Should Independent Hoteliers Outsource Their Digital Presence?

The question to ponder on is why a hotel should outsource anything? Be it security, laundry or housekeeping, let alone their digital presence. Outsourcing is counter intuitive to many traditional hoteliers but over the years many have realized that the right specialists can do a better and cheaper job of many functions. It not only frees up bandwidth but brings in more efficiency to support the core function of a hotel – to ensure guests are happy and have a great stay experience.

A couple of decades ago life was simpler. One would open a hotel, get a sales & marketing team, establish a few key relationships with companies and travel agents to get business in. Competition tracking was simple and hotels would bench mark against a few competitors in the city to track how they were doing. The front office managers would exchange occupancy and ARR figures in good faith and things were in nice rhythm.

It got a little more complex when OTAs came on the scene but was still manageable. Customers were booking from desk tops and large American chains like Marriott and Intercontinental pioneered the concept of rate parity. OTAs and Hotels were selling rooms at the same price. Hotels created websites and there was a well established ecosystem of products like Booking Engines and Channel Managers that hotels could leverage to maintain parity.

The big change from those good old days and now is that traveler personae are getting extremely complex. They are searching, getting influenced and booking travel using social media, search engines, meta-search engines and OTAs. They access the web using multiple devices interchangeably – Desktops tablets and mobile phones until finally coming to a decision about the hotel they want to stay in. The companies who are good at understanding this complex user behavior are the ones that are thriving and growing exponentially. The likes of TripAdvisor, Booking.com spend millions of dollars and countless hours doing AB and usability testing, crunching data and ensuring that they are always ahead of the curve. It is rumored that market leader OTAs run more than a thousand tests a month! It is no coincidence that Priceline and TripAdvisor are valued at USD 58 and USD 12 Billion respectively. The scales are rapidly tipping in favor of intermediaries vs Hotel Direct.

While some may argue that the model of outsourced digital marketing and distribution reduces a hotelier’s control over their brand, independent hotels might not have any choice but to bring on board some specialists instead of preferring the model of recruiting their own teams.

Here’s 3 scenarios when hotel digital marketing should be outsourced:

When Knowledge, Resources & Time Is Against You.
Sure you can get around this by recruiting the best in the market, but you would be surprised at the kinds of salaries you would need to fork out and how difficult it is to retain talent. The best folks want to work for the best companies in their fields just like the best hoteliers want to work for the best hotels.

When you are getting extremely uncomfortable about your cost of customer acquisition through third party channels and want to do something about it.

When you want to experiment with emerging sources of hotel bookings and traffic including social media, Tripadvisor and other meta search channels like Trivago and Kayak and feel that the learning curve might be too steep.

Finding the right partner is the key. Every consultant is a self declared expert on social media, SEO and PPC marketing. Work with someone who is willing to work on a success fee rather than fixed numeration.At the end of the day, hoteliers should focus on their core expertise i.e. running the day-to-day operations of their properties. Having an outside perspective can be invaluable and highly profitable.

Loyalty – Building on this sustainable competitive advantage

It is no secret that larger hotel chains that have well-managed loyalty programs manage to retain customers better than smaller independent hotels. The latter either do not have such a program or have programs that are not attractive due to single locations. A double whammy for independent hoteliers is that companies like Agoda and Hotel.com are trying hard to popularize their own loyalty programs. They offer 1 room night free on 10 paid nights – bankrolled by the hotels themselves, who have been parting huge commissions to these OTAs. This research by Cornell University throws up some interesting points on the correlation of loyalty programs with better take rates http://www.hotelschool.cornell.edu/research/chr/pubs/reports/abstract-17604.html

So what does a small hotel do under these circumstances? Here are some simple tips:

Service: There is no short cut to good old service that ensures that your guests want to come back to you. This is the foundation on which a hotel’s retention strategy is based. Screw up here and no amount of good selling or engagement would be able to get guests to come back on a sustained basis. They would also thrash your name on social media and Tripadvisor which would make it difficult and more expensive for you to acquire new customers starting a downward spiral.

