Monthly Archives: September 2010

Mexico’s drug wars, not immigration law, costing Arizona hotels a bundle

The Gadling released a story today entitled “Immigration law costs Arizona hotels a bundle” where the Arizona Hotel and Lodging Association believes that tourists have cut back on their visits to the state because of its immigration law.

Their assertion couldn’t be further from the truth because it’s not Arizona’s immigration law that has prospective tourists making other plans.  It’s the violence spilling into the U.S. from Mexico’s drug wars that are to blame.

According  to a Los Angeles Times article, “Mexico Under Seige, more than 28,000 Mexican citizens have died in drug-related violence in Mexico since the start of 2007, shortly after Mexican President Felipe Calderon declared war on drug traffickers.  That’s more than the U.S. fatalities in the Iraq war.  There have been 45,000 Mexican troops and  5,000 federal police deployed to 18 states where trafficking groups are fighting local authorities and battling for access to the U.S. market.

Illegal immigration and drug smuggling have always been issues in this border state, but warring Mexican cartels are carrying violence to levels that have shocked law enforcement and government officials.  Arizona State Senator Jonathan Paton told the AFP that “It’s definitely being ramped up beyond anything we’ve ever seen before” and Senator John McCain asserts that this sort of violence is “a threat to our national security.”

Last week Arizona Gov. Jan Brewer filed an appeal to a judge’s ruling in favor of a Department of Justice petition to stop an Arizona immigration law that would have allowed state and local police to request visa papers from individuals stopped for questioning on other matters.

Nearly a dozen states filed a legal brief Friday in support of that law, arguing that the judge erred in ruling that the law interferes with the executive branch’s immigration enforcement priorities.

Tom Costello is the CEO, Partner & Co-Founder of Groups International, a company that provides marketing, consultative services, and technology solutions to the group and leisure travel markets.  Connect with him on TwitterLinkedIn, and Facebook or contact him by email.

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“Fancy getting into bed with a Virgin”

Richard Branson may have started the Virgin Group as a mail order record retailer back in 1970, but it has since extended to include more than 300 branded companies, covering everything from worldwide mobile phone services and Formula 1 racing to space tourism and, most notably, air transportation. The organization recently announced that it will soon make a logical addition to this roster: hotels.

The Virgin Hotels group, which debuted its Web site this week, is in the initial stages of acquiring existing properties in North America. The hotels will be midsize — 150 to 400 rooms, depending on the market — and will include restaurants and communal public spaces, in the hope of attracting local residents as well as hotel guests.

“We polled a group of recent travelers and something like 70 percent said they would stay in a Virgin hotel,” said Anthony Marino, the executive director of Virgin Hotels. “We felt like we could make an impact.”

Though the first hotels aren’t likely to open before six months to a year, Mr. Marino said, possible choices for first-phase locations include what he called “gateway cities”: New York, Los Angeles, San Francisco, Boston, Washington D.C.

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New PhoCusWright survey finds mobile and social networks gaining traction with travelers

In two new reports, PhoCusWright explores how these sweeping trends—mobile and social networks—are changing how consumers shop for, purchase and share their travel experiences. Based on a comprehensive survey of online travelers, PhoCusWright’s Traveler Technology Survey 2010Mobile and PhoCusWright’s Traveler Technology Survey 2010: Social Networks each provide unique insight into an extremely influential technology that is impacting traveler behavior and attitudes.

PhoCusWright’s Traveler Technology Survey 2010: Mobile reveals some significant trends in device ownership, and explores the types of activities that travelers perform (and plan to perform) on mobile devices. Among the report highlights:

Keeping in touch
Among online travelers who carry smartphones, more carry touchscreen devices than non-touchscreen devices. However, only a third of those touchscreen smartphones are iPhones, suggesting that some travel companies should broaden their mobile strategy.

See what is on tap
The growth trajectory for those who intend to purchase travel products via their mobile device is extremely strong, and is projected to nearly double in 2011.

PhoCusWright’s Traveler Technology Survey 2010: Social Networks looks at how consumers use online social networks. In particular, the report focuses on travel-related communications and activities on social networks, and how this activity impacts the travel planning and sharing processes. Research highlights include:

Posting is the new postcard
While posting about general subjects is far more common than travel-related posts, nearly four in 10 social media users have posted something about travel, underscoring the importance of having a coherent social media strategy.

“Fans” or not, travelers connect with companies online
Relatively few social network users are “fans” of travel companies online; however, more than one third of online travelers have interacted with a travel company through an online social network via a computer.

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A Ten-Step Program for Easing Your Hotel’s OTA Dependency – By Daniel Edward Craig

These days, bashing online travel agencies has become a popular sport. The likes of Expedia, Travelocity and Priceline are being blamed for commoditizing hotels, for decimating rates, and for training travelers to demand deep discounts. We can probably find a way to blame them for that oil spill in the Gulf of Mexico too.

Not that OTAs need defending, but the reality is, we as hoteliers share the blame. It’s our signature on OTA agreements. We give them access to inventory at heavily discounted rates. And we’ve taught travelers to look for the best deals on OTA sites.

Case in point: While reserving a hotel in Chicago last month, I found six different rates for the same room. The lowest came from Expedia at $180. Inconceivably, the highest rate came from the hotel’s in-house reservations department at $229. Such “rate disparity” is rampant.

What started as casual use has become an unhealthy addiction. Meanwhile, while hotels are staggering toward recovery, the OTAs are boasting enormous growth. It’s time to take back some of the control we relinquished during desperate times. To that end, here’s a ten-step program for easing your hotel’s OTA dependency.

