The hospitality world has changed a lot since Porter came up with his classic Five Forces model for competitive advantage, and his strategy still rings true today. But while competitive rivalry, supplier and buyer power and new entries on the market all figure in your attempts to gain advantage, one of Porter’s forces, the threat of substitutes, has vastly grown in weight and influence. All thanks to the digital era.
To put this into context for the contemporary hotelier, that threat is coming from home sharing platforms like AirBnB and GuesttoGuest which have quickly established themselves as disruptive and formidable alternatives to hotels. Coined the ‘sharing economy,’ these platforms pose a new kind of threat for the hotel industry. With more choice and virtually guaranteed availability anywhere in the world at a range of prices, it is the consumer who is on the winning end in the sharing economy.
While many are still struggling to quantify the dollars-and-cent impact of these digital services on their hotels, the worry is justifiable. According to some hoteliers the threat is substitution in the sharing economy is taking its toll on hotels’ bottom line.
Vijay Dandapani, president and COO of NYC hotel brand, Apple Core Hotels, lays the blame for this firmly at the feet of AirBnB. While visitors to New York City have grown, increases haven’t translated to hotel profits - meaning guests are finding places to stay other than the city’s hotels. “There has been continual growth in tourism arrivals, both international and national, while RevPAR growth has been moderate at best, and more like flat,” said Dandapani in an interview with Hotel News Now.
Knowing how and where your hotel has competitive advantage in this shifting landscape has never been so important - but how do you get it, and more importantly how can you maintain it? In this series of blogs on how to maintain competitive advantage for your hotel, we will focus on a couple of key areas: the hotel website, your rates, incentives, travel agents.
For many guests, their first impression is made when they visit your website. The art direction, copy, design, easy-to-navigate booking engine, and overall user experience are vital. It’s important to optimize load speeds and reduce bounce rates and broken links. And mobile responsiveness goes without saying.
Live chat options are also growing in popularity and success. There are plenty of good quality chatbot options but really these should be only for out of hours interactions, as nothing beats an actual human contact. It’s the opportunity to build rapport and charm straight from the introduction. It’s especially important when you have traffic arriving from Online Travel Agents i.e. The Billboard Effect. These potential guests are clearly looking for information, on the hotel or location and having live chat options can really give your hotel an advantage.
You should have strong calls to action on your website’s content, like banners encouraging booking on your website with incentives (eg. Free breakfast or late checkout) and encourage visitors to subscribe to your newsletter. They might not make the booking on the first visit but helpful reminders in their inbox might seal the deal for future bookings.
To be competitive on price requires crunching booking data to discover the most effective rates and revenue optimization strategies. In previous eras, revenue management meant opening and closing availability and rates. But when OTAs entered the scene, the industry became obsessed with simple adjustments of rates and striving for maximum occupancy.
While ADR is useful as a benchmark, we know that price is not always a factor for certain types of bookings. For example, a guest booking for three nights at full price through your website is a much more valuable booking than a one night stay at a reduced rate through an OTA last minute deal.
Rate parity has evened the field when it comes to distribution, although there is much discussion and debate around this. Other metrics such as RevPAR, favor more desirable, high value guests, and you should consider what booking channel is best positioned to offer your hotel visibility to this segment.
When hotel rates are similar, travel agents suggest that offers and incentives might be the differentiating factor, according to the 2017 Phoenix Marketing International research study of travel agents booking on global distribution systems. Offers geared towards travel agents themselves were a factor that influenced 60% of the respondents.
Commission is the most prominent of these offers among agents, followed by gift cards, vouchers, cash, points, and discounts. The most popular incentives for travelers are free breakfasts, free Wi-Fi, swimming pools, free parking, airport shuttles, transfers, gyms, and early check-ins/late check-outs.