Build loyalty, leads, and a resilient brand with these revenue management and marketing strategies.
Hospitality leaders, already battered by trade wars, natural disasters, and employment slowdowns, now face fallout from a global pandemic. Travel markets teeter, cancellations skyrocket, and a recession looks likely.
As travel restrictions and social distancing jolt hotels and vacation rentals, savvy leaders ready their technology and data strategies for a market recovery. They also find ways to attract new guests and rebook existing reservations. And while COVID-19 reactions are hard and extraordinary, recessionary periods are nothing new. Downturns are part of the travel industry rhythm – and they can be weathered.
The natural impulse for hotels and VRMs is defensiveness. But wholesale cuts in promotions, pricing and staff may have more far-reaching consequences than a recession itself.
Instead of engaging in a price war, consider tactics for optimizing systems, building relationships, boosting loyalty, and preserving long-term guest value. Here are our top strategies for facing the tough times ahead.
Turn to technology
With technology, companies can grow their number of leads (guests that have previously inquired but do not have an existing reservation), add efficiency, support a remote workforce, and create future direct bookings opportunities. They can also reduce knee-jerk pricing and strategies with data-driven decisions. Here are five ways to harness and nurture direct demand to improve operations.
-Unleash automated marketing programs. Resource cuts can devastate marketing for hotels or VRMCs dependent on manual tactics, like Excel-based list exports and email blasting. Instead, deploy smart automation to maintain campaign continuity – even under resource constraints. Stay relevant and build relationships through personalized lapsed-guest emails, booking anniversary notifications, pre-departure re-booking emails, and promotional emails sent without manual effort.
-Capture unbooked leads. Second chance bookings and retargeting open new revenue paths. For example, consider a shopping cart abandonment strategy to capture and engage website visitors who didn’t book. This turns booking engine data into valuable leads. NAVIS’ research shows that abandonment solutions generate 3 to 5 times the number of leads available for voice and email remarketing versus booked guests. One NAVIS client, Banyan Tree Mayakoba, reported $2,930 in revenue per booking on 38% conversion from their shopping cart abandonment leads.
-Spotlight your key metrics. In lean times, ongoing data monitoring is critical to ensure healthy RevPAR performance. Kim Snow, Vice President, Revenue Strategy at Interstate Hotels & Resorts, believes that utilization of daily regrets/denials reporting must become a daily habit, stressing, "These insights hint to where you're succeeding and where you have opportunity." NAVIS clients may know this report as the Nightly Lead Demand report, which highlights their unconstrained demand. It gives them the opportunity to pivot in real-time if the market pushes back against rate or policy. Conversely, if guests don’t resist rates, the opportunity to drive ADR without a decrease in occupancy may surface.
-Optimize for remote working & outsourcing. Disruptions to daily operations – whether from a natural disaster or social distancing – add a premium to remote work capabilities. Here, brands often struggle with live call reservation workflows and staffing. One NAVIS client, Jamaica Inn, opted for a virtual phone solution after a local carrier struggled to route calls in a heavy storm season. Outsourced reservations support is an investment that reduces call disruptions, adds scale and supports after-hours or overflow calls – especially in virtual work environments.
-Use the slowdown for setup. Peak season may not be the time for software integrations and system overhaul. Consider platform, training or email marketing upgrades during a lull. This allows easy implementation and ramp-up in anticipation of a market recovery.
Reach out to past guests
At our recent conference, Navigate 2020, Matthew Libby, Director, Revenue & Central Reservations at Kohler Company, reminded hotels and VRs to understand what drives loyalty in repeat guests. Brand and property differentiators need emphasizing during a slowdown. “Appeal to your most loyal segments through what they love about your property, not rate,” he guides.
Target in-house and near term travelers
Existing business is ripe for future bookings and upselling. Consider targeted promotions to extend the stay of already booked guests, or those with check-ins in less than two weeks. Ideally, avoid explicit rate cuts and focus on service or amenity upgrades. Add automated email upsell or cross-sell promotions to new bookings too.
