Why Personalizing Through Direct Channels Isn’t Enough

As a regular traveler, I’m getting more excited about the shift I’m seeing in hotels and hospitality providers who are working harder to personalize a travel experience unique to ME. We’re living in an era of personalization across almost all industries, fueled by our ability to understand vast data sets and it’s encouraging to see the ways this is delivering a much better experience for customers. While I commend the huge amount of work done by hotels to drive personalization in their own channels, I’d like to politely explain why I think they’re wrong to focus on direct distribution as the only way to maximize their revenues.

As an OpenTravel board member, I’ve had the pleasure of presenting at several hospitality industry events recently. A common theme stands out from the conversations I’ve joined at these events: enticing customers to book through direct channels (branded apps, websites, etc.) is the only way to offer more personalized options. In fact, Hospitality Technology’s 2019 Lodging Technology Study found that “driving more direct reservations” is the top technology investment with 60% of hotels prioritizing this part of the experience.

It’s obvious that hotels want to improve how they can better understand and meet their individual customer preferences – great news for all of us who use hotels regularly. However, rather than solely investing in direct channels in hopes of curtailing indirect use, hotels need to embrace these new channel opportunities. Here’s why:

Experience Retailing

For travelers, their experience extends well beyond researching and booking a stay within a hotel website or app. With 70% of the content shared on Instagram being travel related, who doesn’t daydream about jetting off every time they’re using social media? Consider the significant growth and opportunity with travelers’ increasing desire to use voice search with Alexa or apps like Hopper to book an entire trip - complete with transportation, hotel and activities. In fact, Travelport’s 2018 Global Digital Traveler Research revealed that almost half of travelers[1] used voice search to search for at least part of their trip.

The term “experience retailing” for travel means removing the ‘friction points’ from travel arrangements during the research and booking phase. A seamless experience for a customer might be a one stop shop travel app that sells destination-based travel. For example, a traveler might search their trip using the term “I want to go to a play in New York City.” The traveler’s app, or search method of choice, must then respond with the options for air or ground transportation, lodging and tickets to the play – that are best suited for this traveler.

This group of travel options presented back to the traveler going to New York to watch a play is a personalized trip offer. The offer is essentially a ‘container’ which may hold one or more trip offers from travel suppliers (hotels, airlines, ground transportation and more). The traveler then books their trip through this same ‘container’ channel, based on the personalized offers presented to them. This enables them to book and manage everything in a single place, in a single transaction. Hotels that are invested solely in their own direct channels, risk missing out on being top of mind for travelers booking whole trips in one go - and the associated revenue opportunities. We know from our customers that travelers are looking for whole trip experiences when they book, not just a flight + hotel itinerary, so this is a revenue opportunity I think we’ll see grow rapidly in the next few years.

Personalized Offers Through Indirect Channels

The point I hope I’m making here, is that no airline, hotel or supplier alone can deliver true experience retailing for travel – although I think in the next few years, we might start to see a lot of them try. To meet customer preferences for a more seamless experience, travel retail is moving from a list of options and pricing (i.e., availability-focused model) to a personalized offer, based on an entire trip experience, that will be provided for a certain price, with customized attributes.

Hotels and other suppliers will be required to provide their own personalized offers to retail channel providers (i.e., indirect channels) that will deliver choices tailored to customers, based on their needs or preferences. The attributes of each supplier’s offer include product description, price, rules on how it’s used (which may be based on the customer persona), rules on how this offer may or may not be combined with other attributes and even details on immediate or deferred payment options.

The retailer’s job is to manage personalized offers from many suppliers, both air and non-air, including the abundance of additional attribute options and rules, to then pull together the best possible trip offers for the customer and enable a single, seamless booking experience. Since Alexa may know your customer better than you, hotels are able to take advantage of the preferred search engine or retail channels’ customer analytics, while still delivering the personalized experience that ultimately, improves your margins.

Reservations of the Future: The First Step

To drive this transformation, order management systems will modernize the legacy reservation systems of the past. Retail channel providers will look to order management systems to help them identify a trip based on the suppliers’ unique offers that link up to create the experience that an individual traveler wants. Keep in mind, hotels and other suppliers will maintain control over their own personalized offers that are fed into these systems.

As we progress deeper into this new era of personalization, the discussion around interoperability will become increasingly more important. The initial step to go beyond private channels is to consider the wider variety of channels out there – that are in fact, available at reasonable cost. It’s establishing some basic conventions on how this works that opens up the market for all. As travelers, it’s great news for you and me!

For more information and to get involved in the conversation, check out the resources at HTNG and OpenTravel.