The post-pandemic hospitality market presents hoteliers with a series of challenges and opportunities that will redefine how they earn revenue, interact with and serve their guests, and define the concept of the hotel itself.
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While travel is surging to pre-pandemic levels, a persistent labor shortage continues to drive up labor costs as employees demand higher wages, increased benefits, and more training and work-life balance.
The hospitality market is also qualitatively changing as new customer segments such as remote workers, bleisure travelers, and short-term renters push the more widespread adoption of hybrid travel models.
Hotels must embrace a more flexible and comprehensive approach to revenue generation in order to succeed in this new environment. Travelers are beginning to view hotels as much more than just a place to stay for the night, and so should hoteliers. This shift in sentiment presents an incredible opportunity to expand revenue strategy from solely focusing on occupancy and nightly room revenue, to potentially monetizing every space in the hotel and every touchpoint of the guest journey.
This shift to a more holistic and bespoke approach to revenue generation is only possible because advances in mobile hotel technology have given guests the ability to customize their stay from their mobile devices, and hoteliers have the ability to manage their property and revenue from anywhere with an internet connection. Advances in webhook-enhanced open-API systems have also allowed for the creation of seamlessly integrated tech ecosystems, which in turn have opened the possibility for a unified and highly personalizable guest experience.
Get the Most Out of Every Guest Touchpoint with Mobile Upgrade Offers
Historically, hotels have dramatically underutilized ancillary revenues and underestimated their ability to improve their bottom line. Compare hospitality with the airline industry: Between 2014 and 2019, airlines grew their yearly ancillary revenue from $28.5bn to $64.8bn. Some airlines generated as much as 40% of their overall revenue from ancillary products.
Historically, the hotel industry has struggled even to come close to reaching these numbers. Back in 2011, for example, PhocusWright pointed out that the hotel industry earned only 1.7% of its revenue through ancillary products. They attributed this to its historically slow adoption of mobile and kiosk-based self-service technology, innovations that the airline industry was quick to embrace.
Simply put, the traditional method of trying to ‘supersize’ a traveler’s room during the check-in conversation is a poor way to win conversions. Often, scripted conversations feel like an imposition to guests trying to check into their room or who prefer not to ‘haggle’ in person. Guests might also not be aware of the full range of the hotel’s upgrade and amenity options, and it may be difficult for staff to convey the value of upgrades without pictures or descriptions.
The hotel industry’s attitude towards mobile technology changed dramatically during the pandemic, where innovations such as mobile and kiosk-based contactless check-in moved from a ‘nice-to-have’ to a ‘need to have.’ A dramatic increase in ancillary revenue followed suit. According to a report by CBRE, during the height of the pandemic in August 2020, ancillary revenue (listed as ‘miscellaneous income’) increased by 26% for all U.S. hotels and an astounding 116% for U.S. Resorts. This dramatic increase in ancillary revenue allowed hotels to blunt the worst revenue shortfalls of the pandemic: Even if fewer guests were booking hotel rooms, travelers who stayed spent significantly more than they would have in previous years.
The widespread adoption of mobile technology can account for much of this shift. A fully contactless mobile welcome experience is possible when integrating a mobile PMS system with a digital payment gateway, a keyless entry system, and a mobile guest messaging system. Because the seamless operation of this single touchpoint requires its own miniature tech ecosystem to function, it is preferable to invest in a PMS that bolsters its open-API architecture with simplified webhooks to allow for faster and more efficient data transfers between platforms.
There are many benefits to a contactless, mobile welcome experience, including delivering a convenient and contactless check-in to guests and creating a critical touchpoint to boost ancillary revenues for hotels. Here, hotels can send targeted automated offers for room upgrades, amenities, and monetized early check-in/ late check-out directly to a guest’s mobile device or guest-facing kiosk. Instead of a forced, ‘supersize me’ conversation at check-in, you can send your guests targeted offers based on their personal travel profile that will most impact their stay, supported by vibrant images and descriptions that can convey the value of your upgrades. Available data reveals the effectiveness of mobile upselling: We have seen conversion rates as high as 18% for room upsells and 10% for add-ons, leading to quarterly ROIs as high as 240% based solely on ancillary revenues.
More advanced techniques involve integrating your mobile PMS with a customer relationship management system (CRM) and an upgrade optimizer to leverage your guest data to its fullest extent. CRMs take your PMS’s existing guest profile and additional factors such as loyalty status, travel intent, personal interests, propensity to spend, and custom survey results to create a more nuanced and complete picture of your customer base. Upgrade optimizers go even further by intelligently optimizing the price of upgrades to fit particular customer segments and tailoring specific offers based on a guest’s individual persona and travel needs. These revenue-optimizing integrations allow you to send hyper-personalized messages can send highly relevant messaging at the right touchpoints in the guest journey and at the right price to maximize your chances for conversions.
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