THE POWER OF PACKAGE BOOKINGS FOR HOTELS By Julie Cheneau, Director Market Management Expedia Lodging Partner Services for UK & Ireland Hotels are always looking for new ways to drive demand and packages have been a solid vehicle to do just that. Packages, or combined hotel, airfare and/or car bookings, offer valuable benefits to hotels, as well as consumers, but there s a lack of industry information around how hotels can strategically manage this demand. Between the first quarter of 2016 and the first quarter of 2017 alone, there was over a 35% increase in demand for package stays in the UK and that demand is likely to continue growing in the years ahead. Historically the traditional package booker was often a travel deal seeker. Today, budget and luxury travellers alike find package booking not only cost efficient, but time efficient as well. According to Phocuswright s 2016 report, Destination Unknown: How U.S. & European Travelers Decide Where to Go, travellers who book complex trips like packages tend to take more trips and/or spend more than those who buy just a flight, hotel or other single component. With the continued growth of this category, hoteliers can leverage travel data and partnerships to enhance their offering and make package bookings a key component of their success. To provide hotels with more actionable insights, Expedia took a deep dive into more than 12 months of its first-party data, comparing package demand to standalone hotel demand from global points of sale inbound to UK properties. The findings? A wealth of information and opportunity that should be music to hoteliers ears. Packages are a great way to maximise revenue, secure longer booking windows, and minimise cancellations. Packages Drive Increased Revenue Average Daily Rates (ADRs) a common performance metric for hotels for UK package stays were higher versus standalone stays by an average of almost 20% (see Figure 1). This shows a substantial rate boost for hotels and an incentive to include their hotels in package offerings. The top package destinations by room night volume in the UK were Oxfordshire, Hampshire, north of Scotland and Cornwall.
Figure 1: Average Daily Rate for 12 month period ending Q1 2017 One potential reason for package demand delivering a higher ADR? Hotels offering deeper room discounts in package demand may successfully upsell consumers on room type, due to the overall perceived value. The top package destinations by room night volume were London, Edinburgh, Channel Islands, Manchester and Glasgow, with London generating almost a 75% share of the total package stays in the UK. The appeal of package bookings has never been greater; it s a convenient way to plan a trip, it entices longer stays and at Flemings Mayfair, we tend to see an average of around 50% fewer cancellations than for standalone reservations. The lead time for package bookings at our hotel is, on average, 60 days prior to the departure date which allows us to have a good occupancy base before the beginning of the month. - Claudia Turriziani Colonna, Revenue Manager, Flemings Mayfair, London. Packages Equate to Longer Stays, and Booking Windows UK package bookings typically have almost twice the length of stay than a standalone hotel booking, making them an attractive source of incremental demand for hotel partners. Interestingly, the length of stay for standalone hotel bookings is similar across markets, but there are wider discrepancies for package bookings. For example, London and the Channel Islands attracted travellers for the longest trips (three days and four days on average respectively, compared with average of two days and just over two and a half days for standalone hotel bookings respectively). As illustrated by Figure 2, major UK destinations have a noticeably longer length of stay for package demand compared to standalone hotel bookings.
DAYS Average Length of Stay in Days 3.9 3.3 2.0 2.8 1.9 2.6 2.1 1.4 2.4 1.6 London Edinburgh Channel Islands Manchester Glasgow PACKAGE BOOKINGS HOTEL ONLY Figure 2: Average Length of Stay for 12 month period ending Q1 2017 Package demand also typically has a booking window more than one and a half times longer than standalone hotel bookings, providing more opportunities for hoteliers to upsell to consumers both prior to check-in and on-property. A broad view of the 30-60-90-day package booking windows reveals that the average booking window for packages in the UK is 46 days whereas standalone bookings have an average booking window of only 27 days. The Channel Islands, Edinburgh and the north of Scotland have particularly high booking windows, averaging 64 days, 56 days and 52 days respectively. Fewer Cancellations In package bookings, since the hotel stay is commonly linked to a non-refundable flight, packages tend to have lower cancellation rates compared to hotel-only bookings. This is especially important for hoteliers, particularly during a time when consumers are paying for trip protection [travel insurance] or potentially booking refundable, standalone hotel stays in a separate booking to get the most competitive rate. Notably, some inbound markets with lowest cancellation rates for packages include The Channel Islands (less than 5%) and Newcastle (less than 10%). Less Decline in ADR as Booking Window Shrinks Consumers have been bombarded with information pushing last-minute bookings for great deals or discounts, but how can hotels benefit and drive incremental revenue with packages? Expedia s data shows that package demand can benefit hoteliers while still delivering a great value to consumers. As the booking window shrinks from six months to 30 days out from stay the ADR drops for standalone room nights, but increases for packages. ADRs for packages grew almost 10% while ADRs for standalone stays declined by over 10% (see Figure 3).
