Cheap Commodities: How Hotels Have Become Pork Bellies

September 27, 2016 • By

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From an outside point-of-view, a hotel should be anything but a commodity. After all, guests should be placing high value on a product that involves their most intimate and private moments. They take showers in the bathroom, sleep in the beds, take private phone calls, and yes, even walk around au naturel.

You would think all of these private moments would build a highly personal connection to hotel consideration and booking, or better yet, even loyalty over time. Yet, guest purchase behavior is usually swayed by price. And their brand preference is almost always weaker than the love they have for other consumer goods and services that cost much less, such as their choice of golf balls, laundry detergent or beverages.

Sadly, the blame doesn’t entirely have to do with modern buyer behavior or the fact that new hotels are popping up all over the country.

Here are the five real reasons why your hotel experience is seen as a replaceable commodity (and, surprise! Most of these are the hotel industry’s fault in the first place):

1. The Hotel Experience is Largely Homogenized

Until very recently, hotel brands have catered to loyal customers who want something reliable, familiar and safe (ahem, boring). Place any traveler in a Hilton, Holiday Inn or Marriott guest room and they most likely will not be able to identify the brand they’re staying at or even be able to tell the major brands apart. So, because the experiences are similar no matter where you book, travelers instead use price as a point of differentiation.

2. Hotels Willingly Surrender Rooms to Be Sold Based on Price

When you hand over your room inventory to a 3rd -party channel, you are pitted up against your competitors (who have also lowered their rates) in a platform that makes your region appear overcrowded with options. To narrow down and simplify their choices, consumers are drawn to the one thing that does make each hotel listing different – the price.

This is why OTAs allow users to filter by price rather than by “best martinis” or “closest to cool stuff in the neighborhood.”

3. Hotels Allow Themselves to Be Sold on Opaque Channels That Focus on Cheap Rates and Nothing Else

Opaque channels such as Hotwire and Priceline allow guests to either name their own rate, or publish heavily discounted rates without showing the name of the property. Once the guest has moved forward with the purchase, only then is the hotel revealed. So, these customers are not willingly choosing to stay with your hotel. They’re not told that you offer the best organic breakfast in town, or that your rooms and the artwork reflect the local culture. In fact, they have no idea who you are until their payment has gone through! On opaque channels, you are nothing special and nothing more than a cheap rate.image2

4. Hotels Are Not Good at Telling a Story That Touches People’s Emotions

Let’s face it. You, your marketing staff and your sales team have long put too much emphasis on your hotel features instead of showcasing your unique experience and building it into a story that will resonate with guests. Proudly ticking off a list of amenities – outdoor swimming pool, bar, full-service restaurant, airport shuttle, room service, complimentary Wifi – does nothing to make your hotel stand out amongst your comp set nor appeal to a guest’s emotions. At the end of the day, customers will not remember which hotel offers what, and will – again – turn to price to make the decision.

5. Hotels Put Prices in Every Ad

Other than the ultra-luxury brands, virtually every hotel ad—across every type of media—includes a price point.

Why?

99%+ of consumers who encounter these ads have no previous exposure to the property and no idea whether $129 or $159 per night is a good deal. This price-first mentality has trained consumers to expect discounts, and has pushed hotels further into the category of commodity.

3 Ways to Avoid Commoditization

According to Harvard Business Review, here are three ways that hotel marketers can deflect the inevitable commoditization of their property:

1. Segment Your Audience and Market Directly to Them

Identify your hotel’s key customer segments and create unique products, packages and promos just for them. This approach will allow you to narrow in your marketing creativity on specific niche audiences, rather than just attempting to sell rooms to everyone and anyone. This is why it’s important to segment your email subscriber list and create target audiences for your online ads, as well. For instance, The Garden City Hotel in Long Island knows their hotel appeals to travelers willing to pay a price for grand experiences. So, they leveraged the close distance to Neiman Marcus to offer a luxury retail experience that includes a private tour before the store opens to the public, a customized consultation with a personal stylist, and lunch at the famed NM Café.

2. Build Room Packages Bundled With Ancillary Services or Destination Experiences

A simple overnight stay never provides the full experience that your hotel is capable of. Don’t expect guests to ‘get it’ and purchase ancillary services on their own. You’ll have to build distinctive experiences for them that are based on your property’s unique attributes. To showcase their lifestyle amenities, The Grand Lucayan Resort in the Bahamas built a wellness package, "Feel Grand and Healthy," that includes unlimited fitness classes, a round of tennis or golf, and 20% off spa treatments, along with a stay in an oceanview room.

3. Innovate With New Products Or Upgrades

Innovation should be every hoteliers mantra, period. Seek out ways to innovate every and any part of the guest experience, then spread the word. You can either create a new product experience or offer unique upgrades. Either way, you’ll be offering something that your competition doesn’t, which is the only true way out of the commoditization trap.


About Tambourine

Tambourine uses technology and creativity to increase revenue for hotels and destinations worldwide. The firm, now in its 33rd year, is located in New York City and Fort Lauderdale. Please visit:www.Tambourine.com

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