Merge loyalty and pricing to drive direct hotel bookings
Imagine a world without OTAs, without metasearch sites, where the internet is not dominated by Google.
NB: This is an analysis by Patrick Bosworth, co-founder and CEO of Duetto.
Just think about how much easier it would be for hoteliers to sell rooms directly – and more profitably – on their own website.
Now wake up.
Unless the internet is unplugged, the genie is not going back in the bottle. But that doesn’t mean hoteliers can’t still give consumers plenty of reasons to book direct.
The opportunity is there for savvy hoteliers to take the first step to one-to-one marketing and really begin bridging the gap between revenue management and marketing.
By integrating pricing strategies with loyalty programs, hotels can regain control of distribution, lower costs and provide a more satisfying experience to their customers from the point of booking.
Connecting revenue management and customer relationship management
Most hotels – chains and independents alike – maintain customer data profiles. In the past they were kept in ledgers, recorded manually at the hotel.
Profiles became more refined when property management systems began offering the ability to create and update profiles at various customer touch points.
That’s still the case for some properties, but major brands are now using customer relationship management (CRM) systems to ramp up the levels of sophistication.
CRMs allow greater functionality to analyze customer visits and spend, providing not only the more robust individual data profiles marketers desire but also the ability to segment customers by lifetime value.
Database marketers and the operations teams on property use the data and tiers to determine guaranteed benefits, discounts and personal preferences.
But from a revenue management perspective, the most important customer segmentation is by profit.
For example, the “top tier” might include guests who stay 15 nights a year during peak dates in an expensive room type, or someone who is more value conscious, but stays 50 nights a year.
Both guests are loyal and very valuable customers. So when they log in, they should receive preferential prices – better than what a non-loyalty member would see at the brand.com site or what would be available through the best available rates seen at third-party sites.
These rates wouldn’t violate parity agreements because they’d be “fenced,” or discreet, and they’d really only be an extension of what some companies are already doing with points-based offers.
Hotels could take this one step further and always offer better rates to every customer logging in with a loyalty account, even if it’s their first stay with the brand.
Lower tiers of known customer could receive a modest discount to the public best available rate, whether that be 10%, $10 or $1 less, because these customers are the most likely to defect to another higher cost discount channel.
Only unknown customers without an account and log-in would see the highest and “best” available price also live on OTAs and the GDS.
If marketed, this approach could shift significant share back to a company’s lower-cost direct channel. A brand’s most loyal customers already have an account and are logging in, but a move like this would give all other potential customers a significant reason to join the program and book directly for the lowest prices.
To expedite this, a company could slightly increase rates on third-party channels and for unknown customers on their own website, while maintaining lower prices for loyalty members.
Those prices for customers logged in would now be “discounted,” to differing degrees depending on their profit tier, and bottom-line revenue would increase as more customers booked directly at the lowest-cost channel.
Hotels, including independents with the right booking engine, could test different approaches, even maintaining the public best available rates and lowering prices for known customers, because even if average daily rate dipped, profits would increase with more direct bookings.
By owning and communicating this strategy, brands would educate consumers on where to find the best deal every day of the year. And hoteliers, without breaking parity, would give consumers a reason not to shop 22 sites.
Profits, with more direct bookings and less reliance on third parties, would also increase.
NB2: Money hand by Shutterstock.
Special Nodes is the byline under which Tnooz publishes articles by guest authors from around the industry.