5 Reasons the Drive for ‘More Direct Bookings’ Will Transform the Hospitality Industry into a Direct Response Industry
January 11, 2017 12:39pm
By Jeremiah Magone
First off, the hospitality industry is already a full-blown direct response industry.
That might not be so obvious to the untrained eye, but you just need to know where to look.
Take this, for example.
Every time an OTA charges a commission, that commission is based on a verifiable ROI. That's the only way they can make the super-affiliate relationship work.
From a hotel's perspective, this is good because management can always reason that, "If we spend 20%, we're still left with 80% in revenue… and something's better than nothing…"
And the OTAs can use the same mental calculation, measuring costs against profits, to steadily grow their businesses.
It's pretty simple, right? But it's powerful because it's scientific.
And as the direct response practice of testing and tracking results on everything we do becomes more and more widespread, there are 5 fundamental ways it's going to change the way we do business in the hospitality industry.
1. Direct booking campaigns will push hotels to use more transactional emails:
Since 2015-16, when most hotel bookings shifted to on-line channels, directors of marketing have been, increasingly, looking for ways to up their on-line conversion game. And one of the least expensive ways to do that has been to follow the OTAs' example and invest in automated email marketing.
With a high degree of track-ability already built in to these systems, it's been easy for marketers to show increased engagement levels, larger numbers of sign-ups to their loyalty programs and, most importantly, a higher, total return on investment. (ROI)
Following the OTAs continued use of this medium, I believe it's only a matter of time until every hotel catches on and sets up their own email marketing funnels… to keep communication flowing… and reservations coming in…
Again, exactly like the OTAs, I have no doubt hotels will keep pushing these transactional emails until people either unsubscribe, or die from old age.
Email marketing pays for itself, time and time again, after all!
2. Customer Relationship Management software (CRM) will give marketers a new level of measure-ability
Evolving out of marketers' need to track results, so they can continually produce better outcomes, CRM software is here to stay. And the fact that all the CRM players in the industry only serve about 15-20% of hotels, right now, means there's a huge race going on to capture the rest of the market.
So you can bet your bottom dollar you're going to be hearing a lot about the virtues of CRM, going forward.
And you should listen! Track-ability can give you an amazing level of understanding of guests' behavior. That lets your staff provide a higher level of service. That increases revenues. And, at the end of the day, all that gets fed back to marketing, so they can get even better at targeting your highest-value guests, or look alikes.
Sometimes called 'growth hacking', or 'first-click attribution modeling', this synergistic process of continually measuring the customer's journey so you can keep refining your approach, and increasing profits, is what the direct-response industry is all about. And I have no doubt that, once hotels adopt this approach, in marketing and service standards, there's no real reason to go back.
The results will speak for themselves.
3. The OTAs will redefine destination marketing on social media
As I mentioned, the OTAs are direct response experts. That's how they decide which campaigns to keep, and which ones to shelve… And, as such, every social media campaign they launch in the future will, naturally, have to go through the same ROI test.
Using the 'first-click attribution model', which I just mentioned, above, all this will be at a very granular level. And that will cause an important shift in the social media marketing discipline. Marketers will suddenly stop talking about their number of 'likes', 'shares' or, even, website visits. And they're only going to start reporting on the bottom line… on how many room nights were booked… on the total, lifetime value of your social media guests…
The Agora Model
Money talks and B.S. walks!
This change has to happen.
There's no other choice for the OTAs, really.
Because, you see, just like junk mail, consumers don't have any brand loyalty when it comes to 3rd party offers. The convenience that one OTA offers can easily be replaced by one of their competitors.
So, unless each OTA continues reaching out to would-be travelers in the 'dreaming' and 'planning' phase, and keeps moving those people to their own direct response marketing lists, they'll always run the risk of going out of business.
Think about how Red Bull has changed their business to stay ahead of this reality.
They've completely transformed themselves from a beverage company, into a media company that just so happens to sell beverages.
The OTAs will have to follow the same path, for the same reasons, and, with 'first-click attribution', this will help them become leaders in social media destination marketing.
Any hotel that doesn't want to get crowded out, then, will have to take time to build their own online communities, as well, following the same ROI-based marketing practices.
4. Hotels will start relying on local affiliates to get the word out
Numbers 1,2 and 3, on this list, all speak to one fact. OTAs and hotels will get better and better at marketing over time, and the sheer volume of marketing communications will keep expanding, almost exponentially.
As I'm sure you can guess, this will create a lot of noise… and when there's a lot of noise – people tend to stop paying attention.
