Welcome to Part II of our hotel package strategy blog where we analyze package from a revenue management perspective. In Part I, we looked at hotel packages from a digital marketing perspective and answered the questions of Who, What, When, Why and Where. Now, we dive deeper into the answer of How.
Stephanie Smith of Cogwheel Marketing had a question and answer session with Beth Wakefield of Cardinal Point Revenue to get the perspective of a Revenue Manager.
Stephanie: Beth, as a revenue manager, why you do build and encourage package development to your hotel?
Beth: First and foremost, it helps push ADR. Secondarily, it helps with exposure and leveraging partners in the local community.
Stephanie: Do packages sell?
Beth: It really depends on the market. For branded hotels, we generally see a lot of success with extra points packages and generic Visa gift card packages. Outside of those, we are leveraging the packages for marketing and see a halo effect. Local packages don’t generally generate more than a handful of bookings monthly.
Stephanie: Can you expand on the halo effect?
Beth: We may have a package that includes 2 tickets to a particular demand generator. When visiting the website of the demand generator or their social media, they may realize we have a partnership, but already bought their tickets. At this point, they may complete a transaction other than the package, like BAR or Advance Purchase. Without the marketing, they likely would not have put our hotel into their consideration set, thus still getting business from that guest, but not the package.
Stephanie: Good to know! What are the considerations you take into account when building a package?
Beth: Discuss the package with the operations team. Check they have the availability of the items. Consider incorporating a lead time. Some systems make it hard to block certain dates, so keep that in mind. For example, don’t offer the Museum package on days the museum is closed. Be thorough with your terms and conditions like days of the week offered. Also, think about other things to add value, like adding a length of stay restriction then giving a greater discount on tickets or items included. It is important to consider if the amenities will be given for every night of the guests stay or just the night of arrival. Lastly, consider if the fees are per stay or per night in your pricing strategy.
Stephanie: Let’s get down to pricing and what generally works best. Can you give me an example.
Beth: First, always build your packages at BAR+ (a floating rate above BAR) and not a flat rate. Let’s go through building a Visa Gift Card Package for simplicity:
- Choose an audience to target like guests who may be traveling to the local outlet mall
- Name package “XYZ Outlet Shopping Package”
- Let’s say you want to include a $25 Visa Gift Card. And, even though it may be no cost to the hotel, the mall will give you a VIP coupon book. Let’s value that at $10 to the shopper.
Item: Retail: Cost to Hotel:
$25 Visa Gift Card $25 $25
Coupon Book $10 $0
Total $35 $25
- We don’t want to lose money on a hotel package, but we want the guest to see value in booking it, so the rate can be loaded anywhere from BAR+$10 to BAR+$25 (Again, assuming coupon book is free to the hotel)
- Hopefully, the guest will see value in receiving the coupon book “for free” and they should be easily able to see the value in paying less than $25 for a $25 gift card
- Since the rate is loaded above BAR, the hotel’s ADR will increase when the package books
- Or, you could include a 2-night minimum, but only price at BAR + $5.
Stephanie: Last but not least, do you push packages to the OTAs?
Beth: Yes! A BAR+ booking minus commission is still better than most advance purchase rates.
For more hotel package strategy details, contact either of our 2 experts that have tackled many hotel projects. Digital marketing strategy provided by Stephanie Sparks Smith of Cogwheel Marketing. Revenue management expertise provided by Beth Wakefield of Cardinal Point Revenue. Both are consultants of Cayuga Hospitality Consultants whose profiles can be found here: Beth Wakefield and Stephanie Smith.