HOW HOTELS & RESORTS CAN BEAT THE ONLINE RETAIL GIANTS · PDF filehow hotels & resorts can...

HOWHOTELS

& RESORTSCAN BEAT THE

ONLINE RETAIL GIANTSAT E-COMMERCE

DAN BRAZIER

HOW HOTELS & RESORTS CAN BEAT THE ONLINE RETAIL GIANTS AT E-COMMERCE

HOTELS & E-COMMERCE02

HOTELS & E-COMMERCE

The impact of online and mobile technologies

Whilst the online revolution has given with one hand, it has taken with another when it comes to the hotel industry. Online bookings have soared and hotels no longer rely on travel agents or expensive printed marketing. On the opposite side of the fence, the boom in personal Internet devices such as smart phones, tablets and laptops, has had an adverse effect on revenue as hotels now lose out on the extra up sell services they used to earn from such as movies, in-room telephone and chargeable WiFi.

The answer is however staring the industry in the face.

Whilst the rest of the ecommerce world is fighting to achieve 2-3% sales conversion rates from their web stores, hotels can achieve up to 15%. With a success rate like that, the hospitality industry has an enormous opportunity to capitalize on the traffic and trust generated on their websites and other digital channels.

This e-book examines just how unique and well-placed the hotel environment is for online retail and e-commerce, and why hotels must now step forward and offer guests the online experience they expect in today’s connected world.

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Today’s Hotel Guest

Whilst it wasn’t too long ago that a phone call to the 9am - 5pm hotel reservation desk was the only means of researching and booking a room, the frequency of online communications is starting to change how customers interact with hotels before, during and after their stay, 24 hours a day.

Online reservations have now become the norm throughout the travel industry, and online researching has also shaken the hotel industry, in good ways and bad, with the arrival of review sites and mobile apps such as Tripadvisor, Expedia and Hoteltonight.

Internet use is no longer reserved for bookings either. Hotels report that as many as six devices per room can be connected to a hotel WiFi, compared to perhaps just one per family or business guest just a few years ago. Not only do guests want more of a hotel’s bandwidth; they now expect it for free too.

Dave Garrison, CEO of iBahn, one of the world’s top hotel Internet providers, has observed major change and growth in the use of iPads and mobile devices for applications such as YouTube, Netflix and social media. This has resulted in an increase in hotel broadband use and a decrease in guests ordering movie rental through their in-room television; a double hitter on the bottom-line hotel profits.

This explosion in hotel guest WiFi demand is a clear sign that something dramatic has changed. Today it is hard to deny that most hotel guests around the world are connected and smart hotels must now recognize that, to offer good customer service, they must move with the times and embrace the online world.

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Travellers like to shop. Just look at the airports.

According to airportwatch.org.uk, Heathrow airport generated 21.3% of its income from retail in 2011. On average, passengers spend about £5.70 at the airport. From last-minute souvenirs, gifts for loved ones or clients, to impulse purchases, tax free offers and special airport deals, retail spending makes up a large part of an airport’s profits.

In the year 2010/2011, Heathrow airport made £380 million on retail alone demonstrating just how profitable shopping from tourists and business travellers is.

What percentage of guests who check-out of hotels head straight to the airport to shop?

Interviews with hotel door staff suggest that at least 50% of the taxicabs called on behalf of guests go directly to the airport. How many of those guests are going to the airport early to shop for gifts or spend their currency?

Rather than sending guests away to spend their money elsewhere, hotels should be looking for ways to encourage their guests to shop on site.

Hotels have the perfect opportunity to offer a unique service to their guests and set themselves apart from their competitors, whilst increasing their revenue potential. Guests want convenience and so being able to purchase the items they want at the hotel, before they pack and leave, is the ideal solution.

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Boosting RevPAR

Hotel e-commerce could be the answer to reclaiming custom from airports and also raising revenue per available room (RevPAR). The survey Hotel-Retail Mixed-Use: Hospitality Industry Trends For 2013 by James Butler found that hotels adjacent to retail outlets resulted in a substantial boosts to both the hotel and retailers – in some cases up to a 40% increase in revenues. The study suggests that guests consider the hotel to be more of a ‘desirable destination’ when it has shopping facilities within it’s property or nearby.

