[VIDEO] Airbnb / Hotel Tonight Transaction + Reclaiming Your Customers

Welcome to Mathlete Mondays.  This week we’re going to talk about some big recent news in the hospitality industry. Last Thursday, it was announced that Airbnb will be buying Hotel Tonight, with sources indicating a purchase price of nearly $400M in cash and stock. At first this sounds like a HUGE amount, yet it’s just a drop in the bucket when you consider Airbnb is worth more than $31 billion dollars- yes, with a B.

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What Does This Mean?

With the transaction, Airbnb gains access to 25,000 hotels in 1,700 cities across 40 countries- with the majority represented by boutique and independent hotels.

Many industry advocates have indicated their belief that this transaction may be a win for the hospitality industry, as it allows Airbnb to advance its effort to become an end-to-end travel provider and better compete against the Expedia and Booking duopoly. And I think you can make a great case for this position given that Airbnb’s commission and fee structure initially appears so much lower at 8-20% rather than the 15-30% charged by the major OTAs. Additionally, Airbnb’s curated approach stands in stark contrast to the commoditized offering by Expedia and Booking.

What little negative feedback I have seen revolves around the question of whether Airbnb will allow shared accommodations listings on the Hotel Tonight platform, leading to increased competition for participating hotels.

I believe there’s something larger at play here. We need to take a closer look, and assess what this transaction truly means for the hotel industry- not just for today, but three to five years down the line.

Based on a recent report from Skift, only three of Hotel Tonight’s executives will be leaving the organization, indicating that Airbnb is looking at this as an opportunity to better learn the hotel space rather than just a quick way to gain customers. Additionally, Airbnb usually prefers to grow new divisions internally rather than acquiring new businesses, so they must have seen something pretty compelling with Hotel Tonight.

And if you go another level deeper- and this is important- you’ll see that current HT CEO Sam Shank will be reporting to Airbnb’s President of Homes Greg Greeley, the creator of Amazon Prime, who they hired last year.

Now call me Chicken Little, but with this transaction, I truly believe Airbnb is positioning itself to become an absolute hospitality industry juggernaut. As they continue to advance their effort to become an end-to-end industry provider, hotels will initially rejoice as a new, lower cost channel comes along that can drive real volume. But what happens when Airbnb launches their own line of hotels, as they are doing with apartments today? Or…remember I told you to pay attention to Greg Greeley?  When they start a subscription model business for accommodations where guests play a flat annual fee to access accommodations across the world?

In both scenarios, hotels will find themselves fighting for the same customer against a smarter, more agile, better funded competitor.

Think I’m crazy yet?  Airbnb recently touted a study that indicated 90% of guests who first used Airbnb to book a hotel room then returned for second trip would wind up booking a home instead of a hotel the next time around. And let’s not forget that there’s already bad blood between the hotel industry and Airbnb, and their founding team is just slightly competitive…

Fighting Back

So what can we do about it? We need to gain clarity about our industry’s unique selling proposition, and we need to stop dedicating all of our time and energy to the same old battles. Instead, we need to start changing the battle field.

The hotel industry’s competitive advantage has always been its ability to provide high caliber service. And yet, we’ve always thought of service as the thing that takes place within our walls once a customer has arrived on property. I can’t tell you how many times I’ve heard “we’re in the business of serving customers, not building technology” throughout my career. As an industry we’ve failed to realize that in the modern era, we can serve our customers BY building technology.

In order to compete with the likes of Airbnb, Expedia, Booking.com, and Google, we need to start reclaiming the interaction with our guests during the buying process. Otherwise, we’ll be relegated to the rule of unnamed service provider. Think about the last time you bought something on Amazon.  Do you actually remember who the seller was, or just that you had to press one button to buy the item and it arrived at your doorstep within 48 hours? I hate to say it, but the hotel industry is headed down this path.

To reverse the tide, we need to start connecting with our customers on a personalized basis in order to show that we truly understand their needs and desires. Let me be clear here- when I refer to personalization I’m not talking about updating the email to say Mrs. Jones rather than Valued Guest, although if you haven’t done this yet shame on you… I’m really not even referring to personalized pricing, as I think far too much thought is given to pricing in relation to how we’ll actually reach our customers.

Instead, I’m referring to the development of persona-based marketing strategies. Improving our marketing starts by completing a 360-degree evaluation of our current customer base. We need to dig deeper than segmentation reports, corporate production, and channel mix, and start to evaluate multi-dimensional data that will allow us to determine cause and effect. For example, which channels are booking our highest rated customers, and how does the lead time vary for each?

Once we have a feel for who is booking our hotels and how they are doing so, we can categorize our best guests into classifications represented by “sample customers.” I’d encourage you to actually draw out each sample customer, along with the process they go through when booking accommodations. Make sure you consider all channels they may interact with throughout their journey, and provide an honest assessment of your branding efforts at every touchpoint.

Once you’ve completed this exercise, post your personas somewhere prominent where everyone on your sales, marketing, and revenue management team can see them. More importantly- every time you sit down to talk strategy, make sure you refer back to these personas and determine how your efforts will impact each group.

By forcing yourself to be crystal clear on who your best customers are (and who they aren’t), as well as the way in which they engage with your hotel, you provide yourself the best chance to outcompete the big dogs in the arenas that really matter, while ignoring the ones that don’t.

It’s not too late to level the playing field, but we need to move quickly. At Focal, we’re helping hoteliers do so by assisting them in identifying their most profitable customers and improving their OUTBOUND sales and marketing efforts. Give us a call today, and we’ll show you how we do so.

Closing

Thanks for tuning in to this week’s Mathlete Monday episode.  If you enjoyed it, please take a few seconds to share it with your network.  And as always, if you’re interested in additional episodes, please head over to focalrevenue.com/content.

I’ll catch up with you soon.  In the meantime, good luck outrunning the competition!

 

Credits:

Data & Insights- Skift.com

Music- Bensound.com

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