{468x60.media}
Ms. Halpern Lanz

Sales & Marketing

How Do Hotels Fill Those Last Available Rooms?

By Leora Halpern Lanz, President, LHL Communications

Co-authored by Jovanna Fazzini, Marketing Communications Coordinator, LHL Communications

Hoteliers, marketing directors, and revenue managers in particular are continuously learning how to put the pieces of the puzzle together when it comes to creative and effective options for selling out room nights. Numerous challenges arise with the plethora of new distribution technology, which complicate the process of directly reaching the guest, or even controlling a hotel's presence on the variety of brand and third party websites.

The Director of Sales and Marketing at The Langham Boston, Rachelle Boudreau, emphasized this challenge. "It is difficult to be aware of the various distribution channels, as so many are changing daily and being bought by other companies. These distribution partners are then taking the inventory and selling it online through other third parties. Additionally, some tour wholesalers try to re-sell the inventory through other online travel operators in other countries, who, in turn, will place inventory on a B2B (business to business) and B2C (to consumer) websites, which can ultimately diminish the hotel's rate parity."

Knowing how confusing the digital marketing and distribution landscape can be, how do hotels manage their options to sell inventory, particularly at that eleventh hour?

Contrary to Popular Belief, It's Not All About the OTA'S:

According to Steve Ehrhardt, 2016 Chairman of the IHG Owners Association, and owner/operator of Missouri-based Ehrhardt properties, it is not necessary to utilize OTAs as a long-term booking method in tertiary markets if the hotelier has the right data.

"OTAs are most useful for last minute inventory sales. If they are overused or rooms are discounted too severely the brand risks damage and hoteliers leave money on the table," explains Ehrhardt. "The one thing you can count on is that patterns repeat themselves." Ehrhardt advises that one should know 'the playbook' by looking at historical data, trends, market events, and groups. "The use of revenue management data is an art and a science," Ehrhardt continues. "It's looking at what is best for your market at that time using intuition, and knowing the 'drill' for that time of year using history to maximize revenue. With an effective revenue management strategy and identification of patterns, hoteliers can prevent having to sell inventory last minute, thus avoiding OTAs and their commission fees."

Stephen Field, President of Philadelphia-based Synergy Hospitality, advises that when operating "in primary markets, such as Philadelphia, strategy varies less by exact geographic location, and more by the length of the booking window. For example, airport hotels may have an extremely short booking window, due to flight schedule changes caused by bad weather. Taking this into account, a strategy that places an overdependence on OTAs in these types of markets may displace higher rated last minute bookings."

Field also notes that dependence on OTAs differs with independent versus franchised hotels. "All hotels should minimize OTA use unless there is real distressed inventory in a short-term situation. The challenge with these channels is that they are extremely price sensitive and commoditize guest room inventory. There are too many hotels that rely on OTAs as the sales effort of least resistance, instead of investing in an exceptional sales team. These hotels avoid hiring good salespeople and simply put rooms on the Internet. They think they are saving $50,000-$60,000 in labor costs; failing to realize that one good salesperson can generate many times their salary in incremental business."

Synergy Hospitality prefers to utilize a longer-term sales strategy that is focused on hiring an effective sales team that will build relationships with travel managers, the Convention and Visitors Bureau, local event planners, and corporations. Using this strategy, the sales team generates relationship-based brand exposure. This strategy is based on the assumption that the best solution to distressed inventory is to minimize the amount of it through the use of an effective sales strategy, according to Field.

There are also various platforms and distribution channels emerging as alternatives to OTAs:

Barter

Barter offers hotels a lucrative, dual-purpose business strategy - a financial tool that monetizes unsold inventory, while transforming that monetized inventory into marketing buying power. Innovative Travel Marketing (ITM) of Parsippany, New Jersey, uses barter to fund advertising campaigns and increase brand awareness thereby maximizing a hotels' occupancy and average rate. The traded room inventory can generate corporate and leisure guests who are direct consumers; they are not customers from OTAs who are typically more price-sensitive and less likely to produce ancillary revenue.

Jody Merl, founder and President of ITM, explains that, "You can never recover the cost of an unsold room. It's leaving money on the table. Hotels can convert their unsold rooms into significant equity. By using the full value of those rooms via barter, rather than discounting, we help hotels establish and grow a more desirable customer base."

Merl explains, "Once we determine the available inventory, we create a plan to enhance brand presence and recognition in the marketplace and/or devise tactical initiatives focused on target audiences. For instance, we can use the market value of 20 unsold rooms to run a targeted media campaign to reach meeting planners, which in turn, results in a $50,000 event space rental and additional food and beverage revenue."