Actively Source TripAdvisor Reviews: What’s the connection? It’s stronger than you think! Tripadvisor does a fantastic job of making the reviewer feel great by constantly engaging with them and egging them on for their next review. Their social media strategy is also highly focused, so please be assured that your guests’ family and friends would see their review of your hotel. Guests would also be reminded of your property every time someone finds their entry ‘helpful’ and so on. Once you have more attention in cyberspace and offer decent value, you would find that your conversion rates start creeping up. (A hotel with a rating of 4 from 200 reviews has better credibility than a hotel in the same vicinity with a rating of 4 from 16 reviews). Conversion rates play a huge role on how much interest OTAs would pay to your property. Simply put, they are interested in selling products that are easy to sell and would give you a good listing; even if you offer slightly lower commissions. Basically it puts in motion a virtuous cycle that has loads of benefits in the long run. Actively source reviews, even during the stay or just before / after check out. Have guest relations stock Ipads to get this done. It would also ensure that you have real-time feedback on what is happening in your property without having to rely on the traditional guest feedback form route. They are going to share their experience at your property anyway – might as well have it in real-time when you can do some service recovery if required.

Try Never to reacquire the same customer:The reality is that Online Travel Agents have it hard here as they constantly need to reacquire customers. There is very little loyalty in the online world since it seems to always be about the price. This is not the case with end-service providers and it is a big advantage. Customers have a natural tendency to be loyal towards actual service providers (Singapore Airlines Vs Travelocity or Ritz Carlton vs Expedia). As it is expensive and hard work to acquire customers, so not having to reacquire them through a paid channel makes perfect sense. Remember that paying an agent commission is also an expense. Giving an offer for their next stay and for referring their friends to your hotel works very well provided the offer is meaningful, has a long enough validity and is given electronically (paper coupons get lost). Good booking engines come with a ‘Promo Code’ functionality, use it to facilitate this. Uber (the limousine hire company) does this very well.

Social Social Social: So the rules of the games have changed. No one is interested in the monthly newsletter that you barely manage to push out on time carrying your coffee shop’s promotions starting 6 weeks from now. People want to know what is happening tonight! – use your Facebook page effectively to communicate real time offers. In fact, focus all your corporate communication effort on it. There are several tools available that can allow you to manage this for little or no cost – check out Woobox, Shortstack, Lujure, Wix or Pagemodo. How often should you post on Facebook? Read more on http://www.insidefacebook.com/2014/01/28/how-do-hotels-and-resorts-stack-up-on-facebook/
What about other social networks? Sure, they are important but it’s better to get your arms around Facebook first and then move on to Twitter or Pinterest depending upon your guest profile and location. The number of ‘likes’ on your page is a metric but a very loose one. Incentivize your team on real engagement – contest participation, bookings, discount /upgrade coupons used, real-time posts from events etc.

Ditch that half-hearted loyalty program: If you are running a loyalty program do an audit to see how it is faring. A good metric to see is redemption. If redemption rates are weak and the response to your offers and mailers is lukewarm, quietly kill the program. It would save time and effort that can be well spent in doing other more effective work.

Get on mobile: You need to make it easy for your loyal customers to get through to you. With more than 20% customers already booking on mobile on OTAs, ensure that your mobile presence is best in class. The same goes for the web but it is less of a problem as most hotels having some kind of functioning website.

Finally, do it yourself! Sure, take some tips – but you know your customers best and so say good-bye to your social marketing ‘consultant’.

The Current Reality

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Hoteliers have been losing control to Online Travel Agents for their direct bookings because of very average websites, no focus on mobile, legacy booking engines and lack of resources. According to the latest Phocuswright report published in November 2013, for APAC, in 2012, OTAs command 65% of the online hotel market share booking USD 14.7 Billion dollars worth of Online Gross Hotel Bookings while all supplier websites booked only USD 8.1Billion.

One of the main reasons for the success of the OTAs globally is the single minded focus on all aspects of hotel bookings funnel, where every pixel is optimised for better conversion. This coupled with access to huge resources on digital marketing and mastering sources of traffic has made for a formidable combination, definitely that a small to medium size hotel cannot even fathom, let alone compete with.

Online travel agencies build a bulk of their business on independent hotels. Larger, organised chains are also part of their agenda but are tougher and smarter to deal with, leading to lower take rates and more water tight contracts that don’t allow them to bid on brand keywords. Considering that they are only intermediaries, OTAs have created tremendous value for themselves in comparision to asset heavy hotel companies. The most successful of them all, Priceline, along with their international brands- Booking.com, Agoda.com and now metasearch Kayak have a market cap of USD 58.99 Billion as of 20th November 2013.
The combined market cap of leading international hotel companies- Accor, IHG, Marriott and Starwood is USD 48.10 Billion

In India the leading hotel company is Taj Hotel’s (India Hotels Company) with a market cap is USD 733 million. MakeMyTrip’s (NASDAQ: MMYT) market cap is over USD 1 Billion as of today (1st Feb 2013)

Here is an interesting link that lists the top 15 publicly traded travel companies. http://skift.com/2013/07/08/the-real-15-largest-travel-companies-of-2013/