Top 5 Hotel Trends in 2016 and How You Can Capitalize on Them
Marriott is purchasing Starwood, Expedia is buying HomeAway, Priceline has an exclusive agreement with TripAdvisor Instant Booking, and Google has made clear its intentions to expand and improve Book on Google. To say the hotel industry is in flux is an understatement. In order to effectively map out strategies and budgets that will achieve occupancy and revenue goals for 2016, hotels need to be forward thinking about how the industry is changing and how those changes affect operations. Here are five of the most important trends to keep tabs on.
#1 The Conversation About Who Owns the Guest Takes Center Stage
Hotels have little choice now regarding whether or not to distribute to online travel agencies (OTA’s). Most hotels must at this point, if for no other reason than the marketing presence the OTA’s offer. What is at stake, however, is ownership of the guest. Booking.com announced this year that it would cease to provide hotels with the guest’s email when it sends guest confirmation (Tnooz). When hotels don’t have ready access to their guest data—when the OTA “owns” the guest rather than the property—it severely hampers the ability for hotels to capture repeat guests, the lowest cost and highest value travelers. Hotels require data to effectively market to past guests and access to this data will play a role in how hotels and OTA’s move forward. Train front desk staff to collect key data from guests at check in, and focus on growing the direct channel in 2016 to ensure that the guests are “yours” rather than the OTAs.
#2 Mobile Marketing Shifts
Mobile travel bookings will account for more than half of all online travel bookings next year, and 78.6% of them will use their smartphone to make those reservations (Skift). Clearly, a robust mobile marketing plan is in order. This means responsive design, one-click booking, and location technology. Some hotels are surprised to hear that a comprehensive mobile marketing plan also calls for integrating click-to-call campaigns. According to Google’s “The Role of Click to Call in the Path to Purchase,” 68% of hotel guests report that it is extremely/very important to be able to call a hotel during the purchase phase and 58% are very likely to call a hotel if the capability is available in a smartphone search. Of those who are likely to call directly from search, almost half will call to inquire or compare prices, 40% will call to make a purchase, and 50% will call to ask about promotions or incentives.
#3 Market Share
From 2014 to 2015 ADR grew 5.2%, RevPAR grew 7.2%, and occupancy grew 2%, according to a June 2015 PKF Hospitality Research report. However, supply in the top 59 metropolitan markets is projected to increase 3.1%, and hotels are beginning to see more competition from private accommodations, especially as vacation rentals and alternative accommodations become widely available across traditional OTA channels.
The increasingly competitive market requires hotels to craft strategies around capturing more market share. Strategies include:
- Actively monitoring rates and crafting revenue management strategies that include alternative accommodations in your competitive set.
- Creating last-minute mobile promotions.
- Marketing to locals for staycations and to generate word-of-mouth awareness.
- Honing pre-stay service levels that will set your hotel apart from the competition. Well-trained reservations staff can substantially increase conversions while pre-stay email outreach will reduce the likelihood of cancellation.
#4 Guest Acquisition Costs Continue to Rise
OTAs, which captured 41% of the market in 2012, were projected to be at 43% in 2015 (PhocusWright). Commissions are rising at twice the rate of revenue growth, according to the Hotel Asset Managers Association, and recent reports are suggesting that the Billboard Effect no longer exists (Tnooz). While many hotels need the marketing power of the OTAs, this also means increased commission costs. To offset rising commissions, hotels must shore up reservation sales to ensure that valuable phone channel reservations are maximized to the fullest. Based on an average of stay values, phone reservations bring in 38% more revenue than OTA’s and almost 9% more than web reservations. To ensure this voice channel reservation value is maintained, hotels should implement call tracking, regular coaching, and performance-based incentives.
#5 How Travelers are Changing
Know your travelers. According to the 2015 Skift report “The Habits of Travel Bookers: How Americans Take Vacations,”
- Last-minute trips are on the rise with 58% of all respondents planning on taking a last-minute trip in the coming year and 73% of millennials.
- Among travelers that will take a summer vacation, 22.8% will take short vacations over weekends while just 15.8% will take one long vacation.
- In markets such as NYC, Washington DC, and San Francisco, residents search for local hotels more than anyplace else. The short local getaway will continue to trend.
- More travelers have expressed the intention to travel this winter than the last. The increases are across all generations except Baby Boomers, which are holding steady at last year’s already higher levels (HTrends).
- Bleisure will continue to grow, according to Fortune, and we predict that multi-generational and multi-family travel will experience growth, as well.
The stage is set for the hotel industry to have an outstanding year in 2016. All signs point to healthy demand and continued ADR increases. However, travelers have more options than ever before and a growing list of demands to be met before booking. At the end of the day, rates and service will go head to head as the deciding factors for travelers. Rates strategies can be automated, but service is an art—one that starts from the very first interaction.