Confused travellers seek definitive answers

In these uncertain times, it is becoming likely that travellers will desire more direct communication from online travel agencies (OTAs) soon.

According to GlobalData, 44% of global travellers typically booked with an OTA in 2019, whilst only 17% would consider using an in-store travel agency.

However, recent events, including the demise of Thomas Cook, Brexit uncertainty and now Covid-19, have raised concerns regarding the reliability of an OTA in terms of direct communication.

Confused travellers seek definitive answers

Upon discovering holiday plans will no longer take place amid global travel restrictions and mass flight cancellations, travellers seek advice from the platform they booked with.

The majority of travel companies that offered direct bookings are now allowing travellers to change or cancel reservations without any additional fees. However, if a consumer has used a third-party agent, it can make the cancellation process drawn out and complicated.

With Expedia, bookings with an array of airlines cannot be adjusted or cancelled through the platform itself. For some bookings, travellers will have to contact the airline to make changes. Booking.com has introduced ‘forced circumstances’, expecting companies to refund prepayments and waive any cancellation costs for travellers that have pre-booked. This may end in disputes regarding liability, leaving the customer in the dark for longer.

At times like this, travellers will seek more direct communication and definitive answers regarding holiday plans. If they had booked directly with a package provider or flight operator, the communication process between agent and consumer may have been more streamlined.

A personalised approach remains integral, as well as direct communication

Personalisation is a key theme driving the future of travel services. According to a recent GlobalData survey, 89% of global travellers are now ‘always, ‘often’ or ‘somewhat’ influenced by how well a product or service is tailored to their needs and personality.

Online travel giants, such as Expedia and Booking Holdings, are at an advantage with this theme as data and personalisation go hand in hand. With access to a large number of customer records, OTAs can offer personalised experiences tailored to each specific traveller.

In a post-Covid-19 world, however, one to one communication could become of greater importance, working in the favour of more traditional travel agencies.

Posted in General | Leave a reply

AirBnb’s Financial Drain

Airbnb is losing money at the speed or light and that will only get worse over the coming months. What is the financial future of Airbnb?

Airbnb allows renting of a room online. It’s a very simple platform to connect prospective travellers with room owners. Airbnb’s entire value resides in being an escrow. They provide a layer of trust and handle payments.

For this simple activity of listing rooms and holding transactional payments, Airbnb takes a fee from 20% – 30% of the booking.

As a traveller, you want to have Airbnb as a middleman every single time as you do not want to send cash directly to a stranger in advance.

As a room owner, you want to have Airbnb as middleman as they give you a minimal guarantee and somebody to sue if the property is damaged after the guest leaves.

The two closest businesses are hotels.com and booking.com. They are similar to Airbnb though they rent hotel rooms instead of private rooms. Booking hotels through hotels.com and booking.com makes sense, more so when it comes to business travel or for large hotel chains with customer accounts. These platforms have a bit more focus on searchability, ratings and a seamless booking experience that Airbnb or even regular hotel sites do not have.

As Airbnb grows and gather more and more customers, hotels will start listing on Airbnb and Airbnb will then have to adjust its experience to cater to hotels.

On the revenue front, Airbnb makes US$ 3 billion per annum while hotels.com and booking.com each make up to four times this revenue.

Commission is 20-30% per booking. A bit less sometimes for hotels due to (large) deals with (large) hotel chains. Pretty much all of it is operating margin. It’s a tech company, a simple website. There are no costs like real estate or machinery or physical goods or storage or shipping. It’s all profit hence they’re all very profitable business. More importantly, while hotels.com  employs only 500 employees, Airbnb employs 15000 employees – a single company running a single website!

Airbnb’s strategy has been to burn as much VC cash as possible and hire as many employees as possible – A standard strategy to inflate valuation and raise even more money. Remember as a thumb rule, every dollar of VC funding you use now, you will get five in the next round. The fact is, there is nothing for these 15k people to do. Experts say that Airbnb could operate just as well (probably better actually) with a third of that, or go lean with as little as one tenth if the situation required it.

