singapore Girl" are popular
keywords yet have no relevance for customers searching a Singapore
hotel.
Creating the keyword
list requires a combination of Internet, hospitality and
destination-specific knowledge and extensive research. Some required steps
include:
-
Identify patterns of consumer online purchasing habits for
the hotel/resort and the particular
destination;
-
Destination research to identify relevant copy
-
Research to identify relevant target keywords
-
Research to rank the keywords according to their popularity
-
Develop credible and relevant copy
-
Weave the target keywords throughout the copy
-
Develop the “invisible copy”: page titles,
description tags and meta tags.
A major
goal of the website optimization process is to leverage the popularity of
a particular destination for the benefit of the hotel website. The optimized
destination content within a single
or multi-market hotel website
is very important for the search engines and ongoing marketing including
email and pay-per-click campaigns.
Scoring top positioning
on search engines will depend on how well constructed the word and phrase
list reflects your product and destination,
and only comes after careful
research on consumer search behavior and purchasing habits.
Building this list requires software to analyze popularity, word matching
to analyze relevancy, bench research to dig out unique and specific words
and common phrases to the search that characterize the destination, and
finally some human discretion hopefull from those with a depth and
understanding of online marketing in hospitality and use of search
engines.
Case Study:
Website
optimization blueprint for a destination portal boosts direct distribution
five-fold.
A leading Hotel
Management Company instituted a website optimization strategy for its
local destination portal. The portal represented as many as 10 properties
in 3 major tourist and business destinations. The website optimization
included: 3 optimized destination pages, a 3-tier navigation based on
multiple audiences, enhanced body copy with keywords and key phrases,
revised meta tags, description tags, and page titles, new functionality,
data compressed high quality images, and introduced specially designed
foreign language pages. The optimized website underwent a priority
registration with top search engines and URL submission to all
international search engines. Online bookings doubled within several short
months. HMC now projects online revenues generated directly from the new
website to increase five fold in 2003.
Website optimization
calls for a clearly defined and well-constructed multi-tiered navigation.
We are all familiar with the website navigation bar which delineates the
contents of the website. A navigation bar allows users to scan the labels
on the buttons of the navigation bar in order to determine which buttons
are personally relevant. The labels are also meant to represent the
essence of the content behind each button the user selects.
Too often, the origins
of a hotel website strategy had began
simply digitizing the hotel brochure and then slapping on a booking engine
a few years later. Over time the website grew into a hodge-podge of random
content devoid of any strategic logic. The navigation frequently winds up
being overburdened with redundant and confusing information, mixing
consumer with administrative features ("View King Suite" with
“Career Opportunities”, "Investor Relations", "Press
Releases"),,
and misrepresenting the content and
copy of the website. .
Creating navigation
tiers has proven to be a highly successful approach. Based on the hotel strategy, product mix, and target
audience, the website navigation should reflect a two, three or four-tier
navigation structure. Each tier represents an order of authority that
helps layout the organization of the website. By using a tiered structure
you can arrange the navigation in such a way that it movescompel users
comfortably and easily toward a set of services, including the reservation
process. As a minimum, a
hotel website should have:
-
Actionable
Navigation
-
Main
Navigation Bar
-
Sectional
or sub-navigation
Once the tiered
structure is defined, label the navigation buttons properly and include a
button called “Home”. There is no room for creativity when it comes to
having a Home page button—it’s a must. In fact, clicking on the
corporate logo to return to the Home page is considered offensive in
certain cultures.
The next step is to
streamline the navigation to contain only core products and services.
Avoid cluttering the Main Navigation Bar with superfluous activities.
What is more important, making a reservation or offering employment
opportunities? A hotel
website is a business-to-customer enterprise. Streamline the navigation by
removing or shifting non-essential services away from the Main Navigation
Bar.
A poorly designed
navigation will never turn lookers into bookers. Sadly in this depressed
travel market every incremental bit of business is vital yet manyM
hotel navigations are poorly designed and confuse users with an overload
of unnecessary navigational
choices and useless information that neither enhances nor
drive consumer desire to make a reservation. the hotel's image
We've covered a lot of
ground and hopefully it has become as clear as ice that website
optimization is essential for building a direct-to-consumer distribution
strategy. It should serve as the foundation of any long-term competitive
distribution strategy.