To compete in a more crowded space… against OTA competitors that will always have more choices and easy terms… hotels will need to set up direct response agreements with local businesses. i.e. Create local affiliates.
You see, as soon as hotels start using better tracking technologies, they'll come to an important realization: they can promote themselves by paying small commissions to local businesses and, effectively, catch people's attention much earlier in the 'planning' phase of the buying journey.
This is a win-win for the local economy and, from a guest's point of view, side-by-side marketing provides an important level of social proof.
For example, say you were going white water rafting next week and your tour guide had an ad for a local hotel on their homepage. As a consumer, that ad is an endorsement. It tells you that hotel is probably close by. And that it's also probably a good fit for people who are into white water rafting.
These facts help make this hotel the obvious winner.
So, if hotels are going to make a strong first impression and win more direct bookings against an onslaught of OTA noise, this is the kind of market positioning they going to need.
And, since track-ability will prove profitability, in that relationship, there's also no doubt in my mind that hotels will start taking advantage of this marketing channel, more and more.
5. The 'gig' economy will replace a lot of in-house marketing positions
A lot of people forget that 2008 was a complete, global melt-down of the financial system, nearly as bad as the great depression, but we need to remember the past because it changed the fundamental nature of our industry.
For example, when RevPar plummeted by 20%, most hotels slashed their marketing budgets, laid off staff and started relying on the OTAs to do their online marketing.
Fortunately, things have improved and the last 6 years have been, mostly, clear sailing. But! That doesn't mean hotels have brought all their marketing activities back, in-house.
The OTAs have become an incredibly convenient solution (because they provide measurable results), and 'outsourcing' has become the way of the world.
Luckily, the gig economy offers a solution to hotels' need for more marketing power. And I'm happy to predict that, as soon as hotels figure out how to create local affiliates, like I just described in point #4, they're going to quickly start working with freelancers on an ROI basis, as well.
STRs RevPAR growth chart
"Hey kid, if you manage my Twitter feed, I'll give you a 5% commission. Deal?"
Or a freelancer might approach a hotel and say, "I'll help you get bookings on Instagram for less than you're currently paying in OTA commissions… What do you say?"
Either way, it's a win-win… And just like that, local businesses and members of the local community will get into the hotel marketing business on a 'pay-for-performance' basis.
This partnership will help hotels compete with the OTAs in an authentic way… and, ultimately, let them shift their marketing dollars away from the OTAs in a confident and consistent manor.
Hurray for direct response!
This is a great development for the industry
As a direct response copywriter, I am really, really happy to see these changes taking place in the industry.
It means that measuring results, down-to-the-penny, will become the standard – not the exception. It means ROI is king. And with the confidence that track-ability provides, hotels are going to become much more aggressive when it comes to their marketing. And all of this will fuel innovation!
But one warning for marketing directors
These changes mean – no more coasting along. In the near future, each one of your marketing activities will be put under the scientific, direct response ROI test to prove its profitability. And things like PPC and retargeting campaigns won't necessarily cut the mustard.
(i.e. If you have 10 PPC ads running at the same time, you never really know where your reservations are coming from, right?)
Direct response means you have to be able to measure each marketing activity, individually, so you can always ramp up the winners and cut the losers.
So – for all those who are not ready for these changes – you need to realize that, very soon, hotels will stop measuring your success by monthly revenues, in aggregate…
Instead, you'll be judged by how much you've been able to increase revenues by moving business away from more expensive, 3rd party channels… to your direct channels.
And you'll need to have track-ability in place to prove you did it, too! Failing that, you might be asked to step aside for someone else who does.
Just like Salesforce is optimizing one industry after another, these changes are coming to the hospitality industry, as well. It's just a matter of time.
Someday very soon, all the time and money that's being poured into the 'book direct' movement, right now, will create an industry-wide revelation...
Everyone will suddenly connect the dots, slap themselves on the forehead, and shout, "Hey... direct response = direct bookings... Duh!!!"
Tags: jeremiah magone
Jeremiah Magone is a direct response copywriter specializing in the hospitality industry. His interest in this industry stems from living all over the States, parts of Europe and his most recent 8-year stint in Japan. He has worked with: The Sunset Marquis, Pac Rim Marketing, Wyndham, GuestCentric and The Northwest Point Resort, among others. He currently sits on the board of the San Diego HSMAI and the San Diego-Yokohama Sister City Society. His hobbies include sipping wine with his wife, reading to his son and writing in the early morning.
Contact: Jeremiah Magone
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