The coronavirus has cut Airbnb revenues in half. It’s unknown how long it will last but could be years. Airbnb will be haemorrhaging money at an unprecedented rate. Their fixed costs are simply too high. Airbnb will have to cut the fat sooner or later. Meanwhile middle level employees are reportedly being hired with offers in excess of $400k. It’s going to be a rough awakening for employees. Forget about any bonus. Half of the offers were imaginary money in illiquid shares. It’s hard to estimate what shares might be worth at this stage if anything, without knowing the fine print. They’re likely to never materialize, between VC shenanigans against common employee shares, probable lay-offs soon and any prospect of IPOing in the coming years down the drain.

Twitter used to have 4000 employees many years ago. Most of which were doing nothing and notably self-reporting to be playing Ping-Pong in the office waiting to cash on their shares… a typical case of a company inflating headcount to inflate a future IPO, which of course the market didn’t buy. They had to reduce expenses in the following years while increasing revenues. The headcount was frozen for years and it’s hardly bigger now than it was back then.

Rest assured. Airbnb is a solid business that is at no risk of disappearing. They are burning money for the sake of VC growth and valuation. Can they afford to employ evermore thousands of people for up to a half a million dollars each? Expect a reality check as most unicorns playing the VC game get sooner or later.

What if Airbnb were to run out of cash? It’s not a problem because they will be able to get more very easily. The business is extremely solid and sustainable as explained. The brand is strong and well established worldwide.

The only downside is unbelievably high fixed-costs (workforce) in the face of all travel revenues grinding to a halt from the coronavirus. This means a couple of bad years to go through, easily withstandable with cash reserves, debts and cost reductions, in some combination thereof.

There are hundreds of billions in cash sitting idle in the world with nowhere to invest in. Equities are crashing. Bonds have near zero returns. Cash has negative interest.

Airbnb needing few billion dollars in cash is a godsend for an investor on a 5-10 years horizon. It is ripe for an hostile takeover from a Vulture Venture Capitalist. Get as much control as possible, lay off one third of the company, freeze headcount for 2-3 years. It will be printing money soon enough. Alternatively, it could be financed by debt. Banks like Softbank, JP Morgan, Goldman Sachs can arrange corporate loans in that order of magnitude. They do that regularly when financing factories for the oil or car industry for example. Banks are less invasive about how the company is run and don’t try to take it over.

The future of Airbnb depends on how greedy VC and owners are really (normally they are always ruthless by nature). If Airbnb still has billions in cash from their last funding, the company can withstand a bad year or two doing nothing. If not, the company might re-raise money from a VC and it’s likely to impose strong terms to cut the workforce. Either way, the board might self-seize the opportunity to cut the workforce by one third anytime. Lower running costs, no loss of productivity raises a better outlook both in the short and long term.

Posted in Business | Leave a reply

Brands with a Social Cause

For so long now we have taken the ability to explore and discover the world for granted. We are already seeing some interesting trends shaping the travel and tourism landscape. Global travel technology company Amadeus declared 2020 the  year of ‘conscious travel,’ reporting that a significant percentage of travellers now factor in sustainability when choosing how and with whom to travel. Meanwhile, Skyscanner’s APAC Travel Trends report revealed slow travel as the type of trip most desired by travellers in 2020.

Amongst the youngest generation of travellers, Gen Z, an even greater sense of ideology is emerging. Dubbed the ‘we generation,’ they are purpose-driven, caring deeply about movements far bigger than themselves. Two thirds are more likely to buy from a company that contributes to social causes, while a third have stopped buying from a  company that contributes to a cause with which they disagree.

Success will lie with those brands that recognize the volatility of the industry – and the world – we live in. They will acknowledge and embrace the huge responsibility we have to create meaningful travel experiences driven by a cause that reaches far beyond our guests, a purpose that goes much deeper than a great breakfast or a comfortable bed.

The future of travel lies with those brands that stand for something, those brands that lay down roots and seek to make a positive and lasting difference in the communities and environments in which they operate.

Posted in Business | Leave a reply

Slow Travel

Slow Travel is a mind-set that rejects traditional ideas of tourism and encourages you to soak in your environments and keep yourself open to new experiences. Slow travel is for you if you want a balanced itinerary where you can pace yourself and eliminate the stress of rushing around. It’s intentional and immersive — allowing you to go deeper on the things that matter most to you while traveling. It’s conscious and connected — connected with yourself, those around you, and the world.

