Hotels Mimicking Airlines: The New Business Model

Hotels are undergoing a transformation in their business models by drawing inspiration from the airline industry. This strategic shift aims to enhance guest experiences and drive revenue growth. By adopting strategies similar to airlines, the hotel industry is evolving to meet the changing demands of modern travelers.

The implementation of surcharges and fees, a practice that airlines have utilized for years, is gaining traction in the hotel industry. These additional charges have contributed to a significant increase in hotel revenue, reaching a record $2.25 billion in 2019. By introducing surcharges for services such as early check-in, late check-out, and specific amenities, hotels are diversifying their revenue streams and optimizing profitability.

Furthermore, hotels are exploring attribute-based shopping, a concept inspired by airlines’ approach to seat selection and ancillary services. This empowers guests to personalize their hotel experience by selecting the amenities and services they value most. This customization not only enhances guest satisfaction but also presents opportunities for hotels to increase revenue through upselling and bundling valued attributes.

With the rise of mergers and acquisitions in the hotel industry, market consolidation is becoming more prevalent. Smaller hotel chains are potential targets for consolidation as larger players seek to strengthen their market share. This strategy, previously witnessed in the airline industry, allows hotels to overcome financial challenges and ensure long-term survival.

Overall, the hotel industry is transforming its business model to prioritize guest experiences and revenue optimization. By embracing strategies from the airline industry and adopting attribute-based shopping, hotels are reshaping the future of the industry.

Key Takeaways:

• Hotels are adopting strategies from the airline industry to enhance guest experiences and increase revenue.
• The implementation of surcharges and fees, similar to airlines, has contributed to a significant rise in hotel revenue.
• Attribute-based shopping allows guests to personalize their hotel experience and provides opportunities for revenue optimization.
• Mergers and acquisitions are expected to increase in the hotel industry to ensure market survival.
• The hotel industry is shifting towards a more dynamic and guest-centric approach.

The Rise of Hotel Surcharges and Fees

In recent years, hotels have adopted a pricing strategy similar to airlines by implementing various surcharges and fees. These additional charges include fees for early check-in, late check-out, specific room preferences, and even for amenities like in-room safes. The implementation of these fees has become more widespread, contributing to the profitability of hotels.

Hotel surcharges, fees, and additional charges have become a significant source of revenue for the industry. In 2019, the total revenue generated from these add-ons reached a record $2.25 billion, representing a 6% increase from the previous year. This trend highlights the growing importance of ancillary services and hotel pricing strategies in maximizing revenue.

Examples of Hotel Surcharges and Fees:

Hotels have embraced these surcharges and fees as a way to enhance revenue while offering guests a greater degree of customization and choice. By implementing additional charges, hotels can cover the costs of providing personalized services and amenities, improving the overall guest experience.

The rise of hotel surcharges and fees also has implications for travelers. It’s essential for guests to be aware of these additional charges when budgeting for their stay to avoid any surprises upon checkout.

The Benefits of Attribute-Based Shopping in Hotels

Attribute-based shopping offers a unique and personalized hotel experience for guests, allowing them to select specific attributes and amenities that align with their preferences. This customization goes beyond traditional room types and rate plans, providing guests with more control over their stay.

By implementing attribute-based shopping, hotels can optimize their revenue and improve guest satisfaction. Let’s explore the various benefits this approach brings:

1. Enhanced Guest Satisfaction: Attribute-based shopping allows guests to tailor their hotel experience, ensuring that they receive the amenities and services they value most. This personalized approach creates a sense of value and exclusivity, resulting in higher guest satisfaction levels.
2. Increased Revenue: By presenting guests with a range of attribute options, hotels have the opportunity to upsell and generate additional revenue. Guests may be willing to pay for add-ons or upgrades that enhance their stay, increasing the overall revenue for the hotel.
3. Improved Operational Efficiency: Attribute-based shopping enables hotels to efficiently manage their inventory and allocate resources based on guest preferences. This optimization of resources leads to improved operational efficiency, reducing waste and increasing profitability.

Additionally, attribute-based shopping allows hotels to bundle valued attributes and services, providing guests with attractive options that suit their needs. This bundling approach can further enhance the overall guest experience, driving customer loyalty and repeat bookings.

In conclusion, attribute-based shopping not only benefits guests by providing a personalized and tailored hotel experience but also enables hotels to optimize their revenue and operational efficiency. By embracing this approach, hotels can stay competitive in the ever-evolving hospitality industry.

Potential Mergers and Acquisitions in the Hotel Industry

The economic downturn caused by the coronavirus pandemic has led to a depletion of revenue for many hotel companies. As a result, industry experts predict a wave of mergers and acquisitions in the hotel industry to increase market share and ensure survival. This strategy has been previously seen in the airline industry after the last recession, where airlines combined forces to overcome financial challenges.

Smaller hotel chains, such as Wyndham Hotels & Resorts and Choice Hotels, are considered potential targets for consolidation. However, even larger hotel players like Marriott, Hilton, and Hyatt could engage in mergers to strengthen their positions in the market.

Consolidation and mergers can help hotel chains expand their market share and achieve economies of scale. It allows them to streamline operations, reduce costs, and leverage their collective strengths to navigate through uncertain times. By joining forces, hotel companies can also benefit from shared resources, expertise, and distribution networks.