Merl explains that when a trade arrangement is set, the hotel's inventory is made available and utilized by ITM's corporate media clients, who bring high-level executives to the hotel. The rooms are ultimately booked for senior-level and c-suite leadership and executives with magazines, publishing houses, broadcast companies and individual television stations, or corporate trading partners. These guests spend money in the hotel, spread positive word of mouth, and potentially return as cash guests. Merl said, "the benefits are further multiplied when you contrast the barter-produced end user with the OTA-sourced guest, who is often a discount shopper seeking the lowest price point."

Bartering can also be used as part of the hotel's long-term sales strategy, particularly in anticipation of known occupancy patterns, to address opportunities, dates, and time frames or to create annual brand campaigns tailored to hotels' specific needs.

"For example," shares Merl, "assume a 200-room hotel averages 50% occupancy in May, with an average daily rate of $200. The other 50% of rooms, which do not sell, amount to $20,000 in unsold rooms. If the hotel trades with ITM, it receives a $20,000 ITM advertising budget. The hotel has now monetized empty rooms to pay for media and draw 'profitable' guests." Barter can also be leveraged to monetize unused meeting, banquet and event space, and hotel recreational areas such as a golf course. Whenever a hotel has unsold inventory, it can optimize its equity through barter to:

  • Support the sales effort with a cohesive advertising campaign;
  • Impact low season business and gap periods with a tactical campaign
  • Launch new products;
  • Test new markets;
  • Test new media.

Flash Sales

Often overlooked in favor of OTAs, flash sales can target the luxury guest. According to Amy Finsilver, General Manager of XV Beacon Hotel in Boston, using sites like Jetsetter and Gilt are beneficial in targeting guests who are more likely to contribute to ancillary revenue.

"If you have a contact at, for example, Gilt, the contact will tell the hotelier when there is availability to post a flash sale. The hotelier then sees if Gilt's time of desired promotion matches the hotel's needs. If it is November, and the hotel notices it is pacing behind for January, the hotel can contact the Gilt promoter, who will notify the hotel if there is an opening. If there is an opening, the hotel will give the site a specific number of rooms with a value-added package, which is then included in Gilt's upcoming promotion."

As a result of the transaction with the flash sales coordinator, the site obtains a percentage of the room rate, and the guest obtains a discounted price. The commission cost depends on the type of package and the time of year, ranging between 5%-30%. It is most beneficial to implement this strategy when the sales and revenue management teams notice they are pacing behind.

Maintaining Occupancy Rather Than Lowering Rates

As hoteliers embark on the selling expedition, for some it is better to simply ride out the wave of lower occupancy. For a hotel like XV Beacon, with the value proposition of being a five-star, five-diamond experience, rated the #1 Hotel in the US by Condé Nast Traveler in 2014, significantly discounting the rate on an OTA is not an option. "My mindset is not to sell-out, it is to sell at our high rate to communicate the value of our experience to the guest," Finsilver adds. Since XV Beacon competes with other five-star hotels like the Ritz Carlton and the Mandarin Oriental, she realizes that she cannot afford to offer contract rates as low as these other brands. She instead competes by "trying to see what the guest wants, for example realizing that there are guests who want to bring their pets; thus we welcome dogs of any size and do not charge a pet fee."

Hotels can also take advantage of low-occupancy periods by completing renovations at this time, or by "closing off" specific floors of the hotel. Boudreau says using slow periods "to complete renovations, construction, and necessary back of the house work" can be beneficial. She also limits which floors are in use, which lowers heating and utilities expenses.

alt text
There are also cases in which hotels have relationships with local hospitals and can offer available rooms for the families of loved ones who need hospital care away from their own hometowns. Hotels can donate as few as one or two sleeping rooms to a local hospital to accommodate family members who are assisting patients or who are visiting for comfort and support. The humble gesture can prove to be a significant help for a family in need of a comfortable experience.

Donating Rooms for Philanthropy and Social Responsibility

With guidance and historical data from the front office manager, the revenue manager, the sales and marketing directors, or regional distribution advisors, it's both an art and a skill to balance the juggling act of the sales and revenue management challenge.

Execution of last minute public relations, email marketing, or digital marketing campaigns can be daunting, but of course critical. It is up to hotel marketers to remain vigilant and current with distribution and marketing technologies and tactics to properly align occupancy with desired rates. The tactics shared here require their own set of skills and know-how and are certainly not exhaustive. Filling those perishable rooms takes risks, trial and error, stamina and belief that your approaches will work if you stick with them. What steps do you take to prevent those perishable rooms from going unused?

alt text
This article was co-authored by Jovanna Fazzini. Ms. Fazzini is a Boston University 2016 graduate with a Bachelor of Science in Hospitality Administration and minors in Business Administration and Dance. Since graduation, she has been the Assistant Director of Finance & Accounting at the Boston Marriott Cambridge Hotel, working with LHL Communications as a Marketing Communications Coordinator, and interning for a political campaign. She has completed internships in various hospitality sectors, including Food & Beverage at Scampo at the Liberty Hotel Boston, Human Resources at Hotel Villa Real in Madrid, Pricing and Competitive Analysis at Road Scholar Boston, and marketing with LHL Communications.

