Case Study – 5-Star Hotel (Hospitality)
Hotels today are no stranger to the digital world, let alone web marketing. Just not too long ago, brick & mortar travel agencies seem to command a very large share of travelers, and some probably still do.
With the Internet, comes online travel agencies (OTAs) such as Agoda, Booking, Expedia and so forth. Simply put, agents that connects travelers to hotels. It’s hard to imagine running a hotel business today without OTAs’, since they command a very large volume of travelers looking for the best price, location or room type in their excursions; be it for business or leisure.
However, the one simple fact that the industry don’t realise, that came their way, was the dependency they had on such agents. While well-known brands stood strong in both awareness and recognition, they make up to a very small number of the total number of hotels in the world.
Independent hotels would stand a tough trial this shift in trend – Where online reviews and pricing structure literally determine the number of nights sold in a day, week or month.
The traditional rush on filling up occupancy rates and entry of unseasoned hoteliers into the industry has led to a larger amount of disruption in the market. It seems that anyone can run a hotel today – Unspecialised, unskilled management teams can figure a way out, somehow.
One 5-star hotel that was introduced to Marketify somehow wants to think differently. They realise that OTA dependency is an industry-wide problem, and their properties are part of it.
With hundreds and thousands of Ringgit spent in commissions to OTAs’ for bringing FITs’ (Free Independent Travelers), the equation doesn’t seem right. The amount of money spent does not justify the value of marketing brought back to the hotel.
The hotel is not gaining recognition as well as the Hiltons, but why are they spending so much but unable to retain return spend?
When Marketify was called in, our team was briefed to allocate ad spend budget online. The Marketing department in the hotel is looking to boost direct bookings through multiple platforms other than OTAs.
In the process of understanding the direction, product and competition, Marketify realises that despite large amounts of ad spend by the hotel on multiple online platforms, the fundamental problem will not be solved – Repeat stays.
Through the study of the hotel’s reservation data from their PMS (Property Management System), we realise that over 80% of their hotel nights were sold to one time stayers. Of that 80%, the average nightly rates were below their BAR prices, signifying drastic price change in certain periods of the year.
Based on the data, we also realise that the cost of acquiring a new customer (marketing campaigns targeting new stays) are 300-400% higher than the cost of re-marketing to existing guests.
In short, their marketing campaigns were often flatlined and not targeted.
The first thing we told our client was to scrape the idea of online marketing altogether, as a start. We need to first develop a strategic method of reducing the number of 1-time stayers to 2, increasing the number of nights stayed per reservation and actively seek to improve upselling capabilities of the hotel.
Using Excel to perform simple forecast data on our idea, changing the way we approach our situation would mean an increase in revenue by 15-20% on the first year without costing further marketing dollars into the equation. The strategy was to evolutionise the way each guest-facing department in the hotel works, and we started off with the Front Office guys.
By looking into simple ideas to regularise pricing, introduce boosting packages and jump at the opportunity to sell, our hotel client was able to immediately raise revenue collection from their existing guests.
One of the biggest challenges that we faced were trying to balance between sales and service. Often, service-inclined personnel aren’t great salespeople and vice versa. There are tremendous amounts of work to be done.
reducing ota costs
Commissions paid to OTAs’ are by the hundreds of thousands, often taken directly from the moment the guest commits on a hotel reservation. And our hotel client is no stranger to that.
Our approach to the situation was to first regulate the product and price offerings between the two platforms. For a 5 star hotel, price is often not a major factor for hotel guests, but rather the value that derives from their stay. The small little things.
Through our data analysis, we also realise that there are a good number of middle & mid-upper spenders that patronise our hotel client. Our approach to these group of people was to go-low and upsell.
One of the things we realise from our data as well, after running our strategies for a year, with continuous analysis, was the spending habit. Hotel guests are less likely to spend after they have checked in, comparing to when they are performing their bookings through any channels.
Hotels can turn to their database for tons of information, and for re-marketing.