Customer Ownership and the Danger of Losing Control
One of the main reasons our hotel partners engage with us in Bookassist is to drive their own brand online and to build their direct business. And of course to capitalise monetarily on that. By and large, we achieve this with our hotel partners once they are committed to the hard work and the initial costs required to put the direct booking strategy front and centre of their entire business strategy. Using online travel agents (OTAs) is a critical part of a hotel’s business, but a balance needs to be struck and most hotels are over-reliant on OTAs. The process of shifting business away from a reliance on distributors and towards direct booking on your branded website is initially quite a difficult one to get moving, and some hotels greet the initial spend requirements with a certain reticence. But it can quickly snowball into positivity as more and more direct bookings generated means more and more savings made per booking, freeing up cash to allow for reinvestment in the direct booking strategy. When understood and managed properly, momentum builds and it becomes self-perpetuating.
While we measure the result of a direct strategy in terms of bookings made, the actual reason a direct strategy becomes successful relates to customer ownership and how a hotel manages it. Likewise, the reason why mismanaged online distribution can be a threat to your business is that hotels do not grasp the danger of losing control of customer ownership. It may seem obvious, but what exactly do I mean when I say that someone is “my customer”? If they are staying in my hotel, then are they “my customer”, yes? Not necessarily. The key relates not to where the customer stays, but to how their choice was made and to who was responsible for triggering their decision. Who owns the mindset of the customer is perhaps the most relevant question to consider.
The Decision Process
OTAs have largely commoditised travel into location and price, with little opportunity for hotels to project or control their brand. Rate parity agreements forced hotels to think only in terms of price and weakened hotels’ individual brand value considerably. Unable to pitch their uniqueness on OTAs, hotels were increasingly forced to compete on price only and, with rate parity, their own website prices also continued to fall, further weakening margins. For the online customer, the OTA presents a compelling option with great choice and good pricing. When a customer books on an OTA and then gets great service at the hotel, they are on the whole pleased with the OTA as much as with the hotel (if not more so). It is on the OTA’s website where their key decision and commitment was made, and the OTA owns the mindset of the guest in that case. A happy customer will likely return to the OTA . Critically, it is the OTA who has the customer data in full, and they do not pass much of this to the hotel. The OTA is likely to have customer history and browsing behaviour, and can make very positive use of future marketing and targeted offers. Even if you have a strong data-gathering policy at check-in, you cannot match the data and tracking the OTA has already gathered. As a hotel, your chance to influence the OTA guest, to reward them or to encourage repeat bookings is slim. Your control over the customer experience is limited to the time they spend in your hotel, but even the positivity this brings is reflected as much on the OTA as on your hotel. OTAs are increasingly “big data” aware and understand the value of their customer data very well. And they are consistently better at remarketing than the average hotel. Guests who book your hotel indirectly are targeted on many occasions by the OTA following their visit with incentives to stay in other properties, most likely your competitors, for even better deals. The pitch on price is relentless and OTAs encourage loyalty to their brand, not to any one specific hotel.
The Value of Direct
When an online customer books direct, the decision trigger is quite different. If they are already familiar with your property/brand, then their direct booking is an endorsement of what this stands for. If they are booking as a result of a marketing campaign of yours, then you are definitely doing something right. If they are booking because their research has led them to your website and your content has convinced them, then your digital strategy is working positively. All of these reasons point to the guest’s mindset being under your influence, and on this you can build. For the direct guest, you are in control once the booking is made. With pre-stay contact, and everything you do from arrival onwards, you can work towards demonstrating the positive link between brand and price that ultimately enables you to hold your rates in a competitive environment. You are in control of your brand distinction and can charge for the difference. With the customer data, you are in control of the future customer relationship and have an open line of communication with your guest from enquiry stage through to repeat booking and referrals. You have the ability to nurture that relationship yielding additional revenue through upselling prior to arrival, additional spend over a customer life time and the possibility of creating brand ambassadors on social media to further encourage more direct booking referrals. All assuming of course that you actually do these things with your data. In our experience, few hotels do and major opportunities are being lost daily to capitalise on the data asset that hotels have. Those lost opportunities directly affect your bottom line.
The irony of distribution is that while you widen your catchment you also actively compete with yourself online (and often lose) and threaten this direct customer relationship. When a guest specifically searches for your hotel by name, they are already your customer and yours to lose. Only entries for your online presence (website, social media, blogs etc) should ideally result from that search and ensuring this as much as possible is a critical task. But your own distribution policy probably means that all your distribution partners take your rooms, and your best pricing, and then use this to compete against you for your own direct guest on the search results right alongside your hotel. In many cases, they will do a better job at attracting that guest in (and charge you for doing so). It’s like you’re encouraging multiple hands to go up when your name is called out, instead of just allowing yours. Your strongest chance of seizing customer ownership is already jeopardised and you are allowing it to happen.
“Free” Booking Engines
OTAs have now begun to push further into the ownership area by incentivising hotels to cede more control of rates and availability to them. Recognising the increasing threat of direct booking, or indeed the opportunity it affords them, OTAs have begun to offer “free” booking services for your hotel website, which on the face of it may look like a pretty good deal. But they also could be a Trojan horse. With shared rates, they lock in effective rate parity (even as rate parity clauses are beginning to be thrown out of courts across Europe) and with shared inventory they guarantee all the stock an OTA can want without them having to ask. They can punish by offering competitors as alternatives when your hotel has no availability. And more importantly, they suck up the customer data and customer tracking right on your own website and in doing so can profile your guest and offer much more targeted alternatives. While the zero cost may look attractive, the real cost is coming down the line in lost data.
The focus on direct booking is usually couched in terms of the need or desire to reduce commissions to your distributors, to increase your margin, to drive more gross profit from your sales. While these are all critical and important issues, they are not the overriding advantage of that focus. The advantage of building direct bookings lies in the long term, in the personal data you are gathering and in the relationships you are fostering. It is the regaining of the customer ownership that is key, and it is customer ownership and what you do with it that will bring longevity to your hotel’s business.
Dr Des O’Mahony is CEO and Founder at Bookassist (http://www.bookassist.com), the multi-award-winning technology and digital strategy partner for hotels worldwide, and is a HSMAI “Top 20 Extraordinary Minds” recipient.