There is something undeniably romantic about taking things slow. It is this allure that forms the basis of slow travel – a growing trend that’s swapping whistle-stop city tours for leisurely strolls, and red-eye flights for low-key cruises. Travel should be so much more than lurching your way frenetically around a destination, trying to scratch things off a tick-list (a sure fire way of reaching ‘tourist burnout’).

On paper, slow travel is an offshoot of the slow food movement – a focus on local farming, regional cuisine, communal meals and traditional food preparation methods that began in Italy in the 1980s as a protest against the opening of a McDonald’s in Rome. This cultural initiative has evolved into an entire way of life known as the Slow Movement, which aims to address the issue of ‘time poverty’ through an increased focus on making connections; with people, places and things.

In its simplest form, slow travel means travelling by particular modes of transport such as train, horse, walking, biking and boating. It’s all about appreciating the landscape as you go, and being at one with it – which you don’t get by flying or driving when you’re seeing everything from behind a pane of glass.

Another perspective  is that slow travel is a mindset, not just a series of choices. While physically slowing down is necessary, slow travel is more mindset than velocity. Slow travel is to tourism what meditation apps are to our lives. In it, connecting to the soul of a place through its history, food, language and people becomes more important than chasing bucket list ticks and Instagram photos. Slow travel enables us to learn, relax and rejuvenate; to be part of a place for a short period rather than just crash through it. Done responsibly it allows us to go beyond the ‘leave only footprints’ mantra that has long been associated with ecotourism. When done right, it can leave positive impacts that will last long past your trip, benefiting the local communities, economies and wildlife.

Posted in General | Leave a reply

Rethinking complimentary WiFi in F&B areas

Offering free WiFi to hotel visitors has been a strong value-add to the guest experience pretty much since the inception of wireless connectivity itself, right? However, as we are all addicted to our phones and WiFi access incentivizes us to use these devices even more, having this service readily available in restaurants can slow down food and beverage delivery to ultimately limit the seat turnover as well as the average daily restaurant seat revenue.

More time spent by diners on phone equals slower seat turnover and reduced revenues. Humans are horrible multi-taskers, hence when patrons are focusing to their screens, they are not looking at the meal and not thinking about what they want to order, delaying the whole process. Moreover, because a device competes for attention with the server, it will unconsciously deter guests from understanding the full value of a menu item based on the in-person conveyance of said dishes or drinks. This can result in such behaviours as no pre-meal cocktails and fewer appetizers or desserts ordered, not to mention that such patrons will consume more time per table overall.

Given such outcomes, there’s a strong case to be made for purposefully not setting up an internet portal for paying customers, with some places even going so far as to strategically position their restaurants so it is out of range of the regular lobby WiFi range or in an area with weak 4G/LTE signal.

As a concurrent trend taking place in downtown urban centres, many cafés (mainly independents) are banning laptops on their premises because the standard behaviour here is to order a coffee and then occupy a seat for well over an hour when that spot could instead rotate through several other paying customers who aren’t looking for a free offsite workspace.

To point out the contrary argument to all this, many restaurants intentionally offer ample WiFi because that’s part of the environment they are trying to create. Such outlets are typically borderline busy during peak and half-empty at every other time slot. In these cases, allowing patrons to take their time is perfectly acceptable because there’s no rush to accommodate another party. Still, too much focus on the mobile device will mean increased work from the staff, who have to more frequently return to a table because its attention is not firmly on ordering, along with the aforementioned reason of decreased average guest checks. This could also be time spent by servers having to explain how to access the WiFi or spell out the password – and those seconds add up!

So, how do you rationalize which route to go for your restaurant? It depends on what sort of atmosphere you are trying to create. If you’re aiming for that lackadaisical brunch-rolls-into-happy-hour vibe, give away all the bandwidth you want. If, however, you are hoping to foster a hot spot where reservations are a prized possession, my recommendation is to ditch the WiFi and discourage phone usage during mealtime altogether.

