Over the last decade, the direct channel has received significant attention, but much of the focus has been on the digital realm - online bookings, websites, PPC and banner advertising. Unfortunately, one growing portion of the digital world is eroding all that we have worked so hard to build and protect: OTAs are commoditizing the industry by promoting price as the primary differentiator, demanding ‘best price’ from properties and in some cases dictating volume, and then taking 20 to 25% of your revenue. In a recent membership survey by the Hospitality Asset Managers Association, more than half (54.4 percent) felt that third-party commissions were the most concerning issue they face potentially threatening bottom lines.
At the same time, studies have shown that online travel purchasers tend to be price driven. For example, according to Yesawich, Pepperdine & Brown, almost six out of ten leisure travellers now actively seek the "lowest possible price" for travel services and a study by the Joint Hospitality Industry Congress found that there is a real expectation among consumers that Internet prices will be lower than those in the "bricks and mortar" world.
Most recently, Google is also entering into the game with online hotel bookings. The company is seeking to have hotel searchers book and pay via Google rather than handing off the lead to a third party travel site or hotel site. This was first featured by travel news site Tnooz.
So while the digital world offers some necessary and worthwhile business building tools, our clients have identified some significant challenges:
- digital marketing receives 75% of the marketing budget while only 25% of bookings come in via the online channel
- skyrocketing distribution costs (OTAs) are eroding margins
- labor costs on the rise
- shorter booking windows
- how to sell experience over rate
At NAVIS, we know hoteliers have access to a huge opportunity sitting right under their noses. However, unfortunately, we’ve found most don’t have the right tools and technology to make this possible. This is where NAVIS comes in.
Shifting the Focus to the Most Profitable Channel
Capturing market share, revenue and driving personal service means shifting strategies to emphasize the most profitable reservations; these are direct (phone) and personal. The direct channel costs 10-15 times less than OTAs and 4- 10 times less than GDS travel agents. In addition to being more cost-effective, phone channel bookings have a 45.4% premium over OTA bookings and 8.25% premium over web bookings.
Unfortunately, most properties are not maximizing this channel, only converting an average 30-40% of calls. That means there is a lot more revenue potential available for properties who leverage this opportunity.
The online channel and the voice channel should work in tandem. The path to purchase flows from devices to voice, from voice to devices—sometimes multiple times depending on whether the reservation is complicated or of unique importance. A recent Google studyreports that among travelers;
- 52% will call a hotel directly from a search to make a reservation
- 50% will call to inquire about promotions, incentives or deals
- 49% will call to ask about or compare pricing
Rather than declining in importance, voice conversions are increasingly critical in this new travel-purchasing model. While the voice channel relies on people, ideally a savvy reservations sales team, conversion rates can be substantially improved if this team has the assistance of the right technology.
Personal Service in the Digital Age
According to PhoCusWright, of the reasons travelers reserve offline, 35% say they want personal service, and 15% desire a particular travel agent or agency. Baby Boomers, of which there are currently 74 million, are driving a resurgence in travel agencies. They prefer a personal touch especially when crafting culturally immersive experiences.
Also interesting is the fact that Skift reported that 33% of wealthy Millennials (earning $150K or more) are using traditional travel agents more than any other income bracket.
The desire to interact with a person when planning travel not only has not diminished, it is becoming increasingly important for reasons including:
- “Consumer confusion” is growing with too many intermediaries between guest and property
- More searches on mobile devices are leading to more calls
- Offline sales are more valuable/profitable than online sales
- The demand for experience-based lodging has increased
For hotels in search of the most profitable reservations, this means reevaluating your approach to voice reservations and ensuring this area of your property is receiving the attention it should.
When you sell an “experience” over the phone guests buy it when they’re on property – with the voice channel offering an average 30% increase over OTA’s in year over year total spend (rooms and ancillary) for both new and returning guests.
Looking ahead, both emerging and traditional lodging providers must adapt to changing customer preferences, diverse consumer segments, and technology that will all drive future growth. The successful brands of tomorrow will invest to understand customer insights in order to provide guest-centric service, and open up their online and voice channels to work together. Today’s consumers are empowered by the online capability to compare options and pricing, so the distinction will rely on delivering memorable, high touch, customer experiences. Starting with their first interaction before guests even arrive on property, make every touch point with your guests count.