Part 2 – Luxury Hotel White Paper

                                                “Tapping Your Best Commodity”  By Jim Harenchar

I’ve Got My Data, Now What?

Consumers have access to an unprecedented number of options to shop and book hotels, with new choices continually emerging. Not only does the popularity of different channels vary due to technology enhancements, but it is increasingly difficult to treat the channels as unified booking sources.

Phocuswright research indicates a recent inverse relationship between OTA and supplier-direct website booking trends. But the environment is more complex, with metasearch impacting OTA share and hotel call volume impacted by mobile device use.

As channels become more complex and layered with nuance, traditional market segmentation and demographics are insufficient when considered in isolation. Instead, leading hospitality digital marketers are focusing on behaviors and signals indicating intended behavior.

“Market segments don’t stay in hotels– people do”

Marketing Vice President | Luxury Hotel Group

Demographics are not as helpful to travel marketers as in other industries. Age, education, ethnicity, family size, gender, income, race and religion categories stay the same for a traveler. But a guest’s specific interests for their last trip may be radically different from their next one. Personas are aggregated representations of target customers, based on individual preferences, behavioral and demographic data. Fully developed personas describe important quantitative and qualitative aspects of the guest’s personality and the motivations guiding their travel decisions.

For example, understanding that guests 18-34 are more than twice as likely to book through an OTA than directly through a hotel website is highly relevant when allocating funding to attract incremental weekend business from a younger demographic. Additionally, personas also help provide a conceptual bridge between high-level market segment goals and the massive volume of detailed campaign and website data.

What’s Your Device?

Already challenged with understanding different guest personas from different regions booking through different channels for different itineraries, marketers must also consider how mobile computing has changed consumer behavior. Travelers increasingly use mobile devices to plan and  book hotels.

After several years of trailing other industries, travel sellers are finally becoming more adept at offering improved mobile experiences. As a result, mobile’s share of travel visits has grown 48% year over year, while mobile web conversion rates have grown at nearly double that pace – 88% over the same timeframe.  Mobile apps are important for large hotel groups seeking to engage with frequent guests across a portfolio of properties during the shopping, booking, pre-arrival and in-destination phases of travel. For most smaller groups and individual properties that lack the scale and technological expertise to develop and deploy apps, a quality mobile website that effectively showcases the hotel should be sufficient.

Campaign tagging captures an action and links it to a specific marketing initiative. Tags provide invaluable information regarding the source of a click that brings a customer to a website landing page. Despite their valuable tracking capability, a surprising number of hotels fail to tag social media links to content pages or booking engines. Best practices dictate that every link encountered by a prospective guest should be tagged.

“Tagging content for tracking is table stakes. Otherwise, it’s like buying a billboard.”

Sr. Director Digital Marketing | Digital Travel Advertising Platform

By employing campaign tags, traffic arriving on a hotel website landing page can be identified not only by source, but by the campaign and the ad creative that triggered the visit.

Consistent tagging methodology across promotions and distribution channels eliminates ambiguity.

For sophisticated omnichannel campaigns, tags can help to associate customer acquisition tracking across platforms. The most valuable piece of data hotels possess is the first-party tracking “cookie” – a unique identifier that allows a user to be remembered across various sessions while browsing a website. The cookie not only serves as a link to previous website visits, but often serves as a connection to website registration and the frequent guest/reward program customer profile.

A newer tracking tool is the advertising identifier that follows consumer behavior, enabling  a newer tracking tool is the advertising identifier that follows consumer behavior, enabling the presentation of targeted ads across devices, based on the user’s interests.  Each of the dominant platforms in digital commerce– Amazon, Apple, Facebook, Google and Microsoft – offer their own form of ad ID. These ad IDs do not capture personally identifiable information, but accurately track cross-device behavior of that unique identifier within each provider’s digital ecosystem.

The true digital marketing “secret sauce” that enables highly targeted, cross-device marketing and customized digital user experiences is the successful pairing of proprietary consumer information from first-party cookie data with advertising IDs. When combined with robust campaign tagging and reliable analytics, hotel conversion optimization is not only able to measure promotional campaign success, but also track which combinations of marketing programs, personas and products produce the greatest ROI. If personas are associated with these behavioral characteristics, the marketer is able to seek new prospective customers using “lookalike” audiences sourced across partner websites and ad platforms.

Turning Insight In To Strategy

Successful marketing programs require tight strategic alignment and tactical integration of customer acquisition campaigns, booking processes and pricing to attract high-value prospects and monetize the engagement by profitably converting business.

“We are targeting personas and managing the same guest profile across all platforms. This omnichannel approach is increasing conversions higher in the funnel.”

Sr. Director Digital Marketing | Major Digital Travel Advertising Platform

 

Taking a holistic, end-to-end perspective, the upper portion of the funnel – customer acquisition – involves two distinct aspects of attracting website traffic. The first is the realm of potential marketing campaigns. The types of campaigns launched by the hotel should be tailored to the preferences and behaviors of the persona being targeted. Campaigns involving personas that tend to drive higher ancillary spend, or those more likely to result in repeat visits may justify a higher-than-average advertising bid.