Another advantage, and this time from the diner’s perspective will be that they would be able to enjoy the meal and conversation with their colleagues/partners much more when they do not have the option of using their phones/gadgets.

Another point is that if the kitchen is passionate about their product, the chef and his team would feel more honoured if their guests were to concentrate on their meals.

Posted in General | Leave a reply

Pitfalls of a home-sharing strategy

Despite hotel owners’ fears, the hotel players involved in homeshare tend to dismiss sceptics’ concerns about cannibalization. The audience for vacation rentals, they argue, seeks a different product than the business traveller staying a night or two in a city or the young single looking for adventure on a budget. Hotel companies are eyeing potential vacation destinations that wouldn’t necessarily support a full-blown hotel development. Length of stay is probably the biggest factor that separates demand for hotel rooms versus vacation rentals — hotels average less than two nights; vacation rentals tend to stretch out for seven or more nights.

Hotel companies will be weighing their ability to scale and the potential revenues that homeshare affiliations will yield. Airbnb has already set the bar low, so potential fees from renting out a single home or apartment pale versus the management or franchising fees associated with hotels.

For many companies, it’s hard to justify the economics of investing in the marketing and infrastructure to support something that represents a very small share or revenue for the foreseeable future. One way to mitigate the smaller profit is to focus on the upper reaches of the market and destinations where higher daily rates will yield higher income.

Homeshare owners need some love, too. To be competitive and continue to grow the platform, marketshare and units, companies need to make their products more attractive from the top to the bottom for all constituents, both travellers and owners.

Posted in General | Leave a reply

Unlimited Luxury

Luxury has gotten its hands on all-inclusive and the trend isn’t slowing.

Luxury hotels are experimenting now with what looks like a fully stocked, free minibar, daily breakfast for two and other amenities like laundry or a cocktail in the lounge. At the 24-room, 5-star Bhutan Spirit Sanctuary in the Himalayas, guests receive as many treatments as they’d like over three, four or seven night stays.

It’s a trend that really draws on the experiential — if a guest is already paying luxury prices, giving them that extra bit of luxury will only result in delighted guests.

Posted in General | Leave a reply

Sustainability Rankings for Hotels?

How are you saving the earth today?

According to Booking.com’s 2019 Sustainable Travel Report, 70% of global travelers say they would be more likely to book an accommodation knowing it was eco-friendly, whether they were looking for a sustainable stay or not. The up-and-coming younger travellers will change “more likely” to “most definitely” in the coming years, especially as their spending power grows.

It’s time for hotels out front on sustainability to make their case known – and it would be very interesting to start seeing rankings on booking engines that prioritize hotels in a given location on how small their carbon footprint is.

Posted in General | Leave a reply

Can F&B outlets affect the RevPAR?

One of the thorniest dilemmas in hotel operations is whether to have to a restaurant and then how to run and manage it, since Food and beverage could be a boost to one of the thorniest dilemmas in hotel operations ~ whether to have to a restaurant and then how to run and manage it, since Food and beverage could be a boost to a hotel’s credibility or as a potential cash drain.
Restaurants must add to the overall value of the hotel, and thus average daily rate, even if they are not a runaway success as stand-alone offerings. Restaurants are changing their concepts and becoming as popular with locals as they are with guests, and that never used to be the case. The most important focus for hotel F&B is to make any restaurant or bar a destination in its own right and to give employees the level of expertise they need to succeed.
It’s difficult to be specific on what (a restaurant) brings to (revenue per available room), but it is about brand value and allure. On some days, you may only have a few residents eating in the restaurant, but if the restaurant adds to the hotel’s allure and RevPAR, it may yet be worth it. After all, it may be a qualitative process, not a quantitative one. What is critical is to have differentiation, and that does not only mean going upscale. Have experiences to sell. You could put street food into a hotel if it seems right, and even if it does not make profit, it will add to the hotel’s brand value.

