Why offering local tours and activities is a huge revenue opportunity for hotels
Hoteliers will not only increase occupancy, but also get incremental revenues and advantages over competitive set and the OTAs by offering local tours and activities bundled with hotel accommodations or offered as add‐ons.
Offering local tours and activities is a multibillion-dollar business, with the online travel agencies having shown a growing interest in this sector. Expedia alone is looking to grow its local tours and activities sales fivefold - from approximately $400 million a year to over $2 billion.
Yet, in spite of all the industry buzz and its huge potential, less than 20% of local tours and activities are bookable online. Why is that? There are two main reasons: the highly fragmented nature of this sector and travel consumer preferences.
Why should hoteliers consider offering local tours and activities?
The commoditization of the hotel product, in which hotels are forced to compete with the OTAs strictly based on rate, leaves the hotel little opportunity to communicate the value of the hotel product to potential guests. To combat this and “sell on value” as opposed to “sell on rate,” hoteliers need an effective merchandising strategy, including offering a vast range of experiences as part of the property website offerings, in multichannel and seasonal campaigns.
What makes hoteliers best suited to offer their guests local tours and activities?
Hoteliers know their guests and their preferences much better than the OTAs, allowing them to customize and tailor the local tours and activities accordingly.
How can hoteliers make money from local tours and activities?
By positioning the property as the “hero of the destination,” hotel marketers will make the hotel more attractive, thus increasing occupancy, an indirect revenue effect.
At the same time, there is a strong direct revenue benefit for hoteliers.
The overall growth in room revenue, occupancy, and RevPAR that many hoteliers have been enjoying in recent years cannot possibly compensate for “the loss of wealth” in the form of steadily increasing distribution costs via the OTAs. Revenue capture - net room revenue that remained with the hotels after distribution costs - declined from 84.9% in 2015 to an estimated 83.5% in 2018.
By positioning the property as the “hero of the destination,” offering local tours and activities by the hotel - bundled with hotel accommodations or offered as add‐ons - hoteliers will not only increase occupancy, but also provide proactive hoteliers with much needed incremental revenues and significant competitive advantages over their competitive set and the OTAs.
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