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Taking The Direct Approach

The Importance Of Direct Business In Today’s Hotel Environment

Monday, May 15, 2017
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By Mike Chuma

Today’s highly competitive hospitality environment makes increasing the amount of direct business a hotel secures a top priority for all property owners. Direct business comes with fewer third-party fees, higher profit margins and ultimately supports a hotel’s bottom line, and there are several tactics and strategies that help drive more direct bookings for hotel properties.

Welcome Guests With Your Website

A homepage—like a distinctive and exquisitely designed lobby—leaves a meaningful first impression and a lasting impact, which is why a hotel’s brand website is often one of the most important assets for encouraging and driving more direct business. As a result, a greater share of a hotel’s promotional budget is dedicated to attracting qualified traffic to their own website; however, hoteliers must focus on delivering a positive user experience. It is important that the website delivers an exceptional customer experience that aligns with the brand experience guests expect from the hotel. Features should focus on providing straight-forward navigation, ease of booking and multiple payment options. A brand website must also be responsive to today’s multi-device world, meaning it accurately displays content on mobile phones and tablets.

A hotel’s website is the perfect tool to help differentiate the property within today’s vast network of distribution channels. It should provide rates, promotions or special services not available on other booking engines, such as an offer code exchanged for an email address. These types of offer codes can be tied back to the reservations or revenue management systems to measure the success of individual offers or direct booking campaigns.

Appearing locally relevant and globally aware is another must. Hotel guests are often international and require transactions in their native language so multilingual text options and regionally customized information helps reassure customers of the credibility and service standards of the hotel—no matter their native language or where they are booking from.

To further facilitate the booking process, hotel websites should include user-generated content from social media—such as user ratings and reviews—to give guests opportunities to engage directly with their brand. Forcing guests to find this information elsewhere creates a greater risk for them to book elsewhere as well.

Forecasting for Direct Business Growth

To attract the most profitable business in the market, hotels need to anticipate the demand that exists for their market. Forecasting hotel demand helps maximize revenue opportunities across all channels. Understanding a hotel’s total future demand allows a property to price based on the optimal occupancy and ADR it can achieve, rather than incrementally adjust their pricing as occupancy fills. This approach—which is often overlooked by less sophisticated revenue management systems—allows hotels to maximize their outcomes and drives optimal revenue optimization through pricing, market segmentation and length-of-stay levers directed to specific geographies and buyer personas.

Hotels use forecasting to help accurately predict the time frames throughout the year that will bring them higher or lower occupancy and revenue. A good demand forecast assists with not only room rate decisions, but also staff allocation, marketing campaigns, property maintenance and hotel operations. Using data and analytics through accurate forecasting is also the best way for hotels to determine the future direct booking strategies that will drive successful strategies in total revenue optimization.

The Importance of Automation

It’s not enough to analytically determine forecasts, pricing and inventory controls because a hotel also needs to distribute that strategy to their selling systems. This onward distribution process can be an extremely complicated and time-consuming effort, and in a manual environment can occupy all of a revenue manager’s time. Consolidating the multiple, complex data points for each and every day by market segment, and then forecasting by each segment for the next 365 days, can only be successfully achieved through automation.

Deploying modern technology to undertake these processes results in a revenue team that is focused less on data compilation and consolidation, and more on a hotel’s market position and revenue strategy. Automation allows a revenue management system to send pricing and inventory decisions to other selling systems, such as property management, central reservations systems and channel managers—all of which assist in executing and capturing direct business opportunities across any number of room types or lengths of stay.

One Eye on the Competition and the Other on the Consumer

Hotels operate in a highly digital environment where property comparisons in similar locations and class-types only requires a click of a mouse, making competitive pricing critical for driving more direct bookings. Conversely, hotels also need to understand their potential guests and their purchasing drivers to capture higher competitive share. This requires an in-depth understanding of these key indicators, as well as the use of forward-looking market intelligence and travel intent data to monitor competing properties and any effects on forecasting and pricing. A sophisticated revenue management system that incorporates competitor data into demand forecasts and provides insights into guest demographics and psychographics will allow hotels to deliver the ideal product at the ideal price to the ideal guest.

Pricing by room type is an area of opportunity that helps hoteliers deliver a more personalized experience to their guests while also maximizing revenue. Understanding their demand by room type enables hoteliers to make data-driven decisions on whether to oversell the base-level rooms or close them out and sell true to type (rather than forced upgrades at no charge). The traditional approach of just adding a flat dollar amount onto the base room type rate often leaves significant revenue opportunities untouched.

Every hotel has unique guests, room types and locations that need special consideration when building and delivering a strategy across a multi-channel distribution landscape. The opportunities to gain a competitive advantage and drive more direct business lie in a hotel’s ability to differentiate their website experience and align their revenue strategy to overall business goals. A successful revenue strategy must be developed around a data-driven, analytical forecast that is supported through historical and forward-looking demand indicators, and considers internal and external factors. This type of forecast—combined with an automated solution—helps deliver, monitor and deploy a powerful revenue strategy across all channels to maximize direct bookings, outperform market competition and exceed profitability goals.

About the Author:
Mike Chuma joined IDeaS in 2016 as Vice President of Product Strategy, bringing more than 15 years of progressive experience in driving growth and strategy in enterprise SaaS technology, eCommerce platforms, brand management and marketing for companies ranging from start-ups to Fortune 500 organizations. In this role, Mike is responsible for leading product strategy, corporate marketing, product marketing, and sales enablement teams on a global basis.
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