Hoteliers weigh benefits of last-minute leisure guests
Hoteliers weigh benefits of last-minute leisure guests
16 MAY 2017 8:06 AM

A boost in last-minute leisure bookings requires hotel managers to rethink strategies to take advantage of the trend.

REPORT FROM THE U.S.—Hoteliers are adapting their revenue-management strategies to accommodate rising levels of last-minute leisure demand, which sources said is driven by a series of technological, economic and social factors.

Many of those spontaneous, last-minute bookings are from drive-up travelers. But the rise of mobile booking apps and online travel agencies are partially responsible for the surge, having made it easier than ever for the last-minute guest.

“Industrywide, bookings tend to be shorter in nature than they were historically,” said Kevin Ruhman, VP of sales and marketing for NewcrestImage. “The generator behind that is really a more educated traveler. People are realizing they can go to their handheld, or their desktop, and look for last-minute inventory like never before. … So the windows get shorter and shorter, because they can see inventory when they go to any of the OTAs. The industry’s revenue management practices have had to adjust to that.”

Among other factors, the economy is fueling a climb in spur-of-the-moment travel, sources said.

“People are booking in a shorter duration from when they want to go. They are deciding in less than a week, ‘OK, let’s take a small vacation to Chattanooga,’” Navin Shah, chairman of Royal Hotel Investments, said. “There are two reasons why this is happening: Number one, people have more confidence in the economy than before. … The second is that unemployment is going down, so people have a little more money.”

Driving vacations, which are more likely to include a last-minute hotel booking, can fluctuate based on factors such as weather and gasoline prices.

“Fuel certainly, in a long run, will either depress or improve. Weather is more of an indicator,” Ruhman said. “We have properties where if the forecast is good, we bloom on leisure last-minute. If the forecast is not as good, then it’s not as good. … Whatever major city you’re in, weather will determine if somebody wants to go, particularly in leisure. That makes sense: It’s the last-minute getaway.”

Adjusting strategies
For many hoteliers, the answer to the last-minute leisure boom has been to invest heavily in both revenue management personnel and technology. Revenue managers employ a range of tools from complex algorithms to deep historical data to make informed, on-the-fly decisions about how much last-minute inventory to sell and where, and how to price it.

“We’re looking as far back as five years to see in these particular months on these particular days what’s happened,” said Kerry Ranson, chief development officer for HP Hotels. “If that particular trend is still strong, then we don’t play in the OTA, and I’d rather sit and wait. If we haven’t used our trends to play it right, then we could take a whole lot of cheaper-rated business when we don’t need to.”

Increasingly complicated yield management systems are another essential tool for hoteliers juggling last-minute inventory. The latest generation of these systems, Ruhman said, offer specific components designed to crunch the numbers underlying last-minute booking patterns, and then provide recommendations on inventory and channel selection.

“The algorithms in the systems they’re coming out with and building within these systems account for the management of this highly volatile last-minute bookings segment, which hotels need to capture,” Ruhman said. “The smart companies are using those advanced yield management techniques to capture that. We’ve gotten to a point where hoteliers and revenue managers can set up plans based on history, but the systems are dynamic enough to close OTAs when necessary, or conversely, open OTAs when needed.”

A downside
Some hoteliers are also finding the increase in last-minute demand means managing around rising cancellation rates. The wealth of online/mobile options available to consumers, paired with relaxed cancellation policies, has resulted in an upward trend.

“You can see upwards of a 30% cancellation rate,” said Laura Brouk, SVP and chief revenue officer at White Lodging, “which means if you’re going to run 80% occupancy, you’re rebooking a hell of a lot of rooms at that point, which is also what’s making that leisure booking pattern feel like a shrinking window. …

“Transparency has enabled people to cancel one place and rebook another if they see a better rate. The OTAs’ ‘pay later’ model alleviates any responsibility by the customer until they check out, so they can cancel that reservation with very little or no penalty.”

Brouk said the only real solution is for the brands themselves to change policies regarding cancellations, and that won’t likely happen anytime soon. Issues like this motivate hoteliers to push for direct bookings, especially for last-minute inventory, or in some cases, to rely less on this demand segment entirely.

“We’ve been really focusing on marketing further out, with promotions and special offers … and as (bookings) get closer in, shrinking that gap of discounts or promotions,” said Kim Nugent, VP of revenue management for Benchmark Hospitality International. “By doing this, we’re really able to build that base business, so we aren’t relying—in most of our markets—on that last-minute business from the OTAs.”

Loyalty first
That said, sources agreed that in today’s hospitality market there’s always going to be a significant—and potentially growing— base of last-minute leisure demand, even if those guests could conceivably get a better deal by booking further in advance. And since that last-minute guest is now trained to hunt for the cheapest rate, some hoteliers are prepared to abide by market pricing, focusing on the opportunity to gain loyalty over added revenue.

“Just because they are coming to you on a shorter notice, on a company basis, we do not raise the rates. We do not encourage any of our employees to do that,” Shah said. “We do not try to take advantage of people booking in a short duration. After all, we want that leisure traveler to become our guest forever.”

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