Book Direct Strategies – So what is your strategy?
In the 4 Book Direct Strategies published earlier this month, we looked at things we can do as hoteliers that are ‘front-facing’ and which will help our customers understand the benefits of booking direct. But now, what about us? What do we need to do as hoteliers to understand the positive and negative impacts the OTA’s have on our business.
As an industry we need to understand not only what are goals are, how we plan to achieve them, but more importantly why we have them in the first place…
So with your Book Direct Strategy, what is your goal?
- Reduce Commission?
- Build Brand Loyalty?
- Understanding your customers better?
- Growing certain segments of business?
Well I would say all of the above, but lets take one at a time
Commission – our favourite gripe but should it be? Shouldn’t we first work out who is adding to our business and who is taking away? Before we all scream about commission cheques do we actually understand which channels are working best; what is the profit per channel and who is actually adding value to our business? For example, some high commission channels could actually be sending us better business with a higher incremental spend or perhaps they are helping us penetrate new markets.
The OTA’s after all are not the enemy, they offer us potentially the only opportunity to sell and market our hotel in countries and areas that we could never reach. They offer us a sales platform 24 hours per day, 7 days a week, 365 days per year and perhaps it is our fault that we panicked and crossed to ‘the dark side’ offering ridiculous commission, allocations and flexible cancellation policies. Harsh I know but this is a double edged sword and as hoteliers we do need to take some responsibility and manage things the best we can…
But the first step in this whole revenue equation is to work out the cost of sale per occupied room (a mine field of a subject in its own right and something we will concentrate on another time). But over and above this room cost, how much commission are you actually paying? But is that one metric actually enough? No. We need to understand how much the OTA channels are contributing to our overall profitability. So how are you measuring this?
Some perameters to consider:
- What type of business is each channel sending? Is it Corporate or Leisure?
- When do they stay? On busy nights when you don’t need the business or on need dates?
- What days of the week?
- What is their Length of Stay?
- How far in advance do they book? This is key so you can consider which rates you release and why, and also how you manage availability on individual sites
- What is their Average Booking Value? How much are they averaging as incremental spend in the hotel? We all know that certain markets don’t tend to spend a lot in our bars or restaurants where as put a Irish man in the bar with a great steak and a Guinness and the spend will double (tongue in cheek analogy I know but you get the gist)
- Are they a corporate guest (and lets face it, most people staying on single occupancy, Sunday through Thursday will be corporate), could we capture that corporate to book direct at a business rate?
- How much commission are you actually paying – for example, you could have a site with 25% commission which has very little impact compared to the thousands of pounds you pay out to the OTA on 12%
All of these questions if tracked correctly will lead to the answer – which channel is impacting your business the most, which is making the most profit for you and which is having a positive impact on your bottom line revenue. Judge the answers over a realistic period of time before making a decision.
But lets not forget one important factor often overlooked – how much are they cancelling? I have often seen hotels with less than 100 bedrooms, operating in a mid-scale environment losing upwards of £15,000 per month of revenue in the month/for the month. Meaning for example: people you thought were going to stay in August, actually cancel within that same month, so you have very little time to react as cancellations are often made within a few days of arrival. And we know magic’ing business out of a hat with a few days notice can be tough.
And what revenue decisions are we making on business that might not ever turn up? Potentially we are moving rates too soon and maybe slowing down demand due to an inflated perception of Business On The Books. Or maybe we are closing other channels (fingers crossed not our own) because of demand we feel might materialise.
Either way, cancellations, no-shows and un-constrained demand need to be evaluated by channel. All of this might sound time-consuming but I promise it is worthwhile.
If you can, invest in revenue management software which will automate all of these metrics for you and help you make informed decisions. If not, then at least allow someone in your team to evaluate. This is an important metric and one we need to get right before we can make good revenue decisions.
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