Nov
11, 2003 * Net Gains In Sales
Vivek Nayak writes on how bookings over the
internet are here to stay
After the lull and, now, the upswing in the hospitality
industry's fortunes, value addition and cost cutting are the
operating mantras. The internet has evolved as a medium with
the potential to help the hospitality industry to excel in both
these areas. As an hotelier, if you are unaware of the potential
power of the internet, then you could be missing something important.
You should know that the internet has the ability to deliver
your hotel's sales pitch on the customer's desktop wherever
he may be, convert the customer there itself and close the sale
with the customer's money safe in your bank. All this even before
the customer steps into your hotel! And if you are already choking
over your tea at that, wait till you hear this. You can close
this sale at a cost of about one quarter of what it would cost
by traditional marketing methods.
Nobody can deny the attraction of a scenario in which the end
customer can confirm a room of his choice, in a hotel of his
choice, at a fair price along with the assurance that there
will be no surprises, or shocks, when he lands up at the hotel.
No agents, no middlemen, just the customer and the hotel, direct
interaction – one-on-one. How does the hotel gain? For
starters, let’s take ‘reach’. By putting up
a part of the hotel’s inventory on the internet and empowering
it with the right tools, the hotel will have acquired the power
of a new distribution channel that is not limited by geography,
political boundaries or cultural and language barriers. It is
like having a front desk operating 24x7 with the ability to
close a reservation and get paid by any customer, anytime, anywhere
in the world.
Second, there is the advantage of direct interaction with the
customer. When the reservation happens through the hotel’s
own website, the brand communication to the customer is unbiased
and untainted by outside interpretations.
Third, in markets where the corporate customer forms a substantial
part of the customer base (like India), the internet offers
a tremendous opportunity to put in a robust Customer Relationship
Management (CRM) programme. For instance, the hotel can empower
the corporate customer with unique login IDs with the facility
of not just booking a room at special rates, but also making
changes to an existing booking itinerary. Such features can
go a long way in cementing the relationship with the hotel.
Fourth, in a highly volatile marketplace, maintaining flexibility
in managing your perishable online hotel inventory is essential.
The hotel should have the ability to put up for immediate online
sale any room, in any property, at any rate of its choosing,
virtually overnight. Only the internet allows the hotel to do
this cost effectively. For this, you need a good online sales
partner who allows you to exploit this flexibility.
Dangers
The biggest danger is false expectations. It would be very
unwise to expect it to be a panacea for all your troubles. Industry
figures have indicated that worldwide, bookings over the internet
accounted for 10 to 12 per cent of the annual sales last year.
This figure is expected to go up to about 18 to 20 per cent
in four years or so. So clearly, online sales are not going
to replace the traditional channels of sales. However, the cost
effective nature of the internet as a marketing medium definitely
makes it an attractive proposition to invest in.
7Ps – a healthy strategy
A good internet marketing strategy is the one that builds on
the Ps of traditional marketing and applies it to the internet.
The 7P strategy is a balance of: Product, Pricing, Place, Promotion,
Pace, Partnership and Perseverance.
Product: Define clearly what your brand experience stands for
and reinforce it in all aspects of the communication on the
internet. Your hotel website should truthfully reflect your
brand experience for what it is - no more, no less.
Pricing: It is cheaper to reach customers over the internet
and to market to them. A judicious policy in rewarding the regular
online customers will go a long way in cementing relationships.
The temptation to offload excess inventory at discount pricing
in third party trade channels for short term gains may be strong.
But they do have serious repercussions on not just the rack
rates but also on the brand identity in the long term. Another
important aspect in managing pricing is optimising the cash
flow. Your online model has to generate funds quickly, efficiently
and cheaply. It is a good idea to seek partnership with an efficient
payment gateway to ensure that the money flows in smoothly.
A good payment gateway is the one that offers your customers
multiple payment options and, given the global nature of the
hospitality industry, one that offers multiple currency denominations
with no hidden currency conversion costs. The fine print to
watch out for is the commitment that a payment gateway makes
with respect to the pay-out period and the Transaction Discount
Rate (TDR) it levies. The faster the pay-outs and lower the
TDR, the better it is for the hotel.
Place: A smart online distribution strategy is the key to the
success of the operation. Deciding how much of the inventory
to release online and for how long and at what terms can be
very tricky initially. But going by the experience of the global
online majors, it is just a matter of time before the hotel’s
management team gains enough expertise to manage this aspect
of the business profitably.
Promotion: Probably the best feature of the internet is your
ability to strike a one-on-one relationship with your end customer.
As your database of information on the preferences of regular
customers keeps growing, your ability to create customised offers
to strengthen your relationship – and your bottom-line
– will grow.
Pace: Since the basic hotel product is highly perishable, your
ability to push your unutilised inventory at very short notice
becomes imperative. Choosing an ideal balance in the placement
of your inventory between the direct channel and the indirect
third party channels to speed up sales is tricky. In such a
situation, if you have invested in developing your hotel’s
website, and have made it very visible online among your core
target customers, then short notice selling of your inventory
directly becomes easier.
Partnership: Currently, in India, what most hotels do is put
up a website with a reservations page on it. When the customer
wishes to book a room, the entire process moves offline and
confirmations happen through expensive faxes and telephones.
The better hotels do it with email. But the truth is, a reservation
is not a reservation until the money is in the bank. Your bank.
A mere reservations page on the website is not good enough.
You need to provide a payment link on that reservations page
so that the sale is closed there and then. To do this you need
to enable your website to handle eCommerce.
And there lies the problem. It is a fact that the cost of putting
up an eCommerce component to your hotel website is heavy. It
is an exercise that involves high entry costs, integration of
complicated software components and maintenance of huge hardware
infrastructure, technical staff and complicated logistics. The
smart thing to do is to outsource it and yet exercise total
control. This is where the right partnership can be invaluable.
A good multi-lingual Internet Reservation Solution with a multi-currency,
multi-payment options payment gateway built-in such as ResAvenue
can make a big difference. The good thing about such a partner
is that it hosts the entire operation on its secure servers
and manages the back end operations. It empowers you with all
the management tools and functionalities you will need to manage
your online sales and payments.
Perseverance: The Internet as a medium of commerce is just
gathering momentum in India. It is important to understand that
it will take some time to achieve its full potential. In such
a situation, it is natural that the early adopters will gain
from the experience and the head start. However, those who wish
to enter this arena with short term gains in mind may well be
disappointed. Hotels who intend to be long term players must
invest in building a strong web presence. They need to work
on creating a website that is highly visible to their target
customer. They need to invest in the study of customer behaviour
and to track his methodology of hunting for a hotel room. They
need to invest in Search Engine Optimisation Campaigns with
good partners to maximise their presence on the web. The road
is not easy, but the rewards are worth the effort.
