February 17, 2020

Addressing the hotel industry’s ‘accepted problem’

Charlotte Fincham
Partner Manager - Hotels

Having helped hotels of all sizes market their rooms both online and offline for more than 20 years, I thought I knew all there was to know about distribution. 

But being part of the ‘nuts and bolts’ development of a highly specialist distribution platform like Upgrade Pack – created to help hotels and airlines optimise the revenue potential of unsold flight and hotel upgrades – has been a real eye-opener. Even for this seasoned pro. 

An accepted problem

Throughout my career working with suppliers in the hotel and resort marketing industries the core focus, like in many others, has been on volume sales and customer acquisition. As such focus tends to be weighted on the distribution of good quality but usually more standardised room classes – with the marketing of premium inventory and suites understandably being assigned more hefty budgets. 

While many hotels see a decent demand (and presumably adequate financial returns) for their premium offerings, there are many (many) occasions where these significantly higher margin rooms are underused, whether due to lower seasonal demand, cancelled bookings, or by virtue of being a newer property that is still building its external awareness and traction – blighting occupancy levels and profit potential.

Where available, a courtesy upgrade at the front desk or concierge is a nice occasional gesture, and can make all the difference to new and returning guests alike, but this investment in the guest experience will still cost the hotel, with its opportunity to resell the original room to recoup any costs for that upgrade limited. 

While the number of days a hotel’s premium rooms spend empty – or are assigned for free or at low cost – may appear small in the big picture, the simple fact is that unoccupied rooms, especially in the premium category, cost money. Yet this seems to be widely deemed in the industry as an accepted risk, one which is almost written off as ‘peaks and troughs’; the cost of doing business. 

Upgrade Pack was founded to tackle this "accepted" problem head on. 

Reward that also brings revenue 

What if hotels could connect with an exclusive community of travellers who not only have an existing room booking with the hotel, but are actively looking to upgrade it? Best of all, rather than chance it at check-in they are willing to pay to secure it? 

Using closed marketplace technology (delivered as a handy app) Upgrade Pack offers dynamically available – and dynamically priced – room upgrades to its members. Our hotel partners pay nothing to access a highly attractive user group, with membership funded by our clients (banks, credit card issuers and employers) as part of their loyalty and benefits spend. There is no fee, no commission. All we seek is a discount on the premium room– a discount that is in the hotel partner’s full control and that aligns with its own revenue management strategy and discounting limits/parameters. 

By connecting to hotel booking systems (and with PMS access through channel managers who host these for hotels) we enable properties to secure upgrade revenue days, or even weeks, prior to guest check-in, without having to discount publicly at the last minute and potentially irreparably affect brand perception. 

Freed up to focus on growth  

It’s widely accepted that the cost of acquiring a new guest is up to ten times that of retaining an existing one. Outside of loyalty scheme memberships, hotels are missing an opportunity for upsell, and in turn a cash route to an upgrade. In the current distribution landscape, it is entirely understandable that hotels might feel compelled to take an ‘all or nothing’ approach to avoid their valuable premium inventory becoming distressed. 

In reality, specialist distribution for premium rooms that are unsold, whether these vacancies are anticipated by the hotel or not, allows them to exercise more control over improving occupancy levels, while converting bookings that are still profitable. Extra advance revenue means hotels are more able to invest in other acquisition marketing activities.  

Claiming back the customer relationship 

Another feature of the conversations I’m currently having with hotels is in terms of the customer relationship. As we focus on direct bookings, our app helps them connect with guests (who may not sit on their  database) in a mutually rewarding way.

As some of the larger chains seek to diversify, through expansion into new initiatives like home sharing, and as more hotels invest in driving bookings direct, the hotel’s relationship with the customer (often still largely owned and influenced by the OTA) will become increasingly key. 

To sum up my journey into a new form of digital-first distribution so far, I’m relishing the fact that not only am I bringing something entirely new to the table in terms of distribution capability and revenue potential, but something that can also help drive positive brand association and loyalty - with no marketing budget required. 

More questions? Connect with me on LinkedIn here.

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