Obsessed about Direct bookings or rather on Overall Commercial Strategy?
There has been quite an online debate about Direct Booking strategies with very different opinions. Now at Juyo analytics, we say we should NOT be obsessed with Direct Bookings. Being obsessed with direct bookings is focusing on the wrong metric. It's like focusing on Occupancy no matter what. Any hotel can fill but can it fill at the optimal average rate that will give the best RevPAR?
Same applies for Direct Bookings. Of course, we can blindly drive direct by throwing a ton of money of it. PPC, Meta search, Widgets, Loyalty Points, But at some point, the returns diminish. It's inevitable. Having that obsession and a strategy that is fuelled by it will backfire sooner or later.
Michael Phelps said that if you want to be the best you have to do things that other people are not willing to do. And that is taking the tough road: Take a step back, think long term and work more strategically about the right KPI's and the overall commercial strategy.
In a nutshell:
1) First and foremost start with the market. Aggregate data from Sources such as STR, MKG, or Hotelbenchmarking Alliance to workout out the market positioning. An RGI of 1,00 is not necessarily the right objective. If you are the top Hotel in town and you have an RGI of 1,00 you probably are leaving a ton of money on the table. Conversely, if you are the least strong product on the market and RGI of 1,00 might be utopia and constant frustration. You need to factor in more data: Review index vs the competition, market positioning, segmentation mix and competitiveness per segment. Working out a model will spit out the desired target.
2) If available for your market, use a tool like demand 360 to understand the competitive set's market segmentation and channel mix. Based on that, start working on a matrix of segment vs channel mix. It's important to be realistic about the strengths and weaknesses of your hotel and target a specific mix accordingly. When the numbers don't check out go back to Step 1, revisit and challenge your assumptions
3) Once that is done its time to start thinking about costs. Allocate all transaction costs per channel and segment. The picture at this point starts to get very interesting as some segments or channels that seemed cheap reveal a different picture. Often direct costs accumulate to levels dangerously close to OTA booking costs. Once that is done we are going to start thinking about our overall sales and marketing spend. Whether it is payroll, website, GDS campaigns, meta search, any revenue-generating tools, Loyalty Programs, etc.
Map all this to segments and channels. We can now calculate Sales and Marketing Efficiencies per segment and channel. That is how much Revenue is every euro in sales and marketing generating. This is a metric that will be critical to measure all year long. Look again at the market perspective. Is this achievable? Is there enough business out there in the segment or channel, am I spending sensibly against that optimal mix? Do I need to spend more? less?
When we have done all that then our desired Net Revenue funnel is ready. So we can accurately track how much the customer is paying and what profit is left to flow to operations.
This does not obviously stop here. This is a dynamic environment. Segment and channel shifts are monitored on an ongoing basis and key drivers of these shifts identified. Is it countries that book less or more, is it room types, loyalty members? Do the booking patterns change? And of course, all of this is tracked down to specific rate plans.
Net Revenue will be monitored on a day by day basis for both past and future. This per segment and per channel. Last but not least all campaigns are recorded and tracked for conversion and ROI on a live basis. Instead of focusing blindly on one metric taking a step back to look at the overall picture leads to spectacular results. But it is long term and methodical work that leads to success. Not one-off miracle solutions. You can read more about this on our previous post: https://www.linkedin.com/pulse/when-managing-your-acquisition-costs-together-revenue-syropoulos/
It is time that we empower decision making on a strategic level looking at the overall Commercial Strategy and not only the tactics. To finish with another quote:
"Strategy without tactics is the slowest route to victory. Tactics without Strategy is the noise before defeat".