Providing a higher quality retail experience for guests is not just a RevPAR advantage for the hotel owners. By bringing retail to time-starved guests who don’t have the time to search the local area for what they need, hotels have the chance to increase guest satisfaction and customer service.

“Hotel retail isn’t just convenience oriented anymore.” says Ann Natunewicz, who runs U.S. retail research for Colliers International and travels frequently for her work, “It’s an amenity because hotels have to differentiate themselves from competitors. At first they were doing it by improving the quality of the rooms and improving the quality of the loyalty program but you want to give people multiple reasons to come. Shopping is the next extension of that.”

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06 ONLINE CONVERSION AND WHY IT IS SO IMPORTANT

What is conversion?

In e-commerce terms, conversion is the art of turning a website visitor into a paying customer. The conversion rate is the percentage of visits that convert into a purchase within the same visit.

The online benchmark for conversion, as set by Internet retail giants Amazon.com, is 8% but according to the report “The State of Retailing Online” by Forrester Research Inc, the typical e-commerce conversion rates sit between 2% and 3%.

The difference between percentage points is the difference of $millions in sales so those involved in ecommerce take conversion figures very seriously indeed. Retailers are now investing large amounts of time and money into techniques to improve conversions and reduce shopping cart abandonment.

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ONLINE CONVERSION AND WHY IT IS SO IMPORTANT


07 WHAT DO HOTELS HAVE THAT RETAIL GIANTS DON’T?

1. Existing Online Traffic

It seems obvious when you think about it doesn’t it?The hotel industry enjoys a staggeringly high number of visitors to their websites as new and returning guests search for room availability and review the hotels amenities and features. These visits are worth money – and not just in bookings.

The web pages of these hotel sites represent a gateway service to reservation and general information. The audience is an ‘active’ one looking for reasons to choose a hotel and make a decision.

According to Wikipedia, the Hilton Hotel Group has 164,000 rooms in its portfolio across 91 countries. Assuming those rooms are booked 200 days of the year, that’s 128,400,000 booked nights per year. Statisticbrain’s research shows that 57% of travel bookings are made online and that figure is growing each year. For the Hilton Group, that equates to an estimated 73,188,000 online bookings per year! That’s a lot of web traffic. Amazon spends a lot of money trying to attract that kind of traffic.

It represents a very big, untapped up sell opportunity for the hospitality industry.

WHAT DO HOTELS HAVE THAT RETAIL GIANTS DON’T?



2. Existing Physical Traffic

Let’s not forget the hotel’s main priority is to occupy as many rooms as possible. This in turn creates a large footfall within the properties themselves.

In the case of the Hilton Group, if just 60% of their rooms are occupied, they have a potential 128,400,000 guests per year walking around their hotels (and that doesn’t include non-room guests such as conference attendees, coffee drinkers, spa, bar and restaurant users as well as many other hotel facility consumers which could easily double the above figure).

Jeff Bezos, the Amazon.com founder who has recently expressed interest in opening physical Amazon stores, would no doubt love to have access to this kind of steady traffic flow.



3. Connected Guests and Visitors

According to ABI Research, over 80% of the US population now has Internet access and over 70% of the US population has at least one mobile device. It’s pretty safe to assume your guests are web savvy and connected to the web in some way, most of the time.

Guests have already demonstrated their ability, and preference, to book and pay for rooms online and, as global e-commerce revenues are expected to grow by 19% per year to $963 billion in 2013, you can count on many of these guests being regular online shoppers too.

Your hotel brand is now an online-vested business. Its success fundamentally relies on generating new guests via social media, online bookings, reviews and ‘word-of-mouse’. WiFi access is no longer an added luxury but an essential hotel feature for attracting customers. It’s why Expedia has added WiFi to each of its hotel reviews alongside other features such as Disabled Access and 24hr Room Service.

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Global e-commerce growth - how much of this could be in hotels?


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4. Browsers everywhere!

Online retailers have a tough job; they constantly compete with each other for online sales. And, no matter how much investment has gone into the design and functionality of retailer websites, they can still only expect to convert 2-3% of those visitors. That probably won’t change either.

