We know that hospitality customers are more demanding than ever before. There’s more competition each year due to new builds and the increasing prevalence of OTAs and short-term rentals. The expectations of travelers are accelerating while properties try to undercut each other’s rates. So what can revenue managers do to stay a step ahead?
One of the most effective ways to keep your competitive edge is to understand the direction of rate shopping trends. It’s important to look at rate shopping from the consumer’s perspective as well as how your pricing strategy can adapt to the changing tides. Here’s a look at the top trends in rate shopping for 2017 so far.
1. Make Big Data Your BFF
Thanks to the internet travelers are more informed than ever before. With the click of a button, potential customers are able to collect and analyze data across multiple platforms. If you haven’t done it by now, it’s time to become acquainted with big data. The OTAs are already a step ahead of most property brands. To varying degrees, they’ve been offering customized experiences from day one. Hotel brands can keep pace by installing analytics that helps track users. By revealing patterns and trends for their users' hotels can drive personalized experiences and customer journeys.
Hotels can use big data to improve the customer experience by gathering information to learn more about their preferences and patterns. If you’re concerned about customers becoming uneasy if you track their habits, don’t worry. In a recent American Express study, 83% of millennials said they would allow travel brands to track their habits in exchange for a better, more individualized experience. Meanwhile, 85% of respondents across all age groups said that customized itineraries are far more appealing than one-size fits all solutions.
2. Loyalty Programs Need to Evolve
Loyalty and rewards programs are central to the sales strategies of most hotels. In order to be maximally effective, they may want to change course. Most loyalty programs rely on spend or number of visits as the metrics used to grant rewards. In today’s rate shopping climate, basing rewards solely on spending won’t appeal to most travelers. The number of stays is also a hard sell when most younger travelers may not initially expect to stay at the same property more than once or twice. Properties need to consider alternative means of rewarding guests to satiate the instant gratification that Millennials expect. Smaller rewards obtained in shorter amounts of time and with less spend may be the key to making rewards programs pertinent to the new jet set.
Personalized rewards can be in the form of a new type of luxury. The ostentation of 20 years ago is seen as distasteful to a new generation of travelers who have grown up largely during the recession. New luxury to them means better service and more personalization, not seafood towers and gilded stationary. Bespoke experiences and bonuses that are tailored to the guest’s preferences will build more loyalty than a one size fits all reward.
Targeted Pricing: A Critical Hotel Revenue Solution
The past two examples have focused on rate shopping on the consumer side. On the brand side, it’s more important now than ever to focus on targeted pricing. Targeted pricing has gotten a bad reputation in recent years because when every hotel brand is fighting for the same new customers, they all lose. In the worst-case scenarios of excessive targeting, it becomes a race to the bottom.
Targeted pricing makes the most sense when it’s directed at customers that are already loyal to your brand. Studies have shown that targeting lower rates for new customers only (known as ‘switchers’) has a very negative impact on your loyal customer base. They will feel as though they’re not valued and will leave to a competitor. So what’s the point of getting a possible few new clients if you lose your bread and butter? It doesn’t need to be an either/or proposition. If you are going to offer discounted pricing to new guests, make sure that loyal customers will feel valued in some way as well.
Finally, targeted pricing should be tailored based on the market segment of the property itself. Especially in higher end markets, price discounts matter less to highly engaged guests. They value personalized experiences and white glove service more than a discount. Properties can capitalize on the guest’s preferences for a feeling of exclusivity while avoiding undercutting their rates.
All told, it’s not just about watching the trends. Revenue managers need to adapt to the emerging consumer trends to wow current customers and attract new ones.