New generation hotels are investing less and yet generate significantly higher returns than comparable traditional hotel chains. The most successful hotels are currently generating between 2.5 to 3.2-times the profits (GOPPAR) per room than the average traditional 2 to 4-star hotel in a similar position. Hard to believe, but it's true. Martin Reents, CEO of hetras, explains why some hotels are more profitable than others and what exactly it is that traditional hotel chains can do to improve. The mega trend in hotel distribution is "electronic distribution" and new generation hotels are currently the ones profiting from it most, because they know how to use it to best effect. This is also shown by their room rates and bookings, which are far above the industry average.
A change dictated by hotel guests themselves
And so, this all just sort of 'happened' by itself? Pretty much. Because that's what hotel guests want. I.e. the vast majority of people book a room online before they travel. That means that hotels that sell their rooms in conventional ways will not attract any of these kind of guests. This in turn means that, unless they make huge concessions to potential guests, especially with regard to price, their utilization will drop. More expensive than other hotels? Unlikely guests will be willing to stay. This explains the low room rates paid by organized tour groups, the high discounts given to companies and expensive extras provided to aircrews. Using online distribution channels, with their much greater reach, allows hotel operators to concentrate on the people that are willing to pay higher rates and hence fully utilize their capacity. Because the kind of guests sporting Rolex watches and matching crocodile leather shoes and that turn up at a hotel unannounced are rather rare ... Moreover, it would also be quite unprofessional to ask these guests to pay more: Imagine their reaction if they found out that they paid too much? Think of the ratings for such a hotel? And the damage done?
Increasingly outdated: Telephone and email bookings
The most important revenue sources are OTAs, i.e. online booking portals like booking.com, Expedia or HRS, which account for 50-60% of the bookings received by new generation hotels. This is closely followed by bookings coming through a hotel's own website, which amount to 30-40%, and is in stark contrast to the less than 5% of bookings made by phone or email. Which is also good news, because the rates achieved for rooms booked in these ways are a lot lower: Off-line rates can be up 30% lower than those achieved through online channels. This means that hotels should ideally aim to: Make it easy for returning guests to directly book rooms through the hotel's website or a mobile hotel App and in a way that does not incur any booking fees. Doing so also creates a classic win-win situation for OTAs: Online portals generate four times as much revenue through new generation hotels than the industry average. At the same time, these hotels receive an above average percentage of their bookings through their own websites. However, they still have to pay a commission to the OTAs, which generally amounts to between 15 and 20% of their sales. This is quite a lot and their loss tends to be keenly felt, which makes it easy to see why hotels would prefer not to have to pay them. However, putting feelings aside and taking a purely analytical approach, it also becomes clear that off-line sales also generate costs, such as for sales staff and everything involved in making reservations, not to mention advertising costs and the low group and corporate rates one has to put up with in addition to low room utilization.
There is no 'one size fit all'
Every hotel is different, which is why each hotel needs its own business case. This will pay off in particular for new generation hotels that sell rooms online and there is a definite trend of traditional hotels increasingly following suit! When it comes to creating a new vision and strategy for a traditional hotel, it is extremely important to make sure that adequate consideration is given to the transition from the old to the new concept. When doing so, there are a number of technologies that are particularly suitable for hotels that are not wanting to replace everything, but still, for example, want to benefit from some technologies. In such a case, it is generally best to start with distribution and to ensure that the hotel is always available on all distribution channels until the last room has sold. The next logical step would be a powerful IBE on the hotel's website and a mobile App. Once the distribution system is up and running, the next thing to tackle would be to create the 'perfect guest journey'.
Guaranteed access to your room - no matter what the time
The nicest arrival I ever had at a hotel was during my first stay at the HTL Hotel in Stockholm: I had booked my room beforehand using HTL's mobile App. I then checked into my room through the mobile App on route from the airport to the hotel, and immediately received my room number on my mobile. And that's when I knew that I could now just sit back and relax, and that there was nothing left to do. Because I would now be able to get into my room anytime I liked! At that moment, something happened inside me, and I had a bit of a deja vu - the feeling that I'd been here before. But I hadn't. However, when I arrived at the hotel in the evening, I went straight up to my room, up a beautiful wide wooden staircase, and then stood in front of it. There was a button under my room number on my mobile saying "open door", and I pressed it - and was home!
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