A quick formula of when to use OTAs

A battle between direct bookings and OTAs (Online Travel Agents) will continue even after the virus situation calms down. I suspect that OTAs will put more pressure on room rates to get quick business to sustain themselves. It sounds like a bad deal (which it is) but there are a quick formula for hotels to consider when they should use OTAs.

One thing that we need to be on the same page first is that driving direct bookings is not free, far from it. Hotels have to pay for marketing resources as well as different types of ads, content creation, and display channels. This ‘cost of sales’ is a key determination of this post. However, direct bookings allow hotels to capture guest details for longer term marketing or loyalty investment.

  • If cost of sales is less than OTAs commission (< 20% on average) – no brainer, spend your marketing money to drive direct bookings.
  • If cost of sales equals to OTAs commission (about 20%) – still invest in driving direct bookings. You will get guest’s contact details and consent for your future marketing.
  • If cost of sales is greater than OTAs commission (> 20% on average) – shift your investment to OTAs is not a bad idea. What kinds of situations under this conditions?
    • Your hotel is in a highly saturated market. Customers just search to get the best deal. Investing in display ads might cost you up to 50%-60% range.
    • Your hotel is located in a low traffic market. It is likely that you have to spend a lot of money to just get customer’s attention that you exist.
    • Your hotel has to compete in the prime advertising space. if your hotel is located among big names with deep marketing pocket, OTAs could be your best friend.

There is no easy formula to work with OTAs. They do do a good job in many areas. They also invest heavily in technologies that many hotels cannot match. But, they suffer from the business environment change as well. We just need to be smart to learn and try new things.

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What I learn from Eric Yuan – Zoom founder

Everyone is using Zoom – a video/audio call + collaboration tool now. Many companies try to introduce a work from home solution as quick as possible. And, Zoom is a perfect solution because its ease of use and its call/video quality. We tried to use Skype before and we were very frustrated with its service quality. We then jumped to Zoom and really like the solution.

I am curious to learn more about the person who founded Zoom. His name is Eric Yuan, a Chinese immigrant to the US. These are what I learn from his story.

  • It starts with solving a problem. Eric got the idea of creating Zoom when he was in China. He had to visit his girlfriend (now his wife) who lived 10 hours away.
  • Never, never give up. To fulfil his vision, he determined to move to the US. His VISA applications were declined 8 times. He got it in the 9th effort – 2 years later.
  • You have to listen to your customers. When he was working with Webex and then Cisco, he heard a lot of customer’s frustrations about the solution at the time. He tried to introduce a new, better solution, but the company didn’t accept the idea. So, he left and founded Zoom.
  • You don’t have to hire the highest qualified people on paper. Instead you should hire those with self-motivation and a self-learning mentality.
  • Company’s culture is the number 1 thing that determine the success of the failure of a company. And, it starts from the top.
  • If your employees are not happy, you cannot expect any success from anything.

He also encouraged us to jump into the startup journey. It’s hard, super hard but it’s worth it. This is something I want to do too, to start my own business. I just don’t have the courage to do it yet.

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Reach VS Impression

I don’t normally look at the reach and the impression data. I always jump to the conversions. As it turns out, reach and impression are a good indication of how good content is (I view ads as an annoying thing that marketers do but I buy lots of ads!).

So, what is the difference between reach and impression?

The content that you look at counts as reach. In simple terms, reach refers to the total number of users who choose to see a brand’s content. Reach focuses on getting people to click on your content.

On the other hand, impressions refers to the total number of times when users were exposed to your content on social media. Impressions do not measure whether or not people actually clicked on a link. And they do not measure whether or not a viewer engaged with a post.

They are both important in the following ways:

  • Impression gives you a basis to justify if users engage with your content or not. If your content shows up a zillion times but the reach is very low, you have to rethink about your content.
  • But, if you have very high reach with very small conversions, your content may be good but you probably offer it to the wrong target groups.

At the end of the day, you don’t need a large number of everything. You better have a small number from the right groups of people.

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Stay top of mind

Under the current difficult situation, should we stop all marketing activities? I have this question in the past few weeks. And, I haven’t had the time to answer it. So, I try to answer this question today.

One thing for sure, we should stop all promotional activities. It’s disrespectful to our customers and to the situation to do promotions right now. We should save marketing spends until the situation is back to normal.

However, we should not disappear from our customers. We should ‘stay on top of mind’ and make ourselves useful. We should engage with customers by

  • offering updates about the situation
  • providing tips that add value to their daily life
  • entertaining them in an appropriate way
  • keeping them dreaming about the world after the crisis passes

That’s what we should do.

