This is a guest article by Jay Hubbs.
Most hoteliers would most certainly confirm that as of today social media is not really working out as a sales channel and rather considered as a marketing tool or for customer engagement. And yes, studies by different consulting companies, Phocus Wright and universities do confirm that social media is not really working out as a direct sales channel for the majority of hotel businesses worldwide.
Question is:
Should a hotelier or a hotel group ignore social media within revenue management or is there an actual influence on direct sales conversions by social media and online reputation that should not be ignored anymore?
Please find below an interesting outlook by our dear friend Jay Hubbs, a leading industry strategist in the areas of sales, revenue management and distribution with a renown knowledge of the online reputation management and social media analysis sectors within hospitality:
Social media is transforming not just how people connect and stay in touch but also how they collaborate, plan, share information and make decisions. TripAdvisor, Facebook, Twitter and Foursquare are changing the travel landscape, and newer social entrants like Instagram and Pinterest are rapidly coming into their own as the viral, sharing economy compounds. As the next generation of travelers, marketers and revenue managers use these sources to make decisions, it will become paramount for hotel teams to analyze the quantitative and qualitative data to capitalize on social trends.
There has been much talk recently about the differences between revenue management and marketing—how the latter is about building brand awareness, recall and affinity to drive long-term demand, while the former is focused on matching that demand with price given finite supply to maximize revenues and profits. Both disciplines aim to make the hotel more money, but at times they are at odds on how to develop and execute social strategies that drive revenue. Managing social network activity has been under the marketing umbrella, and rightfully so. Social media is a purveyor of preferences, locations, experiences and ideas that have been most influential for the phase of a trip, the experiences during the actual trip and sharing once the trip is over.
However, as more and more people use these networks to communicate, research will go beyond places and/or prices to include channels and booking windows, which in essence means that soon we will see a proliferation of information being passed through social networks about the booking phase of the trip as well. This has far-reaching impacts for both the marketing and revenue-management teams at hotels.
Let’s turn that lens toward the travel sector.
With social networks, we get beyond just transparency to an openness and candid dialogue that will continue to evolve, for better or worse, and begin to directly impact how hotels look at their pricing strategies.
The airline industry is vastly different from the hotel industry, encompassing tighter fences, fewer promotional opportunities, more rational discounting, and a very constrained inventory model.
However, the hotel is a much bigger part of the travel experience, even if we don’t spend much time in the room except to sleep. To that end, the hotel is socially important to the trip. And hotels are much more interesting for travelers to connect with friends or to run by their networks when making booking decisions. We will begin to see travelers sharing hotel pricing data readily though social networks beyond what is already out there via OTAs or metasearch players.
To that end, expect an increase in the transparency of hotel rates through these channels. Anybody can find what the best available rate is, but a screaming deal, promotional offer or a special rate through a fenced channel (whether a true fence or not) will be shared. And it will begin to have implications for the marketing and revenue strategies taking place in hotels every day.
Recently, several studies have pointed to the impact of user-generated content in the form of traveler reviews as drivers of rate and revenue. Years ago, Expedia Inc. told the industry that through its websites hotels with a full star higher score in guest comments were able to command a 9% higher average daily rate. More recently, Cornell University and ReviewPro published an article showing the correlation between review scores and revenue per available room, with a one point lift in aggregated review score equating to a 1.4% increase in actual RevPAR. Professor Chris Anderson of Cornell stated, “What was remarkable about the study is that positive online reputation doesn’t merely provide higher pricing power for online sales. It is correlated to higher group booking rates and corporate negotiated rates in addition to reservations made over the phone.”
From a distribution channel standpoint, the impact is clear as well. Travelers are becoming more and more attuned to reading reviews or relying on recommendations from friends on where to stay. Embassy Suites by Hilton recently released its 2013 business travel survey and more than 75% of respondents said that online reviews are “critical” when preparing for business travel.
Reviews are impacting channels that many thought were impervious to social media influence. While some loyalty programs are stronger than others, increasingly they are affected by social media, with shared content eventually carrying more weight than a loyalty card in the wallet. While some loyalists will stay true to the brand, casual preferred brand travelers will begin to weigh social media versus brand loyalty and factor price even more as part of their decision criteria. Some travelers will stay at Brand X hotel no matter what, but the ones with superior reviews or social recommendations will begin to trump the flag outside the building for a growing group of travelers.
One revenue-management executive I spoke with recently told me that he can see the almost instantaneous effect of a bad review, with an immediate dip in conversion, which then affects booking windows and channel-shift strategies. Couple this with shifting demographics of the traveling population, as well as the impact of social on other channels, and the impact goes beyond leisure rates booked directly or through OTAs or metasearch sites.
Market segmentation is critical to the success of the revenue team as well as the overall profitability of the hotel. It is imperative to understand what is driving traveler demand to the hotel or area, what are travelers’ price sensitivities and booking windows and the relative worth to the hotel for their desired stay period over the short term and overall lifetime value in the long term. On the positive side, the transparency of the Internet and social media makes some of this segmentation even easier. But on the flip side, what if all of this segmentation—fences, qualifications, unpublished rates—went away thanks to social media?
A pessimist might look at things this way: Twitter complaints escalate into full-blown maelstroms leading to pick up by mainstream media outlets. Fenced deals are promoted through Foursquare to business travelers. Facebook friends pile onto a corporate last room available negotiated rate over a convention week. Less-than-flattering pictures of the property end up on Pinterest. Do these scenarios have an effect on revenue management? You bet.
However, taking advantage of these channels as opportunities can grow revenue and market share. Examples could include:
These are all marketing activities that have a direct tie to revenue management and should be coordinated.
Social media is all about conversations, building networks and sharing ideas, thoughts and information. To that end, the action items for a revenue team are pretty straight-forward.
Social media is a constantly evolving platform to engage with travelers. Hotels that tie that engagement to revenue management strategies and find ways to incorporate this intelligence into their day-to-day revenue plans will lead their competitive sets and ultimately find themselves ahead on the bottom line.
About Jay Hubbs:
Jay Hubbs is a leading industry strategist in the areas of sales, revenue management and distribution. In his career he has worked for Fortune 500 companies, including Expedia and Starwood Hotels, as well as smaller startup companies in the Internet and social media space including ReviewPro. As a consultant he helps clients in the travel industry develop and implement strategies to grow revenue and market share. Jay lives in San Francisco with his wife and twin boys.
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