Matt Mills, Noetic CEO, explains why a data-driven approach to guest loyalty is a hotel owners’ best strategy.
OTAs are brilliant at filling hotel rooms. But they’re also very expensive – eating up 30% of a hotel’s total revenue in the most extreme cases, and driving down prices in order to achieve top positions.
Nevertheless, over the years, OTAs have gradually taken a bigger and bigger share from both independents and brands. Today, they deliver around 50-60% of independents’ bookings at commissions of 25-30%. While leading brands like IHG have seen OTA sourcing treble in the last five years alone.
All stats taken from: Hotels vs OTAs: Is there a 3rd way?, Noetic and AB Bernstein report, (November 2017).
For hotel owners, the situation has reached breaking point. Analysis from global equity research firm AB Bernstein has revealed the rising costs have driven many independents into the arms of large branded hotel networks – which offer a significantly improved ROI compared to staying independent. Or more accurately, staying independent but dependent on OTAs.
However, there is actually a third option: a data-driven approach to increasing repeat direct bookings through smart data analytics and best-in-class media attribution.
In other words:
- Identify who your most valuable guests are (based on lifetime value)
- Work out which media campaigns are delivering those guests at the best cost
- Allocate your media investment accordingly
Why lifetime value? Because the initial cost of acquiring that guest is amortised across every stay; very much not what happens with repeat bookings that come through OTAs or brands.
Through this approach, Noetic has grown direct bookings to such a scale that this London-based hotel group with ~3,500 rooms has the confidence to not engage with OTAs or GDS-based bookings. It’s results like these that led to AB Bernstein – Wall Street’s premier sell-side research and brokerage firm – to recognise the Noetic view as a viable ‘third way’ for hotel owners to address distribution costs – without recourse to OTAs or joining a large branded hotel network.
But if it’s so simple (it isn’t), why aren’t more hotels doing it already?
The answer to that is simple: current revenue management technology is restrictive, making it very difficult to mine the data hotels need.
And without integrating media tracking and other data sets to enrich and drive actionable insight, most hotel owners are left in the dark when it comes to who their most valuable guests are, where they come from, and why.
That’s where Noetic1™ comes in. Our powerful business performance engine is fully integrated with Oracle OPERA, Google Hotel Ads, dormakaba, Elavon and many other leading brands used in the hotel industry. By integrating with a hotel’s existing technology – we help hotels to see the whole picture, providing actionable insight to inform better business decisions.