Conversion is low for e-commerce retailers because so many visitors are ‘just looking’ and not seriously shopping. Many are comparing like for like, price for price. They are responding to banner ads, product features, social media, coupons and vouchers all trying to win their attention. Online retailers have just a few seconds to convince those potential shoppers to buy before they jump to another site.

Hotels are different.

A hotel guest’s retail browsing behaviour is considerably different to e-commerce browsing in the fact that hotel guests are physical guests as well as virtual guests. That means that hotels have double the opportunities to engage with their customers compared to pure online retailers.

In a hotel environment, browsing time peaks when guests are waiting for meetings, relaxing before a spa treatment, taking a break from a conference, hanging around before or after check in/out, or simply relaxing in their room waiting for partners or family members to get ready.

Hotels provide rich shopping environments for a captive audience, just as airports do, and that means high conversion. To capitalize on this bounty of browsing time, all hotels need to do is identify what to sell and make it as easy as possible for the guest to do purchase.

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says Marc Hoffman of Sunstone Hotel Investors,

which owns 26 upscale chain hotels.



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5. Convenience and Relevance

“Convenience and Relevance are the mother and father of Conversion”, according to Staffan Palopää, CTO of e-commerce specialist Vaimo. In recent years, the convenience of online shopping has greatly improved, contributing directly to the explosive growth of e-commerce. In many major cities, it is now commonplace to have your web purchases delivered straight to you within the hour with services such as Ebay Now.

People are busier than ever, and more impatient, and online retailers have recognized the importance of convenient delivery in influencing shoppers to order from them over their competitors.

And then there’s the relevance of products offered which, when combined with convenience, is a very powerful combination.

Hotels spend millions differentiating themselves from competitors to give guests a compelling reason for choosing their particular hotel experience over another. Whether they sell the luxury, price, location, environmental, family or business benefits, almost every hotel has a strategy and target market created and sculpted over years.

When combining this corporate strategy with an online retail strategy, obvious opportunities emerge. By introducing products that fit with the brand’s positioning, guests will already be in the right mindset for purchase.

For example, Thomas Pink shirts and designer iPad covers are perfect for business hotels, whilst discounted sunglasses will suit the budget resort hotels. Bjorn Borg swimming shorts and sunscreen products are for the beach hotels whilst Hunter Valley organic wine meets the needs of the environmentally conscious guests at the eco-hotels. Without much effort, hotels can offer complementary products, services and brands to meet the customer’s expectations of the hotel for an overall better guest experience, and a more profitable guest visit.


So why are hotels so convenient for retail?

1. Hotels already have private and secure dressing rooms in every guest bedroom.

2. Guests already trust the hotel staff to receive and deliver packages.

3. Guests have already given their credit card details to the hotel to secure orders.

4. Guests can easily return any products they aren’t satisfied with.

5. Guests can avoid last minute, panic buying at the airport.

6. Guests can build a relationship with a product before they buy it (showcase).

These are all strong conversion factors Amazon.com and other online retailers wish they could get their hands on.


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6. ‘Retail Ready’ Guests

Hoteletail research shows that as much as 40% of hotel guests will purchase a retail item from outside their hotel during a weekday stay. That figure jumps to 60% at weekends. Purchases usually occur in stores immediately surrounding the hotel and typically include impulse, last minute, planned or spontaneous purchases. Just ask the hotel cleaning staff how much of the waste they collect from rooms is from packaging of items not purchases in the hotel.

Additional field research shows that hotel guests spend, on average, 50EUR Mon-Fri and 150EUR at weekends depending on the type of hotel and location. It is no surprise that many hotel guests rate ‘proximity to city centre’ in their top three reasons for choosing a hotel. According to the U.S. Travel Association, more than 77% of U.S. domestic trips are for leisure and shopping tops the list for tourist activities.

What makes hotel guests so willing to shop?

According to Oliver Raggett of luxury hotel, The Chesterfield, in London’s Mayfair, “people who stay in hotels often experience a special euphoric away-from-home feeling. Having their bed made for them, being waited on with 24 hour room service, being addressed as Sir or Madam, results in a feeling of greater self-worth which transcends into positive retail mindsets and action”.

To support this claim, Hoteletail found that most retailers directly adjacent to major hotels attribute as much as 40% of their sales to the hotel’s flow of guests and visitors.