However, mergers and acquisitions in the hotel industry also raise concerns about reduced competition and potential monopolistic practices. As hotel chains consolidate, it becomes crucial for regulatory bodies to ensure fair competition and protect consumer interests.

Overall, the potential for mergers and acquisitions signals the hotel industry’s commitment to survival and adapting to the changing market dynamics. With the right strategic partnerships, hotel chains can overcome financial challenges, strengthen their positions, and emerge stronger in a post-pandemic world.

The Financial Benefits of Attribute-Based Shopping

Attribute-based shopping is not only beneficial for enhancing guest experiences, but it also offers significant financial advantages for hotels. By allowing guests to customize their stay and pay for specific attributes, hotels can tap into increased revenue streams and improve their profitability.

One of the key benefits of attribute-based shopping is its potential to generate increased hotel revenue. When guests have the opportunity to personalize their experience and choose amenities that they value, they are more likely to make bookings and spend more during their stay. This leads to higher conversion rates and a boost in overall hotel revenue.

Furthermore, attribute-based shopping allows hotels to optimize their pricing strategy. By offering valued attributes at a premium price, hotels can maximize their revenue potential. This dynamic pricing approach ensures that guests are willing to pay a premium for the specific features they desire, resulting in improved hotel profitability.

In addition, the ability to dynamically assign rooms based on attribute preferences further contributes to increased hotel revenue. Hotels can strategically allocate rooms with desirable attributes to guests willing to pay for them, maximizing the utilization of their inventory and driving revenue growth.

Overall, attribute-based shopping provides hotels with a powerful tool to attract guests, increase revenue, and improve profitability. By offering personalized experiences, optimizing pricing strategies, and dynamically assigning rooms, hotels can achieve higher conversion rates, improved financial performance, and a competitive edge in the industry.

The Implications for Direct Bookings and Online Travel Agencies (OTAs)

With the implementation of attribute-based shopping, hotels now have the opportunity to attract more direct bookings and leverage their competitive advantage over Online Travel Agencies (OTAs). By offering flexibility, better value, and improved guest satisfaction, hotels can entice travelers to book directly through their websites.

Direct hotel bookings provide several benefits for both hotels and guests. Firstly, booking directly gives guests access to exclusive deals, promotions, and loyalty programs that are not available through OTAs. This enables guests to enjoy a more personalized experience and receive tailored offers based on their preferences.

For hotels, direct bookings reduce reliance on OTAs, saving on commission fees and improving profitability. Hotels can take advantage of the direct relationship with guests, allowing them to gather valuable data and insights that can be used for targeted marketing campaigns and personalized communication.

By embracing direct bookings, hotels can maintain a stronger relationship with their guests throughout the entire booking process and stay. This fosters a sense of loyalty and encourages repeat bookings, ultimately driving revenue growth.

The rise of attribute-based shopping further challenges OTAs, as hotels gain greater control over their inventory and the ability to deny attribute-based shopping to these external platforms. Hotel distribution channels are shifting, and hotels are becoming more independent and self-reliant in managing their online presence.

Hotels can optimize their websites to highlight the unique advantages of booking directly, such as price transparency, flexibility in room selection, and direct communication with hotel staff. By emphasizing their website’s user-friendly interface and secure payment options, hotels can instill confidence in guests and encourage them to make direct bookings.

Advantages of Direct Hotel Bookings:

• Access to exclusive deals, promotions, and loyalty programs
• Personalized experience based on guest preferences
• Reduced reliance on OTAs and commission fees
• Increased profitability and revenue growth
• Stronger relationship with guests and improved guest satisfaction

It is crucial for hotels to invest in their websites and online presence to stay competitive in the evolving landscape. By continuously optimizing their online booking process, hotels can secure a larger share of direct bookings and maintain control over their distribution channels.

However, it is important for hotels to strike a balance between direct bookings and OTA partnerships. While direct bookings offer numerous advantages, OTAs still play a significant role in reaching a wider audience and attracting international travelers. The key is to find the right balance and leverage both direct bookings and OTA partnerships to maximize revenue and guest satisfaction.

Conclusion

The hotel industry is undergoing a significant transformation, inspired by the business model of the airline industry and driven by the adoption of attribute-based shopping. This strategic shift is focused on enhancing guest experiences, optimizing hotel revenue, and ensuring long-term competitiveness in the industry.

By implementing surcharges and fees, hotels have successfully increased their revenue potential. These additional charges, similar to those employed by airlines, have become more widespread and harder to avoid. As a result, the hotel industry generated a record $2.25 billion in additional revenue in 2019 alone.

Another key aspect of this business model transformation is the customization of the guest experience through attribute-based shopping. By offering a range of options for guests to choose from, hotels can tailor their services and amenities to individual preferences. This not only improves guest satisfaction but also enables hotels to upsell additional amenities and increase revenue.

As the hotel industry continues to evolve, it is clear that the future belongs to a more dynamic and guest-centric business model. The adoption of strategies from the airline industry, the implementation of surcharges, and the embrace of attribute-based shopping are just the beginning. The hotel industry is poised to reshape its future by prioritizing guest experience enhancement, revenue optimization, and overall industry competitiveness.

About Me Cecil Newman