1. Admit you have a problem. The OTAs are not the cause of the discounting problem, but they are enablers and your competitor hotels are codependents. By advertising heavily that they offer deeply discounted rates, OTAs have contributed to the firesale mentality among travelers. Hotels have exacerbated the problem by being always on sale, by offering discount rates on discount rates, and by treating all inventory as distressed inventory. 

2. Do the math. Yes, OTAs can move a lot of inventory, but at what cost? The terms of OTA agreements vary, but typical commissions range between 15% and 25%, with big-box chains paying the least and small independents the most. At $200 per night for a three-night stay, an independent pays $150 in commissions. Compare that to the low-to-zero costs of direct bookings. How could you use the difference to attract more lucrative direct bookings?

3. Don’t overestimate the billboard effect. No question, OTA business is an important part of the market mix. As Mike Nelson, president of Partners Services at Orbitz, explained on Tnooz.com, “In any economic climate, online travel companies are a strategic resource for hotels that want to stimulate demand, access a global distribution platform and benefit from vast marketing and promotional investments.” But to rank high on OTAs you must offer deep discounts. As powerful as the “billboard effect” is the “OTA effect” of training travelers to book via third parties. 

4. Make direct the best option. Travelers should get the best deals by booking direct, period. Honor your rate parity agreements, but implement a best rate guarantee and clearly state the advantages of booking direct, like Marriott’s Look No Further™ promise. As an added incentive, offer value-adds not available via non-direct booking methods.

5. Be strategic. Instead of discounting across the board, forecast demand in each market segment and develop separate strategies. Reward travelers for advance bookings and build rate on that base rather than offering the best deals on last-minute bookings. In an interview with EyeforTravel, Kurien Jacob of Highgate Hotels argued that opaque sites “should be used only if the hotel needs to protect its overall retail rate to maintain brand image, prevent group room dilution or maintain corporate negotiated rate protection.”

6. Use social media to connect with travelers. Private sales via members-only sites like Jetsetter and Vacationist allow you to bypass OTA rate parity requirements, but the terms can be even less favorable than those offered by OTAs. Use them sparingly to create base and sell off distressed inventory. Focus your efforts on social media and reputation management to build your email database and Facebook and Twitter followers and save your best deals for them. 

7. OTAs are partners and competitors. OTAs don’t care which hotels travelers book as long as they book through them. Traditional travel agents charge 10% commission and provide personalized service in bricks-and-mortar offices. How can OTAs justify such high commissions, and where does the money go? Seen the TV ads, the cost-per-click ads, the print ads and banners? They’re driving up your advertising costs and luring travelers from direct channels. Goldman Sachs estimates that OTAs generate 8% to 10% of Google’s gross revenue worldwide. 

8. Leverage your power. Competition among OTAs is fierce, and they need access to your inventory at competitive rates to compete. In an interview with the Chicago Tribune, Priceline CEO Jeffrey Boyd said, “You’ve got to have the best rate, and the hotel has to be available when the customer is searching on it.” Leverage this power by negotiating the terms right for you. According to revenue management consultant Jil Larson, that means “either block space or last room availability but not both.” If the OTA won’t come to terms, find one that will. 

9. Loyalty means loyalty. Loyalty program members who book via OTAs must understand that they’ve forfeited their perks to the OTA in the form of a hefty commission. Stipulate that members must book direct to qualify for privileges. This is especially true of opaque sites; booking blind isn’t brand loyalty. 

10. Make the booking experience seamless. OTAs are brilliant marketers and are constantly improving the consumer experience. How does your booking experience measure up? Is your website mobile compatible? Make voice reservations accessible, efficient and personal – an area where OTAs can’t compete. And invest in a two-way PMS interface to decrease time spent managing rates and inventory and free up time for strategizing. 

As for that hotel in Chicago, I asked them to match the Expedia rate. They agreed, so like a good hotelier I booked direct. Don’t make your guests jump through the same hoops.

Daniel Edward Craig is a former general manager turned hotel consultant and the author of the Murder at the Universe. His articles and blog about issues in the hotel industry are considered essential reading for hoteliers, travelers and students alike. Visit www.danieledwardcraig.com or email dec@danieledwardcraig.com. Twitter: dcraig.

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Survey Reveals How Smart Phones Are Utilized By U.S. Travelers

Three out ten cell phones in use in the United States are now ‘smart phones’ with Internet connectivity, leading to one of the most intriguing questions facing travel service marketers today: how are travelers using these devices to plan, purchase and share information about both destinations and travel service suppliers? The results of the new Ypartnership / Harrison Group 2010 Portrait of American Travelers (SM) survey provide some insightful answers.

Nearly two in ten (19%) travelers have downloaded a travel-related application (app) to their smart phone. Among them, nearly one-half have navigated a destination using the built-in GPS functionality (47%) or searched for the latest information on flight schedules and delays (46%). Nearly three in ten have compared airfares or hotel rates (29%) or shared information or photos about their travel experiences (28%) using their smart phone. Approximately one in six has booked air travel or lodging (18%) or viewed a virtual visitor guide that provides information on things to do and see while visiting a destination (15%). Finally, more than one in ten (11%) has used their smart phone to download and redeem mobile coupons, while one in twenty (6%) has downloaded an audio walking tour of a specific destination.

“Clearly, mobile devices are destined to play an increasingly important role in the distribution and sale of travel services in years ahead,” said Peter C. Yesawich, chairman and CEO of Ypartnership. “Both shopping and more real-time engagement in the discovery of what a destination has to offer are likely to rival talking and texting in the years ahead.”

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