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7. Reduced risk for peace of mind

It is well documented that the limitation of online shopping, when compared to ‘real world’ shopping, is its lack of physical representation. It takes a great deal of trust from online shoppers to hand over private details to an online store. For many people that will never change because it always represents risk to the shopper.

Physical retail outlets will always have that advantage over online retail. There is something reassuring about being able to walk back into the place you purchased your goods from for a refund or exchange. No postal queues, no online forms, no bank statement checks, no hassle - just good old face-to-face money-back peace of mind.

Evidence has shown that when online retailers remove complicated returns procedures, conversion rates sky rocket.

Several high street fashion retailers, such as Indie brand Fallen Hero, have seen large increases in online conversion rates and reduced cart abandonment with their “click-and- collect” module which allows shoppers to buy online and collect from their stores.

This elegant solution is exactly the type of experience hotels can offer their guests since check in and check out dates are known, and the guest effectively has a temporary postal address or collection point. Not only is this highly convenient for the hotel guest and traveler but it also eliminates a major downside to shopping online (especially in another country).



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8. The Ultimate Showrooms and Dressing Rooms

Fit, feel and sizing are major conversion barriers for online clothing and apparel brands. The same applies for products that require a touch, taste or smell before a purchase is made. This is what makes a Hotel environment such an ideal place to showcase products for guests and brands.

Firstly, the hotel already has the perfect dressing room for guests. Their hotel room is safe and secure, without queues, with plenty of mirrors and places to hang garments, as well as an ideal place to mix and match with clothing and accessories already owned.

Secondly, the hotel property is the perfect showroom. Hotels have already been doing this for years with art in the lobby, fine wines, jewellery and consumables placed in high traffic areas. The Claron Hotel in Stockholm, for example, showcases paintings for sale by local artists and the Story Hotel, in the same innovative capital, rents a pop up store in its bar area to entice visitors and guests to buy clothing and framed photography.

“As many guests stay for several nights they have time to fall in love with a product they might like to own” explains Nikolas Hall, General Manager of Bertrams Hotel Guldsmeden. “Quite often the guest will telephone back weeks after their visit and order products from us” continues Hall, “proving that guests do become attached to products they’ve seen or used at hotels.”

Such a tangible opportunity simply doesn’t exist for pure online retailers who only have seconds to convince a visitor to fall in love with their products on the screen of a computer or mobile device.



15

9. WiFi and other engagement channels

As guests journey through their hotel experience, there are several retail sales points unique to the hotel industry.

Guests engage with hotels in many ways. From social media, travel guides and review sites to the booking system, email confirmations and concierge requests (by email) to the WiFi login when they arrive. And then there’s the physical engagement with hotel staff and property during their stay.

Each of these channels, or touch points, can provide an additional income opportunity for a hotel to boost its guest spend ratios.

In its 2012 Hotel WiFi Report, industry website HotelChatter estimated the cost of wiring up a 250-room hotel with WiFi costs in the region of $125,000. Allowing an average cost to the traveller of $15 per day, that only delivers $200,000 profit per year - for now.

Hotels are holding onto what they see as one of the last wellsprings of revenue, since in-room calls are now non-existent and in-room movie sales are also declining. How long can hotels continue to charge high rates for WiFi? Some hotels are already offering a two-tiered system for WiFi. Top-tier Gold and Diamond members of Hilton Honors and platinum members of the Starwood SPG and Hyatt Gold Passport programs enjoy free internet but increasingly all guests are increasingly expecting their WiFi for free.

“The seismic shift must come when hotels view their WiFi connection as an income opportunity beyond the charges for web access,” explains Mark Parry MD of Wifinity who has connected over 20,000 hotel rooms to the Internet via its freemium and subscription WiFi service.

However free WiFi comes at a cost. “When large hotels make WiFi free in public spaces, data usage typically soars”, says Roger Crellin, president of hotel-Internet provider iBahn. “We have seen up to 300% increases in data traffic”.


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9. Trust

Another important online conversion factor is trust. Successful online retailers like Tesco have carried over their offline brand equity into their online services for this very reason, and pure online retailers such as Fab.com have worked hard to build up trust over many years. As a result, Tesco has successfully evolved its brand online and hotels should follow suit.