Website optimization starts at the local hotel and
encompasses a comprehensive approach for boosting search engine ranking
and converting lookers into bookers. The approach underpins the total online direct-to-consumer distribution
effort. Successful hoteliers use
their websites to communicate directly with consumers and establish
long-term interactive relationships. A website optimization blueprint
drives the overall direct distribution strategy and blueprint creation is
well beyond the skills of SEO vendors and web designers. Partner with experienced
eBusiness strategist to help optimize the website and leverage the Internet
to its fullest potential.
Max Starkov is Chief eBusiness Strategist and Jason Price is
VP of Business Development and eMarketing at Hospitality eBusiness
Strategies (www.hospitalityebusiness.com)
in New York City. Max and
Jason combine the best practices in three critical areas: solid
hospitality and travel background (22+ years), Madison Avenue advertising
and marketing background (8+ years) and Cyberspace experience as founders,
CEOs and executives in two consecutive Internet technology start-ups in
hospitality and travel (6+ years). In 2001 they won the prestigious 2001
Worldwide Microsoft RAD Award for Web-based technology applications,
inventory management and reservation systems for hospitality. To read more
click here: http://www.hospitalityebusiness.com/team.shtml
The World's Most Romantic Hotels
By
Christina
Valhouli Forbes.com
February 7 is not an especially remarkable
date--except for the fact that you only have one week until Valentine's
Day.
If that thought causes your heart to beat a
little faster--but not in a romantic way--it means that you probably
haven't made any plans yet. Fortunately, it's not too late: Rather than
taking the easy way out and just sending several dozen overpriced roses,
you can still book a room at one of the world's most romantic hotels and
turn Feb. 14 into a day that neither of you will ever forget.
From a 17th-century palazzo in Venice to a small
discreet hotel on New York's elegant Gramercy Park or a sultry resort in
Bali--plus many others besides--Forbes.com presents 11 places that will
show her what a romantic guy you really are.
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Intro
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Amandari
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Bauer Hotel
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Bellagio
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Blackthorne Inn
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Four Seasons
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Hotel Costes
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Irving Place
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Sawmill Farm
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Las Alamandas
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Maison de Ville
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Manele Bay
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Source:
Forbes.com
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Cendant
swings to 4th qtr profit, revenues rise
(Reuters) - Cendant Corp. a travel and real estate services company, reported a fourth-quarter
profit on Wednesday compared with a loss the year before, boosted by
robust business at its Avis car rental unit.
Cendant,
which owns the Days Inn hotel chain and the Century 21 and Coldwell Banker
real estate brokerages, reported a profit including certain costs and
other items, of $247 million, or 24 cents per share, compared with a loss
of $307 million, or 31 cents per share, a year earlier.
Quarterly
revenue came in at $3.8 billion compared with $2.5 billion the year
before, boosted in part by acquisitions.
Cendant
posted an adjusted quarterly operating profit, which excludes a variety of
unusual items, of 29 cents per share. Cendant's adjusted earnings per
share matched the company's own forecasts.
The
New York-based company also reiterated its guidance for reported earnings
per share in 2003 of $1.46, and said it expected $17.8 billion to $18.4
billion in revenue for 2003.
6%
rise in UK visits beats BTA forecast
e-Tid.com
- A strong
December helped boost the overall number of visits to the UK by overseas
residents by 6% year-on-year to 24.16m in 2002.
During the year, visitors from North America increased by 2% to 4.32m and
from Western Europe by 9% to 15.33m. Total spend by all inbound tourists
was up 4% to almost £12bn. The British Tourist Authority (BTA) had
forecast overall visits up 3% and spending up 1% from 2001.
In the month of December alone, inbound visitors rose by 36% year-on-year,
while their spending jumped 30% to £960m. The fourth quarter of 2002 was
not only an improvement on 2001, but also on 2000, the last ‘normal’
year pre-foot and mouth and September 11.
The BTA said the ‘massive’ growth in December was boosted by the
tourism industry’s ‘Only
in Britain. Only in 2002’ campaign, which focused on attracting
short-break visitors from key European markets during the autumn and
winter months.
