Hotels and airlines for years have successfully operated “loyalty” programs, which aim to lock frequent travelers into using their hotels via points-based schemes that offer room upgrades or free stays for family leisure trips.
These schemes are more successful the bigger the chain of hotels or airline networks involved and tend to focus on business travelers, where the company is picking up the tab.
Can individual hotels or beach hotel chains use these types of schemes?
A key weakness is the low frequency of customer stays, with even loyal holidaymakers only traveling to the hotel once a year for their 7-night beach holiday. This makes “points” schemes irrelevant for this market of customers, forcing them to look for other ideas to drive loyalty and direct bookings.
“Direct Bookings” have become a bigger focus for beach hotels in recent years, because of the evolution of the market away from “vertically integrated” tour operators who used to promote them via printed brochures and often “guaranteed” their rooms with big up-front cash payments. Today the UK OTA and low-cost carrier tour operators' sites allow few opportunities for hotels to stand out and promote the refurbished, high-quality offerings they have invested so heavily in.
At the same time, the dominant hotel only OTA Booking.com has used its size and power to impose stringent price parity rules, which effectively means hotels cannot offer lower prices to direct bookers.
This neutralises the most obvious route for driving direct bookings, which is cheaper “Non-Refundable” room rates, where customers pay in full on booking via hotel direct sites, boosting cash flows and creating firm bookings.
Booking.com and other OTAs use their scale to demand access to these same rates even though in most cases they don’t pass on the cash for these “Non-refundable” rates any earlier.
This price parity demand means customers can get the same price via the booking.com website or app, which they use regularly for domestic and international travel. This frequency of use builds a level of brand loyalty and convenience, as booking.com holds all personal details and cards. This makes it a much quicker and simpler booking process, that a beach hotel will never be able to match.
At the same time, Booking.com advertises above hotels in Google, when customers search for a hotel name, ensuring that customers know they can book via this well-known brand at the same price as the hotel direct.
At HDC (Hotel Distribution Consultancy) we advise hotels to look at ways they can give their direct booking customers advantages that don’t breach these price guarantees, as booking.com distribution is key and needs to be protected.
We offer a portfolio of recommendations about how to focus on customer “needs” during their holiday stay to create a “Priority Access” schemes, which are only available to Direct Bookings.
These “Priority Access” schemes can be promoted to customers on the hotels' websites as a reason to book direct and be rewarded during their upcoming stay, rather than having to collect points they can only use on future trips.
These schemes offer a workaround OTA “price parity” rules, to reward direct booking. This drives healthy early cash flows and greatly reduces the 30% cancellation levels delivered by the booking.com model, which under-commits customers as they can often cancel up to 24 hours before arrival free of charge.
Taking control of their own destiny via direct bookings must be a key focus for beach hotels.