Thursday, June 14, 2012

A Reality Check For The Motel Industry - Part 1

I've long admired Tania Witheford. She has been involved in the travel industry for many years and is currently the managing director at Her position before that was General Manager (Accommodation) NZ at Wotif Group.

Tania is one of those rare selfless folk that willingly gives back and spends a lot of time as an unpaid consultant by offering the benefit of her experience to accommodation providers - particularly in the motel industry.

Tanya recently approached me and was uncharacteristically grumpy. Her usual sunny disposition had temporarily deserted her as she revealed her disappointment at the latest opinion piece from the Motel Association of NZ (MANZ) widely circulated in various publications. (Read it HERE).

Not wanting to see the motel industry languish in the past, Tanya has kindly put her thoughts in writing and characteristically offers a positive solution to move forward.

In the first of a two part post, Tanya's words of wisdom are worth reading by all motel operators:

 I  cannot sit on the sideline any longer  and watch the  ongoing beat up of “online travel “ agencies (OTA’s).  Whilst the OTA’s are certainly big enough to fight their own battles, my comments are meant to balance the  discussion rather than defend.

I refer to the article written by Michael Baines in the recent issue of Inside Tourism.

In 2003 when I first started with, the early adopters of OTA’s, predominantly from the hotel sector, embraced online as a means to quickly and effectively, market and sell rooms to a “new” audience via a medium that granted immediate gratification, and similarly results.  The traditional wholesale channels whilst effective were “slower”.  You could not release a promotion into the market place with immediate measurable effect  and results.

The internet, removed the geographical barriers and enabled individual properties to compete with the larger chain, leveling the playing field.  The emergence and growth of OTA’s has been  a natural progression, as they found opportunity to exploit the  appetite for shopping online and to meet the need of the consumer through presentation of a range of offers in an easy to use and  consistent format.

Other sectors of the accommodation industry have taken longer to utilize online tools effectively and continue to struggle with incorporating these components into their business for benefit.

At the moment:
  • Most OTA’s do not charge for participation on their websites.
  • Commission  Only (which varies by channel) therefore  results based. GST consideration or not.
  • OTA’s  invest heavily into their website visibility through search engine optimisation and adword campaigns.
  • To achieve this many OTA’s promote their website name in conjunction with the properties name participating on their website – this is not limited to the offshore OTA’s and most are clearly identified.
  • Many of the OTA’s have offices in New Zealand, employing anywhere from 1 – 9 staff each.
  • A number of the OTA’s invest in above and below advertising campaigns to promote New Zealand and its regions, including specific activities involving direct marketing activity with their own massive databases and partners alike. Onshore and offshore.
Need I remind you of those in the NZ market who were quick to desert a NZ based OTA last year when they implemented new business commercial terms, which asked for a relatively small annual participation fee and a commission for success.  These are the same businesses who  over the years have paid significant fees for print/online advertising and not attributed or equated these fees to commission or cost of sale. These too are the same businesses who will pay for advertising on sites that provide a more gunshot approach rather than a targeted approach without result or raise their prices on commission paying sites by x% because they have to pay a commission.

AA and Jasons,  have had to revisit their business models and plans to incorporate  online, not only for the consumer but also for their paying advertiser.  These two businesses, differentiate themselves as an online resource to their customer, integrating the online and print media together with the diversity of offer to direct traffic  and business to their advertiser.   
There are more serious issues in the NZ accommodation sector to be addressed:
  • Rates  strategy and positioning
  • Value – representation and understanding
  • Offers – innovation
  • Sales and Marketing – online/offline
  • Sustainability.
  • Profitability
Many of our accommodation providers under value themselves, most too afraid to move rates /offers and many have not done so in a very long time. 

Whilst I appreciate the ideal for an accommodation provider may be for  all bookings to be via one’s OWN website, you need to remember;  the consumer decides how they search and book, based on an increasing number of triggers, options and influencing factors, including the social media and review sites alike.

And we cannot forget the search engines, as they evolve rapidly,  they ultimately play an  even more significant role as traffic director,   dictating what  results are viewed based on previous search behaviours among a multitude of other factors.

So as an accommodation provider what can you do?
  • Have a good website of your own
  • Ensure you own your domain name
  • Ensure your website has good functionality and facilitates online bookings
  • Invest in the ongoing visibility of your website
  • Consider each OTA or similar as a tool that is available for you to use in your business. 
  • Consciously make a decision about your online partners and how they fit your requirements.
  • Engage with and understand the  OTA
  • Take control and understand the terms of engagement with ANY distribution partner:
  1. Market reach
  2. Market segment/demographic
  3. Visibility
  4. Results
  5. Commission
  6. Payment method
  7. Support
  • Rates /Offers – revisit position
Invest in your own website.  If you are paying commissions to OTA’s why not spend at a minimum  the equivalent of  what you spend on advertising with an external partner and/or in commission paid.
...Tanya will follow up in another post, by providing a reality check to the individual issues outlined in MANZ's opinion piece.

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