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A good leader

I am not saying that I am a good leader. I just read an article about what a good leader should be. And, I have my own perception and definition. My kind of a good leader is perfectly described in Simon Sinek’s book – Leaders Eat Last.

You have to protect, nurture, and sacrifice for your team the same way you care for your children. Leadership is a lonely place. You cannot claim for credit, but you have to take all the blames. I have practiced this mentality for many years but I am still not 100%.

Most importantly, I believe that a good leader must provide at least a guidance to a solution. You don’t have (not possible anyway) to have all the answers. BUT, you must invest your time to do enough research to understand what is going on. When there is a problem and you have no clue about a solution, you have to spend time to learn about the problem. In my opinion, at the bare minimum, a good leader must be able to describe or explain a problem better than anyone else. You don’t have to come up with solutions all the time. Your team can help. But, you have to ensure that everyone understands the problem, and is on the same page.

It’s a lonely place to be a good leader. And, it’s not for everyone.

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What is microcopy?

It is a simple concept that is so powerful. It could turn users into customers and customers into friends. It’s a great branding exercise.

Microcopy has been widely used in tech space. It is small and tiny bits of copy that guide users (or customers) through product experience. What brands could do is to use the concept in, for example, packaging, or as a note in customer journey.

Imagine you enter into a hotel room, open a bedroom and see a short note suggesting activities you could do in the area. Or, you open a bottle of wine and see a word “good luck” under a cap.

The concept is nicely wrapped around by this sentence – Words are giant so keep them small.

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Going niche

No product could serve everyone (well except water and electricity). Minimum viable audience (MVA) is the way of survival. It’s about time for hospitality companies to adopt a laser-cut niche product (and marketing) strategy.

American Express GBT (Global Business Travel) is a good example. They are a credit card company focusing solely on businesses. They just launched a service called “Rest Assured Solution”. It’s an online travel booking platform for business travellers. Their research shows that some of business travellers make bookings outside the company’s policy because they can find cheaper rates out there. As a result, GBT incorporates this rate guarantee feature in this service.

Who are your minimum viable audience?

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*Credit: I took the minimum viable audience from Seth Godin – my (book) marketing mentor.

Subscription model

Do you know Panera, a restaurant chain in the US? They recently offered a $8.99 coffee monthly subscription. Customers can take unlimited coffee under this offer.

They decided to offer this program after a few months of testing. They saw more than 200% increase in the frequency of visit, which is expected. The best part is there have been about 70% increase in food attachment. It’s like they use marketing money in this subscription offer to sell their core product which is food.

Can you add a subscription model to your product or part of your service? If you can and want to, I suggest you to build a strong financial model to justify it. A wrong calculation could cause a major issue.

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Marketing as service

I believe that everything is marketing. The era that has marketing department as an independent unit has ended a few years ago. Marketing should be at the top of the tower with customer service, customer experience, sales, even human resources underneath.

Let start by asking this question – why do we do marketing? We do marketing because we want to offer solutions to customer’s problems. We also do marketing to make a difference to someone’s life. The process is we tell customers that our product could be a solution to your problem. Customers buy the product and we want them to have the best experience. We then service them with the hope that they will stay and recommend our product/solution to their friends. When something goes wrong, they contact our customer care team. We solve their problems and delight them. They rave about us and their friends see it.

There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.

Sam Walton, founder of Walmart stores

Take social media as an example. It’s very hard to draw the line between social media marketing and social media service. Customers will bring up issue regardless of channels. You might post a new campaign on Facebook with an expectation for it to go viral to get more sales. But, your existing customers might see the post and share their frustration.

To be successful, marketing needs to be on the top of the tower. No offence.

Happy customers are your biggest advocates and can become your most successful sales team.

Lisa Masiello, Founder & President, TECHmarc Labs, Inc

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Recovery

What would be the world after Coronavirus is under control? What would the recovery look like? How long would it take for the hospitality industry to go back to normal?

First of all, economic downturn would be inevitable. People lost their jobs and companies need times to recover. Purchasing power would drop in the next 3 to 6 months. Consumers would be cautious about their spend and their health. Young people would start spending before older people.

Holiday is considered a luxury product. It’s not necessary to have holidays. It would take a bit longer for consumers to put holidays in their priority list. There would be a lot of super cheap deals from hotels, airlines, and travel agents in the market. Margin would be very slim. Profitability would be thin.

Hospitality industry is weak in branding. OTAs have set the scene to drive the price down. There would be a massive price war in the market.

I believe in creating a minimum viable audience, an ecosystem. This strategy has our true customers in the system. People who care about our product and see our product as their life’s solution. It’s the only way to win the price war.

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