The power of packages for hotels
Hotels currently have a variety of ways to sell rooms. The halcyon days of basing distribution strategy around the simplistic “direct” and “third-party” options are long gone.
Merchant model or net rates. Facilitated booking with metasearch partners. Exclusive rates for loyalty members. Embedded pricing in Facebook ads. Data science and algorithms. All these topics and more are part of the conversation today.
The major global hotel giants are feeling the pressure, while smaller regional chains and independent boutiques are not immune.
NB: This is a viewpoint by Marco Tagliatti, Vice President, Expedia North America Lodging Partner Services.
An ecosystem of revenue management companies, channel managers and social media agencies compounds the complexity. Property management systems are now as connected to the pricing team as to housekeeping. Food and beverage is a yieldable ancillary revenue stream.
Hotel metrics have moved on from revPAR as the be-all and end-all. Average length of stay can be as important as occupancy rates, and average daily rates now operate in the context of a defined competitor set rather than internal historic trends.
Beyond distribution, alternative accommodations such as Airbnb and HomeAway have emerged as genuine disruptors – changing customer expectations of what lodging can be, and as a result, prompting hotels to rethink their operations and marketing message.
But as is quite often the case in times of paradigm shifts, there are some constants that remain relevant, but often overlooked. When it comes to hotel distribution, that constant is packages.
Packages – a combined hotel, airfare and/or car booking – have always been a solid way for hotels to drive demand. Tourists from the mature markets in North America and Europe are familiar with the concept of packages. It could be argued that the emergence of Chinese outbound travel was built on the relative simplicity of booking and traveling on a package.
The research to confirm the growing importance of packages is compelling – between 2014 and 2015 alone, there was a 4% increase in the number of US travelers booking packages, in the busiest travel period since the pre-recession peak of 2008.
A more recent report found that US and European travelers who book complex trips such as packages tend to take more trips and/or spend more than those who buy just a flight, hotel or other single component.
However, despite being a fundamental part of the global hotel business, there’s a lack of industry information around how hotels can strategically manage this demand in the current distribution climate.
Fresh data from Expedia, comparing package bookings with standalone hotel bookings from global points of sale inbound to US properties during 2016, illustrates for hoteliers the benefits of distributing inventory as part of a package. Packages are a great way to maximize revenue, secure longer booking windows, and minimize cancellations.
One of the many buzzwords in the travel business is upselling – the idea that a customer who has agreed to buy from you can be persuaded to dig a little deeper and spend a bit more. For hoteliers, packages offer a great opportunity for this, as the customer is already of the mindset that their package booking was a great deal, compared to buying the components individually.
The upselling can take on many forms. In the booking flow, hoteliers can offer a more expensive room type. If the lead-in price for a resort property package is for a basic room, guests may consider an upgrade to a sea view or balcony.
Upselling is also an option thanks to another fact revealed in the research – namely that the lead-in time for package bookings is longer. This gives hoteliers more time to sell upgrades and offers to their guests in advance of their arrival, as well as marketing add-ons such as airport transfers or activities via third party partners.
The research also showed that guests booking a package tend to stay for longer. In simple terms, a couple spending five nights at a hotel will have more time for the spa, the bar and room service than someone staying overnight.
There are a number of practical steps hoteliers can take to ensure that their approach to packages takes advantage of the potential benefits, from knowing the differences between how best to attract different global source markets, to understanding the important of precision pricing.
Expedia has been offering packages almost since its day of inception and has built up one of the industry’s most comprehensive global data sources. It has an array of market managers that know the intricacies of their locality, while Expedia PartnerCentral offers robust tools and insights to help hotel partners stay informed. Click here for details on both.
For more data-driven insights into the power of packages for hotels, click here to access a white paper from Expedia.
NB1: This is a viewpoint by Marco Tagliatti, Vice President, Expedia North America Lodging Partner Services. It appears here as part of Tnooz’s sponsored content initiative.
NB2: Image by BigStock