Commenting on the figures, Tom Wright, BTA chief executive, said: ‘A
further positive result for inbound tourism and further proof that a
recovery from the terrible events of 2001 is underway.
‘While there is still some way to go and the current climate is causing
uncertainty in some markets, BTA’s evolution of its overseas structure
and the imminent launch of new lead body for tourism, as well as
developments in the way Britain will be marketed overseas all offer great
potential for the industry.’
The BTA forecasts that in 2003 both inbound visits and spending will
increase by between 3-4% over last year’s figures.
e-Rooms
– A New Market Segment?
By: Elaine Sahlins HVS International
During
the past year, HVS International has performed hundreds of market studies
and analyses. One of the major trends of the post-September 11th travel
world that has become critically important for our analyses is the surge
in the use of the Internet as a sales and marketing tool. Reservations for
hotels are now almost universally booked through an Internet source,
whether the source is a GDS used by travel agents, a website sponsored by
a particular lodging company, or a third-party travel agency site such as
Expedia or Priceline.
As
consumers have become more and more comfortable with using the Internet to
research destinations, locate hotels, and then book the hotel room, the
importance of these reservations has skyrocketed. These room nights are
consistently being categorized by individual hotel properties as leisure
demand. Leisure travelers, according to the major hotel companies and
consultants, are the only strong growth segment of hotel demand. But is
leisure demand, as tracked by individual hotels, really made up of
recreational travelers?
Nearly
37 million of America’s more than 162 million active Internet users have
already purchased travel online. Online travel bookings exceeded $23
billion in 2001, and are expected to reach $63 billion by 2005. During
2002, while the use of the Internet for hotel reservations was surging,
the hotel industry was suffering from the downturn in travel and tens of
thousands of hotel rooms were empty. What happened when technology and new
consumer behavior met a hotel industry in need?
Increased
consumer savvy and the need of hotels to fill rooms have combined in a
sort of “Wild West” sales and marketing event. Hotels began to provide
rooms online at exceptionally low rates to attract business as the economy
receded. While discounting is not a new strategy in the hotel business,
the proliferation and breadth of the availability of low-priced hotel
rooms have reached new heights. Using with Smith Travel Research numbers
of sold rooms in a sample of major market areas, TravelClick discovered
that Internet bookings in the first three quarters of 2002 accounted for
over 23% of rooms sold in New York, and over 15% in Los Angeles, Chicago,
and San Francisco. Anecdotally, for some properties, hotel managers are
reporting Internet bookings ranging from 30% to 50% of all room nights in
2002.
The
use of the Internet by all guests to book hotel reservations has blurred
the traditional market segments. Correlating the number of Internet rooms
sold with the traditional segmentation techniques of market analysis is
one of the challenges posed by the changing trends. During the course of
our fieldwork and research, we have interviewed management from numerous
properties where Internet bookings from auction sites and discount sites
have accounted for over one-third of the rooms sold in the first three
quarters of 2002.
For
lack of a thought-out strategy regarding Internet bookings and their
effect on yield management, these rooms are consistently tracked as
“leisure” or sometimes “wholesale” demand. These hotel operators
are literally in the dark about their true market mix and the purpose of
their guests’ stays. Hotel management companies are struggling to
identify and implement corporate programs to adequately track demand and
effectively manage Internet bookings. And despite all of the technology
available to hotels, many property management systems do not interface
with Internet reservation systems resulting in faxed reservations to the
hotels from Internet bookings sources and front desk clerks querying
guests orally as they check in about the purpose of their visits.
The
lack of effective use of the Internet by hotel operators is resulting in
an erosion of effective yield management. While internet hotel
reservations are viewed by the consumer as a source for obtaining discount
hotel rooms, hotel operators need to reeducate the consumer and yield
manage internet reservations with the same motivations as airline pricing.
Higher rates will be offered on intenet sites during periods of peak
demand, particularly for travelers generating short-term bookings. Market
segmentation is still critical in that hotel operators need to know their
customers and seasonality, and market and price room inventory to maximize
revenues. Room inventories on the internet should adhere to the same
seasonality and be priced according to demand.
