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Analytics helps understand potential of online channels in direct hotel bookings

For several years, the hotel industry’s entire pricing strategy globally was – ‘heads in beds’. The thumbrule a hotel’s general manager deployed was – no room must go vacant. Filling hotel rooms (without really factoring in price) was the preferred way. That strategy’s long gone out of the (hotel room) window.

With increased competition, wafer-thin margins and a world becoming increasingly digital, pricing policies are no longer so “simple”.

The hospitality industry has started using data analytics to improve operations, marketing strategies, occupancy percentages and yield, in its effort to maximum returns from every channel, offline or online.

Leading hotels chains have been using predictive analytics, for example, to calculate the optimal price of every room before letting it out. This is done by using revenue management algorithms and combining different data sets such as a guest’s frequency of visits, or the number of mid-week bookings versus weekend ones.

Students of data analytics will recognize this as “yield management” – a process by which a business, in this case, a hotel, can realize the peak value of a room, inputting factors such as the peak traffic season, weather and even local events such as a beer fest, etc.

Yield management is not a new concept. It can be best described as selling the right product to the right customer at the right time at the right price. What has happened though is that yield management strategies in the hotel industry are getting to be increasingly sophisticated to combat competition. The objective, of course, is to maximize the average revenue per available room per day.

Role of online channels

In today’s “always-on” lives, without doubt, online channels have become one of the important sources of direct bookings in a hotel’s yield management plan. With more and more guests looking online to book a room, the concept of a “walk in” guest has nearly vanished.

According to a report by personalized re-targeting firm Criteo, a majority of hotel bookings were made over smartphones in Q1 2016.

Such is the significance that data analytics has come to play in a hotel’s pricing strategy that there have been recorded cases wherein US motels have used opportunities provided by flight cancellations due to inclement weather to offer potential customers hotel and room services in the hour of crisis, with the rates changing almost on an hourly basis with every turn in the weather.

So, for the purpose of this post, lets focus on online channels, rather than the traditional ones, and look at what a hospitality marketer needs to do in the digital space to encourage direct bookings.

For an effective pricing policy, a hotel has to do the following for each of the channels:

arrowEvaluate the “true value”

arrowCalculate the “cost”

arrowDevelop a marketing strategy for every channel

#Strategize

While strategizing, remember, the customer journey funnel is made up of several stages – research, planning, booking, planning on arrival and even after. Then, in today’s constantly changing digital landscape, the strategy also needs to have a certain degree of in-built flexibility. Research has shown that at least 60% of today’s wannabe travelers start their journey online, in search of destinations and the best deals, before zeroing in on one. Thus, marketing campaigns have to reach today’s digitally connected travelers throughout, and at various stages of the journey funnel, across channels and multi-devices, in order to “win” them over and ultimately bag the booking.

Studies have shown that would-be travelers go through between 15 to 20 touchpoints in a week before they actually make a booking.

#Optimize

At every step of the journey, your marketing strategy has to be optimized not only for the customer but also for the device they use. Do A/B testing of marketing campaigns. Design campaign elements to fit each screen. Use mobile friendly and inter-active content to aid in the travel planning process since most customers these days start their travel journey on a mobile computing device and then transit to the desktop.

#Monitor

Start monitoring campaign metrics in real-time. A hotel’s campaign cannot be like those ‘fire and forget’ missiles. After launch, campaigns need to continuously monitored and optimized for positive results. Marketers have to develop campaign KPIs in order to optimize important success motivators such as marketing mix and share of voice.

Here’s some of the other points a hotel needs to monitor in its multi-channel strategy:

  • Individual channel and device traffic
  • Conversion rate
  • Bookings per channel

Thus, online channels are now a vital part of a hotel’s direct bookings and overall pricing strategy. But a marketer has to use analytics to calculate the cost of customer acquisition and the true value of each of the online channels to understand the percentage of their contribution to the overall profit.

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