At revenue summit, hotel owners ask their brands for more
Hotel owners are always looking for the extra inch of profit and are increasingly leaning on the global brands to not only deliver, but invest more with them in the pursuit.
That was one part of far-reaching discussion and conversation at the Revenue Strategy Summit, here at the Renaissance Washington, D.C. Downtown Hotel. Hotel owners are all looking at ways to grow their bottom lines, and, for some, there is a feeling of having to pursue that achievement on their own—at least from the perspective of monetary outlay.
Never has this been more indicative than in the battle over customer acquisition. "There is a war on driving direct bookings, and the owners are funding it," Chris Nixon, the associate vice president of revenue optimization at Dallas-based Ashford Group, said during a panel on revenue strategy and guest loyalty and experience. "The brands should take on additional costs or [extend] fee concessions."
Owners, of course, want as much out of their brands as they can get. Often, this is in some form of sharing risk or making up-front investment that will help owners boost their ROI.
Not surprisingly, Brian Berry, the SVP of sales and revenue management at REIT Host Hotels & Resorts, shared in Nixon's entreaties toward the brands. "When there is guest-facing technology, there is a willingness to do it," Berry said. "But new TVs? That can be a huge capital expense. We would like to see similar expenses made in technology by the brands," Berry continued, pointing to technology like central reservation systems.
Crescent Hotels & Resorts manages hotels on the behalf of owners. So many times they are put in the unenviable middle position between brands and owners. "It's up to us to go to the ownership group and say we believe in this brand initiative," said Dawn Gallagher, the EVP of sales and marketing for Crescent. "They may say they need better ROI. We are in a position where we have to comply with the brands, but sometimes there is no ROI. We have to advocate for the owner."
Undeniably, hotel owners want a higher contribution of direct bookings versus reservations coming in via online travel agencies. It's a simple cost analysis: bookings through OTAs come with high commissions that slice into revenue. A guest is paying for the same room at the supposed same price whether on brand.com or Expedia: Why not book it direct with the hotel rather than a third party? That's the conundrum facing hotels.
And while the battle over guest acquisition is long and enduring, how a hotel engages with the guest once he or she arrives on property, and post-stay—that is the holy grail to keeping a guest happy and loyal.
Though Ashford's Nixon remarked that OTAs don't influence a guest stay, he also said that guest experience "has nothing to do with revenue right now," and that there isn't "a correlation between reviews and rate."
It was a string of statements Charlie Osmond, chief tease at TripTease, a platform whose aim is to help hotels drive direct sales, took exception to, citing a past experience he had at a hotel in Hong Kong.
"Reviews matter," he said, noting a product called Handy phone, which was handed to him at a hotel in Hong Kong and gives travelers free local data. "I loved it and would pay more at a hotel for an amenity like that," Osmond said.
In order to boost direct bookings, Osmond said consumers need a real reason to book with a hotel or brand directly and forego an OTA. This almost always comes down to an experience, he said, noting, for example, an experience like sabering a bottle of Champagne.
Further Revenue Opportunities
Another topic of note was ancillary revenues; to wit, not enough of it. The hotel industry, according to some, doesn't do a good job of accruing ancillary revenue because it isn't set up with the technology to do so. "There are ancillary products important to a traveler that they will pay for," said Crescent's Gallagher. "To pay $25 for early check-in on my phone is worth hundreds of dollars to me."
Nixon praised other travel products, like air and cruise, as models that know better how to garner ancillary revenue better than hotels. "It's ripe with opportunity," Nixon said of the hotel industry's potential for ancillary revenue growth. He cited numbers that put ancillary revenues at 2 percent in the hotel industry. A far cry from the airlines (15 percent) and cruises (around 30 percent). "Customers are willing to pay for it, but we haven’t moved down that path yet," Nixon concluded.
Automation, Gallagher noted, is the way of the future to deliver ancillary revenue and a better overall guest experience. She cited, for example, push notifications to guests' cell phones alerting them to opportunities. "We spend time getting the front desk to upsell," she said. "The more we can automate, the better success we’ll have. After you get into automated check in, on your phone, you won't want to go back to the traditional front-desk check-in."
Cracking the loyalty proposition continues to be a goal of hotels. With all the talk of loyalty being achieved through offering experiences and distinction, Nixon still believes that loyalty is transactional. "You give us money; we give you points," he said. "It’s like an unhealthy marriage."
True loyalty, he continued, is a guest willing to book through you and pay a premium because there is a connection to the brand. "Brand value is under attack and driving direct bookings can increase brand value," he said.