Re-Capturing OTA Business With a Flagship Store Approach!
Updated: Nov 3, 2020
The challenge with perishable products and the need for diversity
It might be bizarre to refer to hotel rooms are 'perishable products' but they can't be sold when the arrival date has passed so...yes, they are indeed perishable! When you look at it this way, it's understandable that many hotels will create a variety of products and services to attract different segments with the aim of increasing the overall occupancy over 365 days a year.
Yes, these travel segments might have different needs, travel patterns, or seasonality and require a different marketing approach and attention. So the experiences offered need to be diverse in order to balance the occupancy levels across the year and increase overall hotel performance.
Let's take a look at leisure hotels that target meetings & incentives. Or the opposite, business hotels trying to fill their weekends with wellness guests. They often experience disconnects between their overall brand positioning and experience delivery as the customer journey gets confusing and obtuse.
The disconnect between experiences promoted and the actual online purchasing experience
A clear example of this challenge is the disconnect between an hotel website and the actual purchasing process. More than often, hotel websites feature beautiful, luxurious photos of various experiences seemingly available on property, that tempt the consumer into booking. When they start, however, they realize that the booking process itself is distinctly non-luxurious and that the experiences seen on the homepage aren't bookable online.
Imagine a family with 2 kids trying to book a vacation. They find a hotel whose website promotes family friend accommodation. They try to book and are unable to specify that they need interconnecting rooms. They almost always have to call the hotel to confirm what was promised on the homepage.
Third-party distribution players have done a much better job retailing hotels
In contrast, OTA's add their own content which makes hotels incredibly comparable.
A booker can simply search, compare, and book the best option. This way of retailing degrades hotels to a commodity, even the ones with strong brand recognition. Customer reviews are seen as a key quality assurance indicator and differentiator. Whilst those room aggregators with comparability options are surely a benefit for functional stays (read business travel), they may not be the best option for all travel purposes. When emotional benefits and details are of key importance to the customer, other platforms are able to provide a more personalized service.
When booking a family vacation, travel agencies are much more powerful in providing an individualized experience and helping customers to find the right hotel match. With digitalization and online distribution increasing, the general thought was that this was the end of the road for travel agencies.
Suffice to say, this prophecy has not become true. Quite the opposite, with the lack of online personalization during the retail journey for travel experiences, travel agents are as valuable than ever. Good travel agents can answer all questions and provide an individualized purchasing experience with recommendations, even to the level of detail suggesting specific room types, available features like panoramic views or amenities at a hotel. The best travel agents know the products they sell very well and are able to recommend the right hotel to the right customer. This highlights the importance for hotels to deliver ongoing educational activities to travel agents ensuring they can drive even more business to them.
Why are hotels not able to provide a better retail experience themselves?
One of the main reasons for the lack of online individualization is the dominance of hotel legacy systems and the way room inventory is being managed, which makes it difficult for hotels to copy best practices known in other sectors like Amazon. Common internet booking engines available on the market and used for hotel individual websites are simply selling room types and not experiences. Room types are also often deliberately simplified so hotels can manage and distribute them easily via other third-party distribution channels such as OTA’s and GDS. This adds to the problem of commoditizing hotel offerings in order to increase reach.
Another issue is that some hotels prefer to keep room allocations flexible, not committing a certain room number to a guest, since prices may change on a daily basis subject to demand and it allows for allocating guests yielding a higher return (price * length of stay) to a more appropriate room closer to arrival.
However, what the hotel believes to be the best room fit based on their own perspective does not necessarily line up with the guest's expectations. This can cause an experience gap and is also a highly opaque process from a guest perspective - ultimately leading to a negative guest experience.
Some smaller, family-owned leisure hotels often don't use a booking engine and still work with online request forms instead. Not providing an instant booking confirmation option in the first place increases the danger of losing the customer to a third party unless the client is patient enough to reach out to the hotel directly via phone or email. As long the staff are well trained, getting a phone call from a guest is actually a good thing since hotels are able to provide a very individualized service matching customer needs with the right room product and services instantly. It is common knowledge for hotels that reservations through phone yield significantly higher revenues per available room (RevPAR) than other sales channels. However, what % of guests will actually take the initiative to directly phone the hotel? What about guests who don't speak the local language?
Make your own sales channels your flagship store
Since we know that individualization yields higher RevPAR and retail practices from other sectors like for example the known Amazon phrase “people who bought this also bought that...” are improving overall business performance, we recommend hotels to consider their sales channel to be a flagship store!
Let's think about Apple. While you can buy their products through other retail channels, they also have their own flagship stores where the purchasing experience is much more controlled and closely linked with their brand promise, ultimately supporting their brand positioning. Take a Nike sports shoe: while you can purchase most of Nike’s shoes through various different retailers, their own flagship store provides additional limited-edition shoes and an enhanced purchasing experience you won't experience anywhere else.
In addition, flagship stores provide a lot of different benefits to brands as well as encouraging customers to buy directly despite alternative sales channels available to them. The flagship stores can also be leveraged for public relations activities and providing the image of how the brand wants to be seen in the world, ultimately a tool of individuality of breaking out of the sea of sameness.
The opportunity of a dual distribution strategy
Sure, this is easier said than done and when it comes to how this can be actually achieved, there is usually a lack of guidance or solutions. Along with many of our ex-colleagues and customers, we have formed the World Hospitality Alliance to guide hoteliers through this process and help them to drive more direct bookings, expanding their own sales & marketing activities in markets which matter to them.
Our technology solution, the GauVendi Retail System (GRS) not only closes the gap between hotel websites and the experiences they want to sell, but it also elevates the hotel own website to a real flagship store while allowing hotels to drive a dual distribution strategy and continuing to sell common room types via third parties.
More information about the GauVendi Retail System
The GRS retail system connects directly to the property management system and allows for true personalization, making the entire retail journey non-comparable with other third parties. There are no classical room types anymore, customers select their preferred room features & attributes and are presented with best room matches showing a percentage score.
In addition, dynamically bundled stay options can be promoted online, selling experiences, and improving organic search and direct bookings. GauVendi’s build-in inventory management intelligence enables feature-based revenue management increasing yields (RevPAR), automates room assignments, making life easier for hotel operations, and allows for smarter capital investments due to newly gained customer behavior insights.