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The power of package demand for hotels

Pimpawee Nopakitgumjorn - 17 July 2017, 00:08

Packages are a great way for hotels to maximize revenue, secure longer booking windows, and minimize cancellations.

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.

To provide hotels with actionable insights, Expedia group took a deep dive into its full year 2016 first-party inbound data , comparing package demand to standalone hotel demand made by international travelers to Thailand. The findings: A wealth of information and opportunity that should be music to hoteliers' ears. Packages are a great way to maximize revenue, secure longer booking windows, and minimize cancellations.

Package travelers tend to take more trips and/or spend more
While historically the traditional package booker was often a travel deal seeker, today - budget and luxury travelers alike find packages not only cost efficient, but time efficient as well. Unlike dedicated single-supplier websites, OTAs with package offerings give travellers the ability to efficiently compare a wide range of products in a single place. An OTA like Expedia enables comparison shopping within a particular segment (air, hotel or car rental), allowing travellers to save time and money when they combine multiple products.

According to Phocuswright's 2016 report, Destination Unknown: How U.S. & European Travelers Decide Where to Go, travelers 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.

Packages Drive Increased Revenue
Overall, Average Daily Rates (ADRs) – a common performance metric for hotels – for package stays were higher versus standalone stays by an average of more than 5%. This shows a substantial rate boost for hotels – and an incentive to include their hotels in package offerings. As an example, there is substantially more package demand for 4-5 star properties in Phuket and Koh Samui as compared to standalone hotel demand in these beach destinations.

Packages Equate to Longer Stays, and Booking Windows
Package bookings typically have almost twice the length of stay than a standalone hotel booking, making them an attractive source of incremental revenue for hotel partners. As illustrated by figure 1, major Thai markets and resort destinations have a noticeably longer length of stay for packages compared to standalone hotel stays.

Expedia's package demand to Thailand generated nearly two times longer booking windows (60 days) when compared with standalone hotel bookings (35 days). While Bangkok and Pattaya have similiar package booking windows averaging 55 days, resort destinations such as Phuket and Koh Samui have longer booking windows of over 65 days.
For hoteliers, these longer stays and longer booking windows mean more opportunities for them to engage with and upsell customers – both prior to check-in and on-property.


Figure 1: Average Length of Stay

Fewer Cancellations
In package bookings, since the hotel stay is commonly linked to a non-refundable flight, packages have half the cancellation rate of a hotel-only booking. 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, destination markets with the lowest cancellation rates for packages include Phuket, Chiang Mai and Bangkok at under 5%, and Koh Samui at less than 5%. In comparison, a busy market like Pattaya has a slightly higher package cancellation rate of over 5%.

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
As air prices declines, package offerings should be a strategic consideration as hoteliers can capitalize on more attractive combined savings from air and hotel components (comparing average price 91+ days in advance of stay vs bookings made the week before travel).

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 consumers, and avoid the discounting that inevitably happens for last-minute hotel deals.

2. Know who's booking and how this fits with your sales strategy
From a global perspective, the top inbound package drivers to Thailand are Hong Kong, Malaysia, Singapore, Japan, Australia followed by United States, United Kingdom, Germany, France and Italy. Amongst them, travelers from Australia and Malaysia generated the longest booking window, averaging 72 and 63 days respectively. Thai hoteliers looking to target travelers with the longest stay should focus on driving package demand to Expedia's travelers from Australia as their average length of stay approximates 8 days per trip. To secure a safe base of demand with low cancellations, Thai hoteliers can focus on travelers from Malaysia, Hong Kong and Singapore as they typically have cancellation rates below 5%, well below the average Thailand hotel cancellation rates.

3. Engaged guests can help boost bottom line
With the typical package booking paid for in advance, the consumer likely has more funds available to spend on-property at the restaurant, bar, spa, or on activities. It will come as no surprise to Thai hoteliers that highly engaged guests are likely to boost the hotel's bottom line. For example, a US-based Gallup study indicated on average that engaged guests spend USD$588 (approximately 20,060 baht) per stay, versus USD$457 (approximately 15,590 baht) per stay per average guest and USD$403 (approximately 13,750 baht) per stay per disengaged guest . There's a demonstrable benefit to ensuring guests are engaged with the hotel from the moment they confirm their stay.

Expedia's self-service website, Expedia® PartnerCentral, offers several tools to help hotel partners connect with guests anytime and anywhere. For example, EPC Conversations supports pre-arrival guest engagement, empowering hoteliers to create first impressions and set guest expectations with a custom welcome message, build meaningful relations, manage special requests; and provide information about the property's services (spa, concierge, restaurant, etc.).

4. Support from Expedia Market Managers
The Expedia group has an army of Market Managers that know the intricacies of their market across Thailand - Bangkok, Chiang Mai, Pattaya, Hua Hin, Krabi Phuket and Samui. This on-the-ground team works with hotel partners every day and give tailored advise to help each partner achieve their business goal - from seasonal trends and events to different campaigns and promotions that works for their hotel partners. Smart hoteliers can also input package options that deliver a compelling offering that meets the specific needs of their target travelers.

[1] Based on Expedia group full year 2016 package demand data
[2] Based on average ticket prices for flight departures L12M ending Q1 2017
[3] Gallup, 'Engage Your Hotel Guests by Taking Care of Their Well-Being' November 2014

Pimpawee Nopakitgumjorn, Director, Market Management - Expedia Lodging Partner Services, Thailand
Having been with Expedia for the past 10 years, Pimpawee Nopakitgumjorn has a wealth of experience and deep insight in the Thai and Laos market, currently serving as Director, Market Management at Expedia Lodging Partner Services, Expedia group. Pimpawee leads a dedicated team of 55 members including Market Managers in prioritizing opportunities for revenue growth, and oversees the execution of strategic Expedia initiatives both internally and externally with over 8,000 hotels.

Pimpawee joined Expedia as Market Manager, increasingly building her long-term relationships with Expedia hotel partners and stakeholders. She rapidly took on a greater role as she was promoted to Senior Market Manager and consequently Regional Manager over the space of 4 years, where she leads the organization through communication strategies and market insights, fostering an agile work environment, as well as identifying and coaching talent.

Previously, Pimpawee held roles in Agoda Company Pte Ltd/ Agoda Services Co.,Ltd., as well as recruitment agency PA Balanz Executive Search Co.,Ltd.

Pimpawee holds a Bachelor of Engineering degree from Thammasat University, before also obtaining a MBA, majoring in International Business, from the National Institute of Development Administration (NIDA) in Bangkok.




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