What's going on?
Travel has experienced a total reset with the current Covid-19 crisis and the environment has changed with lasting implications. So, how do we react?
The question on my mind is whether there will be a change in how hotel operators approach their marketing and distribution strategies? Other than implementing and promoting new hygiene concepts to make travelers feel confident again, hotel operators are busy re-opening their hotels and doing x-number of re-forecasts... completely missing the point that there has been an acceleration towards online purchasing.
If businesses don’t reinvent the online buying experience, they will find themselves outsmarted in this 'new normal'. Dependencies on third-party distribution players will become even stronger than in the pre-pandemic era.
We are seeing heaps of money thrown in to search engine advertising - while ignoring the actual purchase experience. This is often inferior to third parties and conversion ratios actually decrease. Throwing additional funds towards advertising can drive minimal success and would not bring the best return of investment. Way too often we read the data as we want to read it to justify our actions in the first place and are not probing or testing new assumptions. As the saying goes, the devil is usually in the detail.
Let's take a look at traditional retail practices and distinguish between the Point of Purchase
(POP)[1] and the Point of Sales (POS)[2]. We normally look at these as one touch-point, 'purchase', conditioned to do so by all of the customer experience maps out there. We made a map to show you what we mean...
Distinguishing between the two has its merits! It will help you to craft and analyze customer experience in depth. In physical retail shops, the POP and POS can be in different locations with differing implications for the buying process. A long queue at the cashier might cause a lost purchase, without the staff even knowing about it. If this happens once or twice, it can be no big deal. However, if this happens as a result of poor processes, it becomes a real operational issue.
Now let's look at it with regards to hotel websites. Yes, the POP and POS take place at the same location BUT they occur at different steps of the buying process. I refer to this as the 'Purchase Experience Moment' or 'PEM' for short.
For example, additional services or upsell opportunities could pop up at any time during the buying process or even before the booker confirms the reservation. The better the interplay and composition of the POP and POS experience, the better the overall customer experience, site conversion, and increased share of wallet. Don't forget, the opposite can also happen, if there are large disconnects between the POP and the POS, which is, unfortunately, more often the case.
'So why does this matter at all?' you ask.
'The point of purchase impacts brand advocacy!' we reply!
When looking at classic business strategies, you can gain a competitive advantage by building scale or through differentiation. Hotels are trying to differentiate themselves through their brand, marketing, and experiences offered. Big chains manage to do so by gaining distribution power. OTAs have successfully commoditized hotel experiences by making them comparable. What does this create? An unfortunate situation in which all of the hotels' efforts lose their impact.
According to the customer, third-party distribution channels often provide even a better, more defined, or trustworthy way of making a reservation. In many scenarios, they offer cheaper and more personalized recommendations. An OTA provides a hassle-free booking experience with many options to choose from. A good travel agent can offer an individualized purchasing experience with personal recommendations.
Common wisdom suggests that the distribution channel which ultimately converts the sale owns the customer and is in the best position to build brand advocacy for future business. This is why OTAs or Tour Operators do not pass on all contact details of their customers for the booked hotels (at least not free of charge). They also operate their own loyalty programs and engage heavily in CRM tactics to keep customers. Hotels are immediately at a disadvantage. In order to own the customer, they must become the preferred distribution channel. Basically, their Purchase Experience Moment has to deliver real value for customers - better than that of third-party distributors.
There is no one size fits all!
The choice of the preferred distribution channel is also subject to the purpose of travel and the related customer needs, impacting the buying behavior. Different sales channels provide different value contributions and more relevant for different travel purposes.
If I am planning a more complex vacation with the family, I may tend to involve a travel agency to consult and support me in the decision-making process. On the other hand, for a simple one-night business trip my preferred sales channel might be an OTA, offering a number of options including price ranges that meets my budget and onsite location requirements.
See below examples of the different types of value contribution tenets which are important when contrasting a more functional stay (like a one-day business trip) with a more emotional stay (like a family vacation):
When targeting functional stays, the Purchase Experience Moment should include easily bookable room setups, visible and good reviews, as well as brand recognition. These all provide the booker ease of mind and lead to conversion.
For emotional stays, the Purchase Experience Moment should cater more to personal needs, with a focus on engagement. This can make all the difference. Hotels are well-advised to eliminate as many disconnects as possible between the actual experiences shown on the website and the booking process itself to reduce dropouts.
Why should Hotel Operators take note?
Depending on the type of hotel and the respective business mix (function vs emotional), operators should craft the Purchase Experience Moment for their own channels. This should be an important part of the overall marketing and distribution mix strategy! Since traveling has become unique and special again, customers are looking more than ever for personalized offerings. Hotels now have a second chance to get it right and avoid the mistakes made post 9/11 when they were giving business away to aggregators.
According to the Hotrec European hotel distribution survey 2020, in 2019 European hotels received an average of only 8,8% room reservations through their own booking engines on their websites, compared to 14,2% through phone or 17,1% through email or online forms. A large portion of the business is however coming through third-party distribution channels and there was an increase of 44% of online intermediaries between 2013 and 2019, of which almost half of the increase was from OTAs alone. There is a high danger that instead of increasing the direct business share post-Covid-19, it could go the opposite direction, making OTA’s even more powerful and increase the cost of sales again impacting the hotel’s net profit.
How can the Purchase Experience Moment be improved?
There are numerous known retail strategies available, which hotel operators could and should embrace. I like to highlight four retail tactics, which are commonly used in e-commerce:
a) Principles of persuasion (Robert Cialdini): This includes things like social proof – using reviews & review sites, authority - validating the quality by an expert or an institution, scarcity – showing how many rooms are left, likability – what are my friends or Social Media saying.
b) Ikea-Effect (Norton et al.): This is a cognitive bias when consumers place a disproportionately higher value on products where they are partially involved in the creation. In the case of hotels, this is achieved by being able to create your own vacation package selecting your desired room and location, specific attributes, F&B choices, and ancillary services.
c) Gamification: Keeping guests engaged during the booking process, like placing a bid for a specific upgrade.
d) Personalization: the use of chatbots engaging with the customer during the booking process and allowing to address individual needs.
Customer experience should come first!
Whilst common e-commerce tactics can be very powerful, there is a small line between overdoing them and overpowering the client, or providing a great customer experience. Tactics like showcasing scarcity, creating a sense of urgency with “book now” etc. can also turn consumers off depending on how aggressively this is being used. It is always important to approach the PEM from a customer perspective, making it as personalized as possible and avoid non-value steps.
So, now what?
We believe the PEM has a significant impact on the overall hotel business with regards to performance and brand perception. It has the power of driving higher conversions, increasing share of wallet, reducing the gap between guest expectations and booking experience, and elevating the entire brand perception.
Now is the time for hotel operators to get their distribution strategies right. Instead of re-forecasting a lost business year over and over again, consider all that I have written above.
It is not about making radical decisions overnight but taking a step by step approach, focusing on what matters – your guests! What does it take to provide a personalized purchase experience to them when it comes to your hotel.
The current market environment has evidently changed travel behavior, and we are in for another period of low and uncertain demand. Leisure travel is the most resilient in this climate and hotels which are able to successfully target their domestic markets will have an advantage. Revenue share per customer and driving conversions are now crucial for all hotel operators to thrive. PEM becomes even more important, as a key tool to drive demand and yield higher revenues per customer.
Ask for a free demo of GauVendi to learn how you can improve your Purchase Experience Moment and boost your revenue at the same time!
The World Hospitality Alliance is a group of experts around the world that is available to advise and provide more information on how those tactics can be implemented and which steps to take first.