Examples of types of customer acquisition campaigns include:

  • Search (SEO/SEM)
  • CPC advertising
  • Email marketing
  • OTA advertising
  • Social media
  • Retargeting
  • Metasearch
  • All forms of offline advertising

The lower portion of the funnel is dedicated to distribution conversion – the process of monetizing the traffic acquired by converting sales. Two types of fundamental distribution channels exist – those that process bookings directly with the hotel or its affiliated brand, and those that involve intermediaries such as OTAs, TMCs and group bookings handled by the hotel sales office. The upper and lower portions of the funnel must work in tandem to offer an end-to-end user experience across the initial point of visitor acquisition, through the online discovery/shopping experience and ultimately through the booking process. Tracking methods and analytics should be similarly aligned throughout the full length of the funnel to ensure accurate performance measurement.

To fully assess the best channel mix, a large number of factors must be considered. By establishing a data-driven decision-making process, alternatives may be tested and results evaluated to determine the best route forward. In the following example, a family beach resort hotel intends to optimize its retargeting ad spend and boost hotel direct distribution.

Channel optimization processes must consider at least a dozen factors:  (the 5 P’s ++)

  • Offering the right PRODUCT (beachfront hotel)
  • Including the right EXPERIENCE (kids eat free package)
  • To the right PERSON (targeted persona/segment)
  • Providing the right VALUE (ocean view upgrade)
  • For the right PRICE ($299 per night)
  • Using the right CONTENT (family beach GIF)
  • Via the right MEDIA (retargeting ad)
  • On the right PLATFORM (mobile)
  • Doing the right THING (clicking on an offer)
  • In the right PLACE (metro New York City)
  • At the right TIME (weekend evening)
  • Through the right CHANNEL (hotel-direct)

Countless tools are available to measure many of these areas individually. But to compete effectively, hoteliers require a planning framework capable of translating organizational goals to maximize performance of campaigns, customer segments, products and operations through various distribution channels. Without quality tracking data, it is impossible to optimize the channel for true profitability and the resulting customer acquisition and conversion dynamics associated with a promotional campaign.

 Closing The Loop

Given the large advertising budgets, sophisticated technology platforms and data-driven decision cultures of the OTAs, hotels need to step up their game to more efficiently acquire traffic, and more effectively convert that traffic into more profitable transactions. The same applies to independent properties competing for market share against branded hotels. The entire lodging industry may also heed this warning, before facing a major disruption facilitated by technological advancements. While direct booking channels may be more profitable, the cost, time and probability of success in attempting to change established consumer preferences must be thoroughly evaluated. Additionally, with brands, management companies and owners all potentially involved, initiatives must fairly align responsibilities with risks and returns.

Hoteliers would be wise to analyze the customer acquisition and conversions costs of transitioning traffic to new channels (proprietary sites). It may be more cost effective to identify and solicit new demand than to change behavior of existing customers. If the high costs or risks associated with introducing disruption or change to current behaviors, it may not outweigh the reduced ROI and current engagement.

Once the hotel industry successfully addresses the strategic fundamentals, conversion optimization will be enhanced to focus on further process improvements that are able to deliver four key marketing breakthroughs:

1) Eliminate digital marketing/sales/advertising/CRM/social/revenue management silos to share information that improves customer acquisition and guest personalization.

2) Refine customer segmentation granularity down to the individual traveler/itinerary level to better anticipate guest needs, increase conversion and enhance satisfaction.

3) Embrace machine learning and big data to identify better signals from more sources.

4) Apply advanced technology as a tool to make better decisions more quickly, and empower guest contact staff to focus on hospitality and service delivery instead of administrative functions.

In the immediate term, the hotel industry should consider the conversion optimization strategies and tactical best practices to improve unit profitability and maximize customer lifetime value. For properties with limited access to resources, the same approach may be followed, with priority.

Any hotel with a high revenue-generating website and a strong digital marketing strategy that drives direct online bookings usually has a great hotel digital marketing agency behind it. With lower cost-of-sale and overall greater value to the hotel’s strategy, direct bookings will continue to be a huge focus for years to come. Digital marketing and technology advancements continue to change rapidly and luxury hotels would benefit greatly from partnership with a firm that has proven to be forward-thinking, results-driven, and experienced in the luxury hotel space.

With the strong growth in the luxury hotel market, it’s important now more than ever to have a strong, robust digital marketing and advanced technology strategy to drive bookings from your website. Don’t underestimate the value of the luxury travel consumer.

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Research/Credits:

1) www.eyefortravel.com – Bringing Predictive Analytics To The Hotel Industry

2) Phocuswright – Parsing Shop and Book 2016: How OTAs, Airlines and Hotels Compete on the Desktop and Mobile Web and ADARA

3) Phocuswright –  Channel Optimization in Hospitality: Secrets of Data-Driven Hoteliers, March 2017

4) Mysoftinn.com – Direct Booking VS. Online Travel Agency. What Hotels Need To Know in 2017