Posted in General | Leave a reply

Corporate travel & Sharing economy

As traditional hotel chains continue to reap the profits of unwieldy business travel expenses, a new trend is emerging among many business travellers: participation in the sharing economy.
The sharing economy’s popularity within corporate travel can be attributed to the same factor that has launched its entrenchment in the world as a whole: convenience. Instead of queuing in a long line at the rental car vendor after an even longer flight, business travellers can open their phone and call a car directly to their hotel in minutes via rideshare apps such as Uber or Ola.
Corporate travel policies often limited business travellers to just a few hotel options, and sometimes these options are further away from the places where travellers have their business obligations all in the name of a company partnering with a certain hotel chain. With home-sharing platforms such as Airbnb, business travellers are able to pinpoint the most convenient lodging locations for their business obligations and find a home-sharing option that is free of being tied down by any hotel chain loyalty.

Posted in General | Leave a reply

F&B affects RevPAR?

One of the thorniest dilemmas in hotel operations is how many F&B Outlets are required and then how to run and manage them, since Food and beverage could either be a boost to a hotel’s credibility or a potential cash drain.

Restaurants must add to the overall value of the hotel, and thus average daily rate, even if they are not a runaway success as stand-alone offerings. Today, restaurants are changing their concepts and becoming as popular with locals as they are with guests, and that never used to be the case. The most important focus for hotel F&B is to make any restaurant or bar a destination in its own right and to give employees the level of expertise they need to succeed.

It’s difficult to be specific on what (a restaurant) brings to (revenue per available room), but it is about brand value and allure. On some days, you may only have a few residents eating in the restaurant, but if the restaurant adds to the hotel’s allure and RevPAR, it may yet be worth it. After all, it may be a qualitative process, not a quantitative one. What is critical is to have differentiation, and that does not only mean going upscale. Have experiences to sell. You could put street food into a hotel if it seems right, and even if it does not make profit, it will add to the hotel’s brand value.

Posted in General | Leave a reply

A Dynamic Approach in Travel Marketing

As digital continues to mature, there is a shift occurring among marketers: travel marketing and digital travel distribution strategies are converging, and it’s having a major impact on the industry. To be successful in this era of convergence, travel providers must think more strategically, not just about inventory, but about how they’re selling entire experiences. With convergence, new revenue streams are up for grabs and these extend well beyond the traditional traveling ecosystem.

Blurred lines

Travellers all have needs, but those needs vary dramatically depending on the moment. Travellers are increasingly agnostic about who meets their needs, and that business is there for the taking
One week, a traveller may be flying for business, and the next that very same traveller may be on a summer vacation with family. They’re not one or the other—they’re both, just at different times. As these lines blur, habits are shifting, and travellers are finding unconventional ways to meet their in-the-moment needs.
Unlike in the past when people were using phone calls, travel magazines, and traditional travel agents to research, today’s complicated consumer is bouncing between numerous touch points in a digital ecosystem. They’re sending out travel intent signals and leaving a trail of data behind them. For marketers, this presents a golden opportunity, but only if they take a holistic approach.
It’s no longer about aggregates or averages, every traveller is unique and marketers must be flexible enough to look at each traveller’s ever changing needs and act quickly to meet them.

Smarter, faster, nimbler

If travel brands want to act quickly, they must improve their understanding of what customers want and need at any given moment. And to get there they must be “always on” across every channel. It’s one thing to personalize marketing to a leisure guest by using broad stroke segmentation, but when brands get on a one-to-one level with the individual customer, they can understand their constantly changing needs.
To get there, they must understand each customer on a trip by trip basis—and combine the person with the occasion to serve up relevant offers.
Since modern travellers are always on, brands must be, too, because always on means valuable data.

Paving the path with data

The first step is using data to establish intent. Consumers may be dreaming or researching – or they could buy at any point. By looking at each trip as a mini campaign, marketers can focus on that whole journey and the points along the way, and then engage them in the moment. Once intent is established, marketers must take what they’ve learned about each customer and put the right messages in front of the right people at the right time.
It’s a combination of taking one-to-one marketing, making sure it’s “always on,” then testing, measuring, learning and adjusting.

This dynamic approach is a shift from traditional methods that are often seasonal in nature.

It’s a race to see which travel brands can do it best, and those that do will win the ultimate prize: customer acquisition and loyalty.

