Exclusive Feature: Today, consumers want a personalised shopping experience, and all businesses are faced with the challenge of how to adapt and many leading retailers are able to pull up a shopper’s previous transactions, enabling mobile store associates to specifically suggest new items based on their previous buying behavior, increasing the opportunity for sales and creating the impression that a particular store ‘understands’ them before the instance of transaction.
In some ways, the hotel industry has been slower to make these changes at the same stage, creating openings for other accommodation providers.
Airbnb applied a simple technology-based concept to a wide range of bespoke accommodation options and enables guests to easily personalise their booking though coupling their stay in a destination with a range of activities, or ‘experiences’ based on their own unique preferences.
On the other hand, hotels are still offering sets of fixed promotions or packages hoping to satisfy customers’ needs. The growth in Airbnb and homestay accommodation options at the expense of hotels highlights that consumers will not wait around for hotels to figure out how to personalise their stay. They will look to new channels or alternative accommodation types to give them the choices and experiences they seek.
Personalisation can directly influence guest satisfaction levels and profit improvements when applied correctly by hotels. While hotels that offer high levels of customer service have been practicing ways of personalising a guest stay once they are at the property—be it through suggesting a restaurant booking or theatre show that may match a return guest’s interests—less is being done to personalise a potential guest experience at the initial booking phase.
This puts hotels at disadvantage in a competitive field. In the current model, rooms are priced as units and rates are determined by demand and availability. Online Travel Agencies (OTAs) then display these rooms in a side-by-side, competitive marketplace format where little information is provided about any of the distinguishing qualities each unique room may have to offer.
For instance, if you’re shopping for a king room at a five-star hotel with ocean views in Phuket and a guest comes across three similar listings, they’ll most likely opt for the lowest-priced option—or maybe the one that allows free cancellation. What the booking channel can’t tell the guest is that there’s an available room with stunning sunset views that would really make their Thailand vacation an unforgettable experience. If only they knew.
Many potential guests today book for the lowest price, meaning hotel brands are increasingly becoming commoditised. Finding the optimal price point for a room has been made harder by the power of the OTAs and platforms that encourage rate shopping, but is the lowest price all that matters to guests these days? A more personalised approach to pricing can help hotels to stand out. Hotels which allow customers to personalise their choices and experiences gain brand loyalty, with many hotels’ service values and rewards programs appearing very similar.
As guests demand more tailored accommodation experiences, a ‘customer-choice’ pricing model could help deliver the ideal product to the ideal guest at the ideal price. Through sophisticated data analytics and a more detail-oriented online booking experience, this next level of dynamic, bespoke pricing can become a tangible reality.
Today’s hotel guests may appear to be fixated on price, but really, they want more than just a place to sleep, and whatever it is they desire, they want the highest quality version of it they can afford. Cost will always matter, of course, but hotels can start to reposition price as just one factor of the overall decision. In a customer-choice pricing model, each guest would be given more options in the online booking environment. They can select the individual components of a room they want and leave off the ones they don’t, either spending extra or getting a cheaper rate in the process.
By implementing customer-choice pricing, hotels can separate and categorise all their products and services into components of value. Features that are currently invisible during booking could now be brought to the surface as part of the decision-making process. This will help drive differentiation, meaning there will be less emphasis on direct price comparison with competitor products being marketed as the same thing, despite their many differences.
Hotels should not forget that there is also power in choice, both for the buyer and the seller. With customer-choice pricing, potential guests will tell a hotel how much they’re willing to pay, and hoteliers can, in-turn, monetise more of their assets.
Customer-choice pricing can help hotels secure new bookings in an era where personalisation is no longer just desired but demanded by consumers. Through offering guests, the option to make selections to their stay (adding and removing items based on their preferences) on their own, they will be more appreciative of the value they receive for the money they pay. Instead of customers scouring the Internet for the best possible price, hotels can elevate their property by offering a tailored experience, using the right choices to arrive at the right price. And with increased transparency for potential guests into what they’re getting for their money, they will have greater piece of mind that their stay will meet their expectations—increasing the likelihood of securing the booking and return customers.
Written by Tracy Dong, Lead Advisor, APAC, IDeaS Revenue Solutions
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Tracy Dong is the Lead Advisor, APAC, IDeaS Revenue Solutions / IDeaS.com