This
year, we have all been hearing and reading about the growth of leisure
demand and its importance to the post-September 11th recovery of demand
for hotel rooms. Similar to trends experienced in the early 1990s,
drive-to destinations are performing better than fly-to destinations and
weekend travel has increased. But room rates in some of these markets
continue to be depressed and, in some areas, continue to decline. Looking
at the specifics, a great deal of the decline can be attributed to the
Internet bookings. But labeling the Internet room nights as leisure is a
misleading and dangerous trend. In fact, hotels would be better served to
identify more specifically those guests that are booking online.
During
the week, most of those guests are probably the same guests that have a
higher preferred corporate rate or used to pay rack rate, some six to 12
months ago. In fact, many corporate travelers are now required to book
online. According to the results of a survey released by GetThere, a Sabre
company, in August 2002, “43 percent of [the respondents’] employee
trips are now booked online.” In addition, the majority of respondents
(52%) are “either using or considering a full or partial mandate of
their online booking site; a trend which continues to increase due to
economic pressures, executive awareness, and employee comfort booking
online.”
Distinguishing
between the source of demand and the purpose of the stay remains a
challenge for yield management. With true recreational (leisure)
travelers, business travelers, and meeting and convention attendees using
the same site to book the same hotel for the same rate for the same
nights, how should the room night be categorized?
If
the purpose of the stay is business, should the room night be classified
as commercial and resultantly, the overall commercial rate tracked by the
hotel is then diluted? If meeting attendees can book on the Internet
outside the meeting or convention block and obtain lower rates, whose
responsibility is it to guarantee the room block? Hotel management and
meeting planners are reacting to this conflict with short-term strategies
such as charging meeting and convention attendees who book outside the
block higher fees and/or requiring hotel management to identify all
attendees registered for the meetings and conventions but booked outside
of the block to manually determine if the room block is meet. With all
this confusion, how can hotel managers confirm that true leisure demand is
actually increasing?
Effective
use of the internet as a yield management tool requires a knowledge of the
guest and their reasons for booking the hotel but now also means managing
the room inventory on line for rate maximization. We are aware that many
of the large hotel companies are actively working to deflect the impact of
discounting from Internet bookings. By carefully regulating their
inventory available to online sites such as Expedia or Priceline and by
offering lowest-price guarantees on their websites, hotel companies are
attempting to influence market share and pricing. Using frequent guest
programs and user interfaces, these companies are likely to be able to
track demand segmentation from their users. But even if demand can be
identified, how will yield be managed?
These
issues remain to be uniformly approached by hotel managers during the next
18 to 24 months. Many hotel companies are formalizing yield- and
revenue-management policies and accounting, however, the process of
identifying, tracking, and anticipating consumer behavior regarding room
bookings has to be managed to effectively improve average rates.
Elaine Sahlins
Suite 620
116 New Montgomery Street
San Francisco, CA 94105
415-896-0868
415-896-0516 FAX
Corporate
Social Responsibility: Are you putting it to work?
There are
fundamental environmental and social concerns in our society that will
inevitably lead to changes in the way businesses operate - but what will
the changes be, at what pace, on what issues and in which geographies? How
best can a company manage these changes and leverage value from good
practices?
Tourism Concern, a
membership organisation concerned with promoting an understanding of the
impact of tourism, highlights a couple of issues:
“Spain’s 12
million visitors a year leave behind 100,000 tonnes of rubbish”
“13-19 million
children are working in the tourism sector all over the world. More than
one million of these children are forced into tourism’s sex industry”
In the current debate
around corporate transparency and accountability, having and communicating
responsible business practices is moving from a ‘nice to have’ to a
‘must have’ for all industries, and is no longer purely the preserve
of traditional ‘dirty’ industries. In addition to risk management,
active pursuit of responsible business practices can drive innovation and
creativity, can assist companies to attract and retain a talented
workforce and can enhance and protect corporate brands.
There has been a
growth in environmental and social reporting within the travel, tourism
and leisure industry over the last few years such as British Airways, Six
Continents and Accor. There are a number of initiatives to support
improvements in the industry such as the International Hotels Environment
Initiative and the Tour Operators Initiative whose members are tackling a
range of issues, including performance measurement.
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