In 2016, major hotel companies revamped
their loyalty programs and introduced direct booking discounts linked to
loyalty membership.
The factors that drove these decisions are still in play now,
and the stakes are arguably higher in 2017, as Marriott International more
fully integrates with Starwood Hotels & Resorts; as hotel owners pressure
hotel companies to make sure the ends justify the means for discounted pricing;
and as the industry's business cycle continues to soften.
Direct Booking Discounts
When Hilton Worldwide introduced its direct booking
campaign, CEO Christopher Nassetta said the initiative wasn't "a flash in
the pan." Hilton and the other companies that introduced such discounts to
attract customers and to bring travelers into direct channels to lower
distribution costs seem fully committed to keeping their programs in place. And
according to these hoteliers and industry analysts, the discounts are working.
Some investors are asking, however, whether the loyalty
rates provide discounts to travelers who already would have booked with a
property, discount or no. Revenue per available room is forecasted to be weaker
in 2017 than during the past few years, and hotel owners may push back on these
discounts or opt out entirely if they think the discounts are dragging down
revenue.
2017 also could shine a brighter spotlight on the true value
of corporate and travel management company discounted rates versus these direct
booking rates. Travel managers in 2016 already found some of their rates were
lackluster when compared with loyalty rates at certain properties. According to
figures provided by TripBam, loyalty rates are beating corporate negotiated
rates at small and midsize programs 5 percent of the time, just as frequently
as TMC discount rates do.
New Tech & Digital Marketing
Part of drawing travelers into loyalty programs is offering
them an improved experience via mobile apps, and this will be a big area to
keep an eye on in 2017. Already in January, Marriott has expanded its
app-powered Mobile Key from 25 properties to 500 and rolled out mobile service
requests at 4,000 hotels. With Marriott's now massive scale, both in portfolio
size and loyalty program members, competitors will be looking to attract and
hang on to customers through their own enhancements. Hoteliers like
Intercontinental Hotels Group and Hyatt Hotels Corp. that have toyed with
keyless entry may go all in, while those that have already made advancements in
mobile, such as Hilton Worldwide with its Digital Key, could move forward with
other, more creative initiatives.
Hotel companies have always had an eye on
driving incremental new revenue. In 2017 and beyond, though, they'll look more
to digital channels and data to do this. Hoteliers are trying to find out as
much about individual travelers as possible and will use everything they learn
from analytics and loyalty membership information to drive booking conversions
through hypertargeted advertising and marketing. Duetto VP of managed services
Calvin Anderson, an advocate for using Big Data to drive revenue opportunities
in the hotel industry, is optimistic about how this will affect corporate
travel. With hypertargeted advertising and conversion tracking, he said, broad
marketing campaigns won't lure travelers away easily because each traveler's
data will tell hoteliers that that individual is in a managed program. Until
that day comes, however, travel managers should be aware that the problem of
managed travelers being marketed to directly could get much worse before it
gets better.