Fishing Where The Fish Are

At gCommerce, we have been busy evaluating the changes in consumer booking behavior through the Internet. This should be no surprise, but the overall behavior of consumers online is in a state of flux. 

I like to quantify online marketing and revenue management initiatives in terms of demand pools. In my experience, these demand pools hold especially true when dealing with a transient customer.

As we see it, there are four basic demand pools:

1. Hotel Direct Demand. This is the most valuable of the demand pools. It refers to customers who are loyal to a specific property and will always look to book with their favorite property before looking at other options.

2. Interest-Based Demand. This refers to customers traveling because of a specific interest or activity. Common categories include golf trips, spa trips or trips built around a specific event.

3. Market-Based Demand. The most competitive of the demand pools, this consists of customers who know they are traveling to a specific market and have general criteria (price, location, etc.), but are not biased to a specific property.

4. Incremental Demand. This pool consists of travelers who do not plan to take a trip, but receive an offer that is so attractive that they decide to book a trip. These travelers are generally very rate-sensitive and focused on receiving the best value possible.

Interactive Marketing can have an impact on each of these demand pools. Here is a brief overview of common tactics to attack each:

Hotel Direct Demand: Using tools associated with a property’s loyalty program can garner great results. These customers are emotional about a particular property. The experience they have through the Web needs to tap into what makes them emotional. A property’s Web site in particular is vital to ensuring these customers never get “curious” and try a competitor’s property.

Interest-Based Demand: Creating effective packaging through a property Web site that connects the property with events and attractions in the market is a first step to penetrating this demand pool. The hotel must effectively represent each of its key amenities through its Web site. Don’t skimp here, as travelers really want to understand all that a hotel or resort has to offer. Finally, a property must market each individual event, attraction and amenity with a dedicated Internet marketing campaign, incorporating paid search, public relations and media placements to gain traction with this demand pool.

Market-Based Demand: In most locations, this is the most robust of the demand pools. Oftentimes, properties will rely on big travel sites like Expedia to gain exposure and capture their fair share of this demand pool. Keep in mind, these customers are not loyal to a specific property and may not become long-term fans. They are generally price-sensitive and research driven; they will read everything they can find about a property before making a reservation.

Incremental Demand: Always the most fickle demand pool, igniting incremental demand is very much based on the value of the offer presented. Travelzoo and similar programs have been consistent tools for hotels to reach this segment of travelers.

As the economy has nosedived, we have seen a big shift in the value of each demand pool. 

First off, Incremental Demand has all but dried up. gCommerce clients that have continued to launch campaigns to get people on the road have seen ROIs decrease substantially. To be effective, a property will generally need to offer a rate with which they are not comfortable. 

Market Demand, while smaller, is still there in most locations. That said, the consumer is becoming far more rate/value-sensitive. In most markets we operate in, we have seen competitor hotels offering deals that just six months ago would have seemed insane. 

Incremental Demand is interesting. Searches for high-end vacations such as golf trips and spa weekends have dropped. However, searches for events and attractions that would appeal to a local drive market are holding solid. This points to a consumer who is trading big, expensive trips for long weekends at their closest population center. 

Lastly, there is Hotel Direct Demand. Properties that consistently offer stellar and consistent service are holding strong in this demand pool, while properties that do not offer a compelling advantage are seeing their Hotel Direct Demand dry up (presumably the customers are dropping into the Market Demand Pool). TripAdvisor and other customer review sites are a vital tool to maintaining a loyal customer base.

Based on these findings and others, we are advising our clients in most cases to ditch their efforts targeting Incremental Demand Pools. The ROI is just not there. Instead, we are seeing better returns when the marketing dollars are spent marketing packages targeting events, attractions and amenities in the area and at the property. Shift those marketing dollars and measure the returns every day.  

As hard as it is to swallow at times, most properties really need to drop rates and drive trial to attract the Market Demand Pool. Participate in Online Travel Agent site promotions and get those customers in the door. 

Finally, there is no time more important than now to earn long-term fans of your property. When you gain trial from a new guest, do everything you can to get to know them and ensure their stay is memorable. Use the Web to further the relationship. These customers cost less to attract and will fuel gains in market share even during the toughest of times.