Posted in Marketing | Leave a reply

Boost your hotel revenue

Apart from selling rooms, hotels wish to maximize their revenue. But with many markets becoming more competitive, boosting revenue is easier said than done. Increasing room rates to broaden margins might be great during high season, but during the low season, high rates drive customers away. Instead of simply adjusting room rates up and down, there are many other ways for hotels to generate more revenue and create a better guest experience at the same time.

Quick ways to drive more revenue in only a week: Upselling, Using your local network and Involving employees

Ways to drive more revenue over a quarter: Improve guest satisfaction and online reviews, Leverage low-demand days and Host unique events and activities

Ways to generate more revenue in the next twelve months: Get familiar with Google Hotels, Harness the power of hospitality tech, Analyse your distribution and optimize it.

To come up with the coolest ideas on how to implement some (or all) of these ideas, get your team together for some brainstorming. You’d be surprised by the original concepts they’ll come up with and how much more ownership your team will take if they feel like they’re playing an active part in creating and implementing new revenue-generating strategies.

Posted in General | Leave a reply

Loyalty Programmes

Loyalty programme guests are also more likely to perceive the company’s products and services as providing good value and so they are less sensitive to the company’s price premium. They are further likely to act as brand ambassadors by recommending the company through word of mouth, either through personal recommendations or via online review sites. Such recommendations, the researchers comment, are highly valued by hotel companies as they are known to be highly effective.

Nevertheless, loyalty programmes also bring challenges. They are, for instance, expensive to set up and maintain, and the profits they generate are hard to separate from those of other marketing efforts. It is also challenging for marketers to create and manage profitable loyalty programmes because there are high costs associated with adding value to customers’ experiences, especially given their widely differing needs and interests. Overinvestment is thus an ongoing concern.

Loyalty programmes also open up the possibility of “service encounter failures”, which can sour the relationship between a hotel company and its customers and thus damage its reputation. Another potentially negative effect is that “bystander customers” sometimes perceive “unfairness in comparison to target customers”, which could put them off the brand.

It is found that hotels’ spending on loyalty programmes was associated with better performance, as measured by the average daily room rate, revenue per room and occupancy rate. Spending on loyalty programmes also pays off in terms of hotels’ overall gross operating profit. This is particularly interesting because it implies that loyal customers do not just increase room occupancy, but their spending on “food and beverage at the hotel, spas or other amenities” also contributes to better overall financial performance.

Even when factors such as the amount spent on e-commerce, advertising, marketing strategies and the size of the hotel and scale of the hotel chain are taken into account, spending on loyalty programmes still has the most positive effect on hotels’ operational and financial performance. In other words, loyalty programmes bring in the greatest returns compared with investments in other forms of advertising and marketing, regardless of the type of hotel.

Hence Managers are justified in placing more emphasis on loyalty programmes because they bring the greatest returns.

Posted in Marketing | Leave a reply

The Gig Economy

The gig economy is booming, and that’s good news for hotels. The gig economy is defined as a labour market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs. In a gig economy, temporary, flexible jobs are commonplace and companies tend toward hiring independent contractors and freelancers instead of full-time employees. A gig economy undermines the traditional economy of full-time workers who rarely change positions and instead focus on a lifetime career.

In less than a decade, the contractor workforce is expected to become the workforce majority. While the contractor workforce may not be a fit for all business models, hoteliers are undoubtedly benefiting. Timely solutions for staffing needs, seamless integration and measurable results are what hoteliers need and want.

Today’s contractor workforce represents diverse professional backgrounds and experiences allowing for that seamless integration that every hotel leader is seeking. Unfilled positions result in lost revenue. Hotels have goals, and ownership expects those goals to be met – no excuses.

Most contractors have 10+ years’ experience in the hospitality industry, and more than 64% users agree that contractors offer varied experience and unique perspective required for taskforce.

From the perspective of the freelancers/contractors, Lifestyle is key. Both freelancers/contractors and full-time professionals prioritize achieving the lifestyle that they want; however, freelancers/contractors are more likely to get it. More than half of all freelancers/contractors say no amount of money would convince them to take a traditional job.

Posted in General | Leave a reply