Expand revenue sources
Future-proofing means diversifying revenue sources. At Navigate, Libby recalled the over-dependence on golf at one of his properties. The team studied popular trends and made simple investments to widen interest outside the golf community. They added wellness activities like yoga and Bold Cycle, a boutique indoor cycling studio. They also capitalized on the ‘local first’ phenomena and introduced locally-sourced amenities to capture new segments and cash flows.
Make policies ‘people first’
Rigid policy enforcement sets the wrong tone, especially in a downturn set off by illness and CDC cautions. Ideally, hotels and VRs accommodate cancellation requests while securing future bookings. In response to COVID-19, one NAVIS client allows for cancellations with a held deposit toward a future stay. Another now holds funds for a calendar year and encourages travelers to rebook. Also, consider backfilling cancelations with outreach to past Not Booked, No Availability leads.
As well, be aware of guests’ pressing concerns. GCommerce recommends highlighting cleanliness in marketing and social messaging. Mining reputation management tools to feature testimonials on cleanliness may slow cancellations.
Forbes reports that 62% of guests are more bothered by unfriendly staff than sub-par amenities. Stressful times exacerbate sensitivities for guests and staff. But adopting “more human” policies eases tensions and creates goodwill. Remember: your biggest asset in the future is the relationships you develop now.
Give attention to your local market
Yes, travelers are canceling flights and travel. But weary prospects and cooped up families will need a break, especially after the major thrust of bans, restrictions, and illness concerns pass. Consider ways to leverage your “drive-market” and close feeder markets to stimulate local leisure business and energize demand once things clear.
Grow – don’t shrink – your marketing investment
A popular adage says, “When times are good you should advertise. When times are bad you must advertise.” Studies show the advantage of maintaining or increasing marketing budgets in weak economies. The reasons: competitive noise drops, cost of advertising declines and mind share for future sales is up for grabs.
Brands must also maintain investments in reservation talent. If staffing cuts hit sales teams, a hotel or VR may trade near-term savings for more prolific revenue generation.
“Preserve guest and sales facing positions,” shares Frank Calaguire, Principal at SCS Advisors. “If you’re going to take calculated risks, take them at the back of the house.” If you must cut some of your reservation team be sure and keep your strongest performers.
Avoid an ADR plunge
Whatever marketing or loyalty call-to-action you choose, avoid reliance on price cuts. Published discounts may displace years of competitive positioning and erode brand equity. Rather, compete on quality of service or other incentives that resonate with specific segments.
Research from Cornell University finds that hotels with an ADR at or slightly lower than that of their competitive set have inferior RevPAR performance. This holds true across all hotel market levels. For example, in the luxury market, hotels that have an ADR that is higher than the competition set have the same or slightly lower occupancies but have 8-14% higher RevPAR.
Conversely, hotels that have a lower ADR than their competitive set have about the same to slightly higher occupancy levels, but report RevPAR of 3-9% lower than their competitors.
Trust revenue management practices
Resist the temptation to interfere with revenue management systems. A recession is not the time to ignore daily pricing guidance. Management teams must work on strategy – and avoid emotional price responses. If rate cuts are required, consider using opaque channels like Hotwire.com or Priceline.com that obscure hotel information.
While some price reductions may be in order, a savvy combination of price-based and non-price-based strategies is ideal. Non-price levers can include:
• Competing on quality (e.g., contrast your service levels to lower-priced competitors)
• Building strategic partnerships with travel agents
• Experimenting with OTA commission incentives
Even price-based tactics do not require across-the-board rate cuts. For example, bundled services may disguise room rate reductions. Cornell guides managers to identify what travelers want and package it profitably. Consider promoting facilities with available capacity (like golf or spa) that don’t add significant incremental cost.
On the other hand, unbundling makes sense for certain property levels. Discount airlines have used this approach successfully, letting travelers purchase a core product, and charging additionally for bags, wi-fi, and other services. Depending on your segment, a modest base rate plus fees for services may work.
Times are hard – and may get harder. But when the outbreak ends, consumers will regain confidence. As Marriott CEO Arne Sorenson shares, “Travel will come back, and it will probably come back fairly quickly.” As hotels and VRs anticipate this recovery, creating and converting demand with technology, service and brand improvements is vital. NAVIS makes it simple.