Fortunately, for hotels, the process has already, naturally started. Hotel guests are already comfortable interacting with the hotel brand online since they probably booked their room and paid for it through the hotel website. They’ve probably handed over their credit card details again when they arrived at the hotel and allowed you to photocopy their passport.

Trust is a given in the hotel industry and it’s worth gold. Hotels now need to carry that over to their other revenue generating channels such as online shopping and do as Tesco has done.



17

10. E-mail marketing: Opt-in Ready Guests

Email is still regarded as one of the most effective e-commerce marketing tools for online retailers. In an article for Business News Daily, David Mielach’s research revealed that, on average, around 23% of all emails are being opened and 5% of those are being clicked on. It may sound low but in actual fact, it’s a substantial number when compared to Google’s click-through rate of 3%, which is considered to be very good.

According to Mielach, the reason for this is quite simple: consumers are more likely to open emails from brands they know.

Most hotels collect data through their online booking process and have a ready-made list of contacts that know their brand. Assuming they follow the FTC CAN-SPAM regulations and secure an opt-in from their guests, they are free to market e-commerce services to them in much the same way airlines up-sell products during and after the booking process.

British Airways, for example, likes to send three emails before a customer’s flight to promote various, relevant upgrade options, with tempting shopping offers which results in a boost to the airline’s average income per passenger.

Hotels should be using the data they’ve gathered for much more than just customer feedback. By understanding their customers, they can offer relevant, useful products before, during and after a guest’s visit.



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11. Express cart check out and easy payment

Cart abandonment (when a web shop visitor leaves the site before completing the purchase) is one of the most challenging problems for online retails and one of the most important performance metrics for conversion.

As online retailers fight to reduce cart abandonment, hotels are actually faced with a unique opportunity to counteract that.

The most common reason for cart abandonment is at the stage when a customer is asked to enter payment details. As the hotel already holds the guest’s financial information (taken when reserving the room), it can offer to secure purchases before, during and after the guest’s stay easily. This buying obstruction is removed and the guests can order easily by requesting to ‘charge this to my room’ or ‘send to my room before I buy’ just as they would in the hotel bar or restaurant.



19 SUMMARY

We hope that this e-book has highlighted the incredible retail opportunities for hotels to sell more than just rooms online. Like the airline industry, hotels are faced with rising costs, increased competition and rising expectations. They must innovate and look to maintain margins by selling online and boosting ancillary income to replace lost in-room revenue such as movie, WiFi and telephone.

Online retail is now ready to take a more prominent place on the balance sheet of the hospitality industry. Hotel guests are web savvy and connected, and eager to shop as the world of e-commerce provides a familiar 24/7 opportunity. Just as WiFi access was a perk 5 years ago, hotel e-commerce should be the perk today. Perhaps then, with a change in focus, the hotel industry can take a share of the $618 billion of online sales expected for 2013.

It’s an exciting time for hoteliers who see the opportunities!

SUMMARY



Dan Brazier is founder of Hoteletail, the virtual shopping mall for the hospitality industry. His company supports all hotel and resort environments with ecommerce innovation to increase guest spend and satisfaction.

As a global businessman and leisure traveller, Dan has stayed in many of the world’s hotels. During his travels and conversations with hoteliers and guests alike, he has gathered extensive research and gained a great insight and appreciation of the industry’s challenges and the new opportunities for growth for hotels worldwide.

ABOUT THE AUTHOR

About Hoteletail

Hoteletail is a technology company that builds and manages e-commerce and virtual shopping malls for hotels. Hoteletail seamlessly integrates e-tail technology into the journey of a hotel’s mobile connected guests, before, during and after their stay. The results of which are increased retail revenues, improved brand engagement and customer experience.

Hoteletail unlocks a hotel’s full retail potential by using web, mobile, tablet, WiFi, popup and kiosk technology to bring the virtual retail experience to life for guests and visitors. The software seamlessly presents guests with hotel products and services, local stores, tenant brands, charity brands and other tourist attractions, far beyond the traditional channels.

For more information please visit www.hoteletail.com or contact us at:

E: [email protected]

T: +46 8 559 20102

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