Now that the first quarter of 2011 is through, the overarching trade data is starting to pile up; some good, some bad. As a plus, the hospitality industry is showing definite signs of full recovery from the 2008 – 2010 slump. However, even with this positive news, REVPAR, ADR and profitability are not necessarily following suit. What is causing this discrepancy?
Look no further than the OTAs. In their infancy, the OTAs seemed lucrative: you simply transferred your remnant inventory to them, which added instant cash to the bottom line. Sure the rates were not terrific, yet occupancies improved and total revenues increased. But a monster was created, and a gluttonous monster at that. Giving these online sites leftover rooms the odd weekend or off period week was one thing. Now, thanks to those original sales, the OTAs have garnered their own loyal customer bases.
And that is the new bottom line. The majority of consumers are no longer loyal to specific hotel brands. They bow (and show commensurate loyalty) to the almighty Expedia, Orbitz, or Travelocity. For instance, if you work at a resort in Florida, don’t plan on seeing too many of the same friendly faces year after year, unless, of course, you are offering the best deals for the OTAs. How does that compare to over a decade ago where guests interacted more directly with the hotels, many becoming steady customers?
Hence, it is fairly obvious that while hotel profitability flounders, juggernauts like Expedia have grown by several billion dollars; a quintessential example of wealth transference. What started off as a quick fix to generate more hotel revenue through these snappy online agencies has caused a serious paradigm shift within the customer’s mind. They are loyal to the OTAs and don’t necessarily care about individual hotels.
Bridging the Gap
How did we allow this to happen? And more importantly, how do we restore the balance of power? The answer is marketing, or more correctly, replenishing the dire shortage out there at the moment. The depressed economy of years past forced our hand to analyze costs more scrupulously, and advertising dollars were immediately trimmed across the board. At the same time, the traditional 10% travel agent commission was replaced with a 25% (average, or more) mark up dictated by the OTAs. We accepted this hike as a necessary short-term fix, but better economic forecasts calls for a return to normalcy, or however much is possible in this increasingly online world.
Even in this day and age, television still represents a highly effective and potent mass advertising medium. But when was the last time you saw a hotel ad on TV, and not just on the free, in-room ‘What’s Happening’ channel? The answer is probably never. Compare this with the advertising undertaken by Expedia, Orbitz and Travelocity. These corporations have invested heavily to boost their franchises’ mind share through solid broadcast campaigns. While I am not pretending to examine their individual creative merits, I conclude that they are all quite memorable.
Alas, television is not for everyone, as it is quite expensive on a national network basis. However, chains like Hilton, Sheraton, Marriott and even luxury brands like Ritz-Carlton would likely benefit from a heightened voice share on this medium. And with the advent of targeted local cable channels, television advertising is no longer out of reach for individual properties in their key feeder markets.
On the contrary, you might say that hotels are wiser than OTAs by diverting their ad expenditures to more modern media, such as Google or Yahoo sponsored links. Well, there certainly has been some hotel presence in this regard. But as a test, check any destination, and you’ll see that the OTAs are quite pervasive on this front; often holding the number one, two and three link positions.
Then there’s what I consider as a middle ground: magazines. Pick up any of the leading travel magazines and you will find some terrific ads for many hotels, both for chains as well as individual properties. By and large, the ads are well written and art directed. However, their potential to reach the target audience is a mere drop in the bucket compared to what is needed to maintain, let alone grow a franchise.
Getting Back to Marketing Basics
How long has it been since you commissioned a real marketing plan, with specific objectives, goals, and a budget to make it effective? I’m not talking about the twenty pages of ‘gobbly-gook’ that your director of marketing grinds out every season. Rather, I’m talking about a marketing plan that has some teeth; marketing plans that have concepts and programs with both risks and the potential for sizeable returns.
Real marketing campaigns are not measured as a single-digit percentage of operating budget or by carrying forward last year’s paltry allotment. Real marketing, and its respective budget, is based on analysis, target audiences and consumer research. More importantly, however, real marketing involves the development of unique concepts and ideas that will serve to differentiate your property or chain.
And that’s the true challenge. Rather than giving your money away to electronic room hawkers, use those funds to create new meaningful advantages for your product. As examples: embrace new technology through the creation of mobile platforms for learning and booking your property; expand your social media presence with online concierge activities; create value by becoming masters of your local scene through a genuine understanding of what’s happening; secure community involvement in the arts, sports or other programs of regional interest; or champion new markets through multi-language communications and outreach; and sell it through a solid, strategically rationalized advertising campaign.
A Fresh Example
Quite recently, Westin Hotels & Resorts unveiled its new $30 million ad campaign titled ‘For a Better You’ distributed across popular news and lifestyle websites as well as newspapers and magazines like The New York Times, The Wall Street Journal, Condé Nast Traveler and Travel + Leisure.
The objective is to make people feel better throughout their stay, leaving guests restored and revitalized upon checkout. Westin employed an independent New York City-based firm for this task, creating six intricate sets of imagery for their various locations. They strive to convey the message in a sophisticated yet lighthearted manner without relying on computer graphics.
Not using any standard property or room shots, the campaign instead focuses on the various amenities and features at their locales – the ‘Elements of Well Being’ as they are called. Take their Heavenly Bed advertisement for instance, which offers the insight that a good night sleep is vital for your health and memory retention.
All things considered, this is a great brand strategy – making the experience a centerpiece, and not relying solely on each property’s physical attributes. Considering that this is the first Westin ad campaign in the last five years, I think that the results will be remarkably positive.
The Bottom Line
It’s time to bring back hotel marketing. It’s time to give revenue managers a true marketing partner in their efforts to maximize revenue, not just by building occupancy, but by restoring ADR through significant value with each and every reservation. This is a job that the Director of Marketing has to champion, with less of a stranglehold from the budgetary committee. And, this can only be accomplished after guests are involved directly with the property, and not through an independent, electronic intermediary. If you can work to restore the connection with your consumers and supersede the middleman, then your brand presence, and profitability, will continue to grow, no matter which OTA gets in the way.
(Article by Larry Mogelonsky, published on eHotelier on June 22, 2011)