Competing with short-term rentals for leisure and small groups

short-term rentalsWith travel recovery getting underway, hoteliers would be wise to closely follow the performance of home sharing platform bookings relative to traditional hotels and the total accommodations market. In 2022, it’s undeniable that short-term rentals are becoming highly influential, both in terms of being the brands of choice for many travelers as well as trendsetters that hotels will inevitably have to emulate. On that note, what can hotels do to take back market share from this rapidly growing sector?

With leisure transients first out of the gate to feed the recovery revenue pipeline, the next related segment to consider is small, primarily leisure groups. One area where short-term rentals have already influenced travel behavior is in how leisure customers think about their occupancy demands.

Before, if you were traveling, say, as two couples, you would simply ask for two rooms in a hotel, with or without a special request to have them collocated. The question was only ‘what’ hotel to select. Now, such travelers are likely to first consider the option of getting a shared space with two bedrooms through an alternate lodging provider. The question has become a ‘why’ select a hotel at all. 

In this initial bout of what’s being dubbed Revenge Travel 2.0, we will see many different rationales for small groups of leisure travelers from couples getaways to multigenerational family reunions. For all cases going forward, hotels now need a compelling reason for answer the why before even getting to the what. The goal here is revenue by adapting to these new demands and the steps you can take to quickly pivot as well as set up your hotel for long-term success.

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The customer’s perspective

To start, reframe the question in the first paragraph from the perspective of a brand-agnostic customer. Not loyal to one hotel brand or another, what accommodation will offer me the most ‘value’ in terms of rates, spaces, convenience, and location? As an exercise, this can help you to think more objectively about the inherent advantages of your short-term rental competitors and what operational changes or promotions would be meaningful to these guests.

Here are some notes on these alternate lodging providers and what you can do with these elements:

  1. Rates – Home sharing units have gained the reputation as offering more square footage per dollar over hotels. While we’re all advertising a best rate guarantee to incentivize customers to book direct, it’s now time to conduct an analysis about how your rates stack up with these other accommodations. You may find that an adjustment to your rate strategy is in order.
  2. Spaces Home sharing units offer a diverse range of accommodations in terms of configurations, amenities, and décor. Hotels can thus work to create unique touchpoints in each room or even subcategories that have different FF&E configurations. One note is that part of the appeal of a traditional hotel is the guarantee of certain features no matter the exact room; this brand standard ‘peace of mind’ should be adhered to and reinforced through marketing.
  3. Convenience Even as the pandemic subsides, guests are increasingly favoring more contactless exchanges built into their hotel stays – mobile check-in, mobile room keys, guest comm apps with digital concierge, in-room voice bots versus calling downstairs, mobile check-out and so on. Yet some guests and managers still prefer not to bypass the front desk as a core aspect of the onsite experience. The key is to offer the flexibility for guests to choose.
  4. Location While your hotel is situated where it is, consider how home sharing platforms have long touted their inventory as being ‘embedded in the community’. Can’t you do the same? Hotels often have some of the best locations in town with immediate access to main sights and transportation options. Start by really embellishing these two, then wax in-depth about all the other hyperlocal (roughly within three blocks) businesses that guests should note, both for convenience (groceries and pharmacies) and experiences (restaurants and shopping).

Those four points are brushing over a literal ton of work to properly pivot of a brand, but they are critical right now as hotels look to maintain pricing power by not diluting rates even as the world reopens and travel options explode. From our experience overseeing hotel sales and marketing, we can offer a few more general tips to help you maximize bookings for the year ahead.

  • Bundle wherever you can. Besides learning from home sharing providers, another big goal this year should be to focus on increasing total spend per guest and not just RevPAR. Corroborating that, our past work from numerous asset management assignments has shown a direct relationship between property utilization and satisfaction – the more you motivate guests to use your amenities, the more revenue you earn and the more likely they are to revisit or recommend. Bundling and packaging creates added value to optimize that total spend.
  • Frame it as free. There is something very powerful in the word ‘free’ in terms of drawing eyeballs. Before throwing freebies into your packages or extra nights, consider that many of the services you already offer as brand standards can be reframed as complementary perks, including flexible cancellations and refunds as well as perhaps such features as parking, valet, concierge, business center workspaces, pool access or beach access.
  • Make the numbers simple. What’s easier for your brain to understand: 67% of the time or every two out of three times? Most of us prefer the latter because it’s simpler to visualize, and this same principle applies to your discounts and promotions. If you are trying to build midweek occupancy while the corporate segment is still nascent, consider the reframing of a ‘25% off for four nights or more’ into a ‘stay three nights and get a fourth night free’ type of ad so that the mental math isn’t a barrier.

Obviously, this is still barely cracking the surface. Nevertheless, if you apply these principles to both single-room leisure transients and multi-room leisure groups, you will undoubtedly win over more guests who otherwise would go elsewhere.

This article may not be reproduced without the expressed permission of the authors.


Tags: leisure groups, leisure transients, short term rentals



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