Net Gains In Sales

November 11, 2003.

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.

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