NB: This is a viewpoint from Kathrina Gallogly, marketing manager at Mobile Travel Technologies.
Harris Interactive reported last year that almost 70% of consumers booking hotel rooms through the Expedia mobile app were looking to travel within 24 hours.
Similarly Lastminute.com says it is seeing increased mobile usage and mobile bookings within 24 hours of a guest's planned stay.
This coupled with the recent surge worldwide of same day booking apps, hotel chains know they need to get on board but there are significant challenges to overcome in the same-day booking market, to avoid cannibalisation, to avoid paying high commission on already discounted rates and to avoid relinquishing control of how their last minute inventory is sold and promoted via third parties.
We call this the "three Cs" of the same-day booking market: control, cannibalisation and commission.
Let’s take a look at how hotel chains can address the three Cs when considering how to tackle the same-day booking market.
1. Control
The plethora of same-day booking apps on the market in the last year or so has triggered some concerns amongst hoteliers that they are, despite relative enthusiasm for the model, forced to relinquish control over their product and pricing.
It is vital that hotel chains will be able to control their own pricing for same-day offers, how they set exclusive deals and the number of rooms made available each day or each week.
And importantly it is vital that hotel chains have control over how they promote last minute offers and the language that is used in order to clearly differentiate the offering from that other guests receive when they book in advance and pay a higher rate.
To summarize, the control challenges include:
- No control over who hotels’ empty rooms will be competing against
- No control over a pricing scale - pressure to drop prices lower to secure that days app listing
- Once listed for that day may be unable to sell room to walk-ins willing to pay rack rate
- No control over the marketing of your hotel in a third party same-day booking app
- No control over the customer targeting with a third party same-day booking app
- No control over the time of day and which days they promote last-minute inventory
- No control over reacting to unexpected situations (e.g. Bad weather) which may leave a large portion of people looking for a last-minute room
So, positioning and timing of the last minute offer is key.
An important point to bear in mind is that most, if not all last minute bookers are not hotels’ loyal customers who will book in advance. They are last minute deal seekers.
The last minute market for hotels is about securing new customers and incremental revenues for rooms that would otherwise go unused.
The ability for the hotel chain to have control over how they target this market is very important, so this approach is not targeted at loyal customers and instead the hotel can carefully choose which nights and which cities and which hotels it offers last minute deals for, the time of day it promotes last-minute deals and importantly the hotel maintains ownership of the customer relationship.
2. Cannibalisation (and how to avoid it)
A key challenge with last minute offers is to ensure the guests who book in advance and pay the higher rate are not ‘trained’ to become accustomed to waiting the day before check-in to book and get a discounted rate.
This also carries other challenges such as:
- Loyal customers put off advance booking for fear of missing out on last minute deal
- Hotel reputation tarnished amongst regular guests
- Fear of guests with reservations demanding lower the lower last minute rates once aware
- So how can hotel chains ensure last minute bookings are incremental bookings and not cannibalizing their existing customers?
The key is to take a "No Extras" or "No Frills" approach to same-day bookings. Also the timing and the language used when promoting same-day bookings is important to communicate the context and relative value of the offer.
The messaging should make clear that the same-day room offer is something like the following:
- Run of house rooms only
- Small room, no view etc
- No ancillaries (breakfast, wifi etc.)
- No loyalty bonus (ineligible for loyalty points)
- Very targeted marketing to attract new customers
Moreover, same-day bookings can be targeted at very defined and new customer segments using clever targeting, geo-fencing SMS campaigns and opportunistic campaigns to react to unexpected bad weather, bad traffic or other unforeseen situations which may leave people in the need of a last minute room.
3. Commission
Finally, and very importantly, the commission rates that hotel chains pay for same-day offers need to be considerably less than the rate they currently pay other intermediaries.
With the current last-minute booking apps on the market, hotels are losing up to 30% of revenue in commission or merchant cut. Considering that the rate may already be heavily discounted, there is only a small slice of the pie left for the hotel as profit.
Final thoughts – different customers have different needs
In the hotel Industry, as in every industry, there have been discounting strategies since the beginning of time. How and when the discount is positioned and promoted is the key.
Hotel chains should remain secure in the knowledge that there is no way that everyone will wait the day before to book a hotel or wait for the discount.
There is always a significant portion of customers who book in advance because they want a fully serviced room with all the extras including breakfast with a view etc and the comfort of knowing the room is available to them.
Others for example, may just want a room and a hot shower and an early check-out so a last minute deal would be suitable. Hotel chains of course must limit the number of rooms available at a last-minute rate, so it is not available to everyone.
But ultimately, it's about meeting the different needs of different customers at different times.
NB: This is a viewpoint from Kathrina Gallogly, marketing manager at Mobile Travel Technologies.
NB2: Hotel bell clock image via Shutterstock.