Compete with short-term rentals for leisure and small groups

With the travel recovery underway, hoteliers would be well advised to closely monitor the booking performance of home-sharing platforms relative to traditional hotels and the broader accommodation market. In 2022, it’s undeniable that short-term rentals are becoming very influential, both as the brands of choice for many travelers and as trendsetters that hotels will inevitably have to emulate. In this regard, what can hotels do to regain market share from this rapidly growing sector?

With leisure passengers being the first out to feed the recovery revenue pipeline, the next related segment to consider is small groups, primarily leisure. One area where short-term rentals have already influenced travel behavior is how leisure customers think about their occupancy demands.

Before, if you were traveling, say, as two couples, you would simply request two rooms in a hotel, with or without a special request to have them collocate. The question was only “which” hotel to choose. Now, these travelers will likely first consider the option of getting a two-bedroom shared space through another accommodation provider. The question has become a “why” to choose a hotel.

In this first battle of what’s being dubbed Revenge Travel 2.0, we’ll see many different reasons for small groups of leisure travelers, from couples getaways to multi-generational family reunions. For all future cases, hotels now need a compelling reason to answer the why before even getting to the what. The goal here is to generate revenue by adapting to these new demands and the steps you can take to pivot quickly and set up your hotel for long-term success.

The customer’s point of view

To begin, rephrase the question in the first paragraph from the perspective of an independent customer of the brand. Not being loyal to one hotel brand or another, which accommodation will offer me the most “value” in terms of rates, spaces, convenience and location? As an exercise, it can help you think more objectively about the inherent advantages of your short-term rental competitors and what operational changes or promotions would be meaningful to those customers.

Here are some notes on these alternative hosting providers and what you can do with them:

  1. Rates: Home-sharing units have earned a reputation for offering more square footage per dollar than hotels. Although we all advertise a Best Rate Guarantee to entice customers to book direct, now is the time to analyze how your rates compare to those of these other accommodations. You may find that an adjustment to your pricing strategy is in order.
  2. The spaces: Colocation units offer a diverse range of accommodations in terms of layouts, amenities, and décor. Hotels can thus work to create unique touchpoints in each room or even sub-categories that have different FF&E configurations. One note is that part of the appeal of a traditional hotel is the guarantee of certain features, regardless of the exact room; this “peace of mind” brand standard should be upheld and reinforced through marketing.
  3. Convenience: Even as the pandemic subsides, guests are increasingly prioritizing contactless interactions built into their hotel stays — mobile check-in, mobile room keys, guest communication apps with digital concierge, in-room voice robots by in relation to calls downstairs, mobile start, etc. on. Yet some guests and managers still prefer not to bypass reception as a central aspect of the on-site experience. The key is to provide flexibility for customers to choose.
  4. Location: While your hotel is where it is, consider how home-sharing platforms have long touted their inventory as “community-integrated.” Can’t you do the same? Hotels often have some of the best locations in town with immediate access to major sights and transportation options. Start by really sprucing up these two, then dig deeper into all the other hyperlocal businesses (roughly within three blocks) that customers should note, both for convenience (grocery stores and pharmacies) and experiences (restaurants and stores).

These four points literally scratch the surface of a ton of work to properly pivot a brand, but they’re critical right now as hotels seek to maintain pricing power by not diluting rates even as the world reopens and options of travel explode. With our experience in overseeing hotel sales and marketing, we can offer some additional general tips to help you maximize bookings for the coming year.

  • Regroup wherever you can. In addition to learning from home-sharing providers, another big goal this year should be to focus on increasing total spend per guest and not just RevPAR. Corroborating this, our past work of numerous asset management engagements has shown a direct relationship between property use and satisfaction – the more you motivate customers to use your amenities, the more revenue you earn and the more likely they are to to come back or recommend. Bundling and packaging create added value to optimize this total spend.
  • Frame it as free. There is something very powerful about the word “free” in terms of drawing eyeballs. Before adding freebies to your packages or extra nights, consider that many services you already offer as brand standards can be rebranded as add-ons, including flexible cancellations and refunds, as well as can -be features such as parking, valet, concierge, business center workspaces. , pool access or beach access.
  • Make the numbers simple. Which is easier for your brain to understand: 67% of the time or every two out of three times? Most of us prefer the latter because it’s easier to visualize, and that same principle applies to your discounts and promotions. If you’re trying to increase midweek occupancy when the business segment is still nascent, consider reframing a “25% off for four or more nights” ad into a “stay three nights and get a fourth night free” so that mental arithmetic is not an obstacle.

Obviously, this still barely cracks the surface. Nevertheless, if you apply these principles to both transients in one room and leisure groups in multiple rooms, you will undoubtedly win more customers who would otherwise go elsewhere.

Larry Mogelonski
Mogel Consulting Limited Hotel

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