ADR ADR Decline 6 months 30 days Package Hotel Only Figure 3: Average Daily Rate decline for 12 month period ending Q1 2017 SO HOW CAN HOTELS BE EVEN SMARTER ABOUT THEIR PACKAGE OFFERINGS? Expedia dove deeper into the data to uncover insights and opportunities for hotels to take advantage of. 1 Understand and embrace the air connection Air prices continued a three-year decline in 2016, per Expedia s ARC study, which allows hoteliers to capitalise on more attractive combined savings from air and hotel components. While aggressive airline pricing continues, package offerings should be a strategic consideration for hotels to over-index on their package channel mix, especially vs. the wholesale channel. In addition, like ADRs, Average Ticket Prices (ATPs) tend to start declining 10 months out, typically hitting their lowest price one to two months prior to booking, with an uptick one-month out from booking. This trend shows that hoteliers should try to load package rates a minimum of three months in advance, to take advantage of the lowest flight prices, offer the best value to customers, and avoid the discounting that inevitably happens for last-minute hotel deals. 2 Know how your market fits in Hotels in major metro markets and near airports or convention centres are likely to benefit the most from packages. From a global perspective, the top five countries booking packages into the UK are the US, Germany, Italy, Netherlands and France. UK top ten destinations for package tours are London, Edinburgh, Channel Islands, Manchester, Glasgow, Birmingham, Liverpool, Aberdeen, Newcastle-upon-Tyne and Bristol (see Figure 4).
Figure 4: Top Package Destinations in the UK from global POSa for 12 month period ending Q1 2017 Know what packages consumers are booking 3 Almost all travellers who search for both a flight and hotel within a 90-day period start their search with a flight. By far, the most popular package combination is lodging plus air, accounting for 99% of demand. A deeper look at the package breakdown by traveller origin reveals that UK travellers booking a domestic package are slightly more likely to include a car rental, in comparison to inbound travellers. Differentiate your property 4 With the typical package booking paid for in advance, the customer likely has more funds available to spend on-property, whether at the restaurant, bar, spa or on activities. There are numerous ways that hotels can stand out from their competitors and attract more looks and books. Knowing that package customers are more likely to upgrade and spend more on property, hotels should target guests with special discounts and offers, Value Add Promotions, and complimentary amenities leading up to their arrival. With Value Add Promotions, hotels can better promote their property and maximise their revenue by offering complimentary amenities that enhance a traveller s stay, including free Wi-Fi, parking, breakfast and more. These prominently displayed and unique travel offers allow travellers to clearly differentiate hotel offerings and select the hotel and promotion that best meets their needs. Enticing spa and food & beverage credits can also stimulate additional spend in both outlets, which further drives non-room revenue.
5 Lean on the pros Expedia has an army of Market Managers that know the intricacies of their market from seasonal trends and events, to what works and when for their hotel partners. Smart hoteliers can input package options that deliver a compelling offering that meets the specific market needs of their travellers. Additionally, Expedia s self-service website, Expedia PartnerCentral, offers several tools and insights to help hotel partners stay informed and competitive in the marketplace. Hoteliers can access real-time insights about the market, read and respond instantly to feedback from guests, and stay up-to-date with reservations, arrivals and cancellations. It can also help increase visibility by creating targeted promotions. Interested in packaging up a great deal for your consumers? Contact your local market manager or learn more about working with Expedia here. APPENDIX Figure 5: Top UK Package Markets & Key Data *When looking at markets with min 1000 room night stays. All data based on demand for the 12 months ended March 31, 2017 unless otherwise stated. 2017 Expedia, Inc. All rights reserved.