Leora Halpern Lanz is the principal of LHL Communications, a hospitality content marketing, branding and media relations advisory. In February 2017 she was named one of the Top 25 Extraordinary Minds in Hospitality Marketing by the Hospitality Sales & Marketing Association International (HSMAI). Ms. Lanz is also full-time faculty at Boston University’s School of Hospitality. In February 2017 she was named one of the Top 25 Extraordinary Minds in Hospitality Marketing by the Hospitality Sales & Marketing Association International (HSMAI).Previously, she served for 15 years as the Global Director of Marketing for hospitality consultancy HVS and 10 years as Director of Public Relations for ITT Sheraton Hotels of New York. Ms. Halpern Lanz can be contacted at 516-680-8529 or leora@lhlcommunications.com Please visit www.lhlcommunications.com for more information. Extended Bio...

HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.

Receive our daily newsletter with the latest breaking news and hotel management best practices.
Hotel Business Review on Facebook
RESOURCE CENTER - SEARCH ARCHIVES
General Search:

NOVEMBER: Architecture & Design: Authentic, Interactive and Immersive

Eric Rahe

The advent of social media brought with it an important shift in the hospitality industry. Any guest’s experience might be amplified to thousands of potential customers, and you want to be sure that your hotel stands out for the right reasons. Furthermore, technology has increased competition. According to Euromonitor International, the travel industry will have the highest online payment percentage of any industry by 2020, often occurring through third-party sites that display your competitors alongside you. As a result, many hoteliers are looking to stand out by engaging customers and the experience has become more interactive than ever. READ MORE

Pat Miller

Even the most luxurious hotel has a finite budget when it comes to the design or re-design of hotel spaces. The best designers prioritize expenses that have the biggest impact on guest perceptions, while minimizing or eliminating those that don’t. This story will focus on three blockbuster areas – the entry experience, the guest room, and the public spaces. This article will focus on these three key areas and shed light on how the decision making process and design choices made with care and attention can create memorable, luxe experiences without breaking the bank. READ MORE

Patrick Burke

For over 35 years, American architect Patrick Burke, AIA has led Michael Graves Architecture & Design to create unique hospitality experiences for hotel operators and travelers around the globe, in Asia, Europe, the U.S. and the Middle East. As the hospitality industry has shifted from making travelers feel at home while away to providing more dynamic experiences, boutique hotels have evolved to create hyper local, immersive environments. Having witnessed and contributed to the movement, Burke discusses the value of authentic character that draws on physical and social context to create experiences that cannot be had anywhere else in the world. READ MORE

Alan Roberts

More than ever before, guests want and expect the design of a hotel to accurately reflect its location, regardless of whether they visit a property in an urban center, a historic neighborhood or a resort destination. They also seek this sense of place without wanting to sacrifice the level and consistency of service they’ve come to expect from a beloved hotel brand. A unique guest experience is now something expected not just desirable from any hotel wishing to compete in the world today. A hotel’s distinctive design and execution goes a long way to attracting todays discerning customer. READ MORE

Coming Up In The December Online Hotel Business Review




{300x250.media}
Feature Focus
Hotel Law: Issues & Events
There is not a single area of a hotel’s operation that isn’t touched by some aspect of the law. Hotels and management companies employ an army of lawyers to advise and, if necessary, litigate issues which arise in the course of conducting their business. These lawyers typically specialize in specific areas of the law – real estate, construction, development, leasing, liability, franchising, food & beverage, human resources, environmental, insurance, taxes and more. In addition, issues and events can occur within the industry that have a major impact on the whole, and can spur further legal activity. One event which is certain to cause repercussions is Marriott International’s acquisition of Starwood Hotels and Resorts Worldwide. This newly combined company is now the largest hotel company in the world, encompassing 30 hotel brands, 5,500 hotels under management, and 1.1 million hotel rooms worldwide. In the hospitality industry, scale is particularly important – the most profitable companies are those with the most rooms in the most locations. As a result, this mega- transaction is likely to provoke an increase in Mergers & Acquisitions industry-wide. Many experts believe other larger hotel companies will now join forces with smaller operators to avoid being outpaced in the market. Companies that had not previously considered consolidation are now more likely to do so. Another legal issue facing the industry is the regulation of alternative lodging companies such as Airbnb and other firms that offer private, short-term rentals. Cities like San Francisco, Los Angeles and Santa Monica are at the forefront of efforts to legalize and control short-term rentals. However, those cities are finding it’s much easier to adopt regulations on short-term rentals than it is to actually enforce them. The December issue of Hotel Business Review will examine these and other critical issues pertaining to hotel law and how some companies are adapting to them.