Dynamic Rate Marketing – Hotelier’s Powerful New Weapon to Shift Share from the OTAs

For more than a hundred years, hotel marketers have used two traditional direct- response advertising techniques: lead-in rate (“Our weekend rate starts from $199”) or a less than credible rate range (“Our Holiday Rates are $199-$399”). You can see the same “Rate range” and “Rate from” approach in the print ad from 1908 as well as in today’s Google AdWords. Unfortunately, in this fast, interconnected and multi-device world we live in, travel consumers no longer buy into promotions featuring less-than- truthful lead rates or rate ranges.

Unfortunately, in this fast, interconnected and multi-device world we live in, travel consumers no longer buy into promotions featuring less-than-truthful lead rates or rate ranges.

Dynamic Rate Marketing to the Rescue!

Today's always-connected traveler demands instantaneous hotel information with real- time pricing and resents any type of price promotions that smell of bait and switch.

So what is the solution to this age-old problem? Digital marketing technology innovations are already here, enabling hoteliers to combine online advertising and marketing campaigns with real-time hotel inventory availability and pricing to launch Dynamic Rate Marketing (DRM) campaigns.

What is Dynamic Rate Marketing (DRM)? DRM is a next-generation direct-response marketing category, which allows real-time hotel inventory availability and pricing to be inserted in various marketing initiatives: from display advertising to meta search and email marketing.

What Are the Must-Have DRM Formats?

Meta search marketing: The "grand daddy" of Dynamic Rate Marketing, this DRM format has already proven itself as an invaluable revenue generation channel and a potent tool to shift share from the OTAs. Over the past few years we have seen an explosion of meta search travel sites and features, facilitated by advancements in digital technology and advertisers' perceptions of these sites as "unbiased" online media players compared to the OTAs. Examples of prominent meta sites are: TripAdvisor, Google Hotel Finder and HPA, Kayak.com, Trivago, etc. One of my previous articles discusses this DRM format in detail: "Meta Search Marketing: The New Revenue Frontier in Hospitality."

Dynamic rate banner advertising: This is already proven as a very successful direct- response advertising format on several specialized ad networks (Adara, Sojern, etc.), generating significantly higher conversions and ROIs than banner advertising without dynamic rates.

Dynamic rate retargeting (banners + text ads): Display or text retargeting allows hotel marketers to serve follow-up marketing messages and promotions to users who have already visited the hotel website and are already familiar with the hotel product and services. Retargeting via Google Display Network (GDN), which reaches over 60% of Internet users, has proven to be the most efficient advertising format. Taking this a step further and utilizing dynamic rate banners with concrete hotel rates and promotions on GDN dramatically increases conversions and generates excellent ROIs.

Dynamic rate Google AdWords (in beta): Dynamic pricing is already live in the merchant category of Google AdWords. With rates and availability being one of the top decision factors in hospitality, dynamic rate paid search is definitely a game changing event for any hotel marketer!

Dynamic rate email marketing: Already live for a number of HeBS Digital clients, this new type of email promotion allows the hotel promo rate to change dynamically every time the user opens the email in their mail box to reflect any rate changes in the property PMS or CRS.

Dynamic rate promos on the hotel website (desktop, mobile, tablet): In existence for over two years across the HeBS Digital client portfolio, these dynamic rate "Smart Rate Promos" create a "shortcut" to the booking process by displaying real-time rates and availability as a prominent promo tile on the hotel website. On the desktop website, this DRM initiative can solve weekend or weekday occupancy needs. On the mobile site this product is perfect for encouraging last minute travelers to book for tonight or this weekend. Case in point: Smart Rate Promos double mobile website bookings for our clients!

What is DRM's Value Proposition?

Dynamic Rate Marketing has tremendous value proposition to both the travel consumer and hotelier. By combining online advertising and marketing campaigns with real-time hotel inventory availability and pricing, hoteliers can satisfy travelers' demands for instant and truthful hotel pricing information, as well as respond in real time to changing market conditions and comp set behavior. The main benefit here is that advertised rates in ad campaigns (banners, meta search, email, etc.) change automatically when the hotel changes their rates in the PMS or CRS.

For the hotelier, DRM dramatically increases campaign effectiveness and boosts conversion rates, and increases direct online bookings.

At HeBS Digital, DRM already generates substantial returns for our hotel clients, and has opened a new tremendous revenue source in 2014. This is why we called 2014 the "Year of Dynamic Rate Marketing" in our traditional "Smart Hotelier's 2014 Top Ten Digital Marketing Resolutions."

Case Study: Google Hotel Finder's Value Proposition to the Travel Consumer

With Google Hotel Finder and its associated Google Hotel Price Ads (HPA) served in the SERPs, Google Maps, Google Carousel, etc., Google has 'closed the loop' in hotel research and planning and now provides 360-degree environment in which it covers all 4 prerequisites for fast and intelligent booking decisions:

Hotel Location: Google provides the best mapping service on the web

Hotel Information: Google provides more information about any hotel, its location, destination, local attractions and so on than anyone could possibly read in a lifetime

Customer reviews: Google provides Zagat's Reviews plus a summary of reviews from all reviewing sites, including TripAdvisor

Real Time Availability and Rate Comparison: Until Google Hotel Finder and HPA, this was "the missing link" that forced users to abandon the search engine results pages (SERP) and go to an OTA site or hotel website. Not anymore! The travel consumer can check availability and compare pricing for their selected hotel and complete the booking process right then and there.

How Does DRM Fit Into the Last Mile of the Hotel Booking Process?
With 75% of online travel website consumers indicating price as a primary purchase reason (eMarketer), DRM fits exceptionally well into the "last mile" of the hotel booking process. For example, meta search players like TripAdvisor, Google Hotel Finder, Kayak, etc., have firmly established themselves in all three stages of the last mile of the hotel stay booking process: research and planning, decision verification and booking:

There is no doubt, with the proliferation of other DRM formats such as dynamic rate display and retargeting, paid search, email marketing, etc., we will be witnessing an increased importance of DRM in the planning and booking process.

How Can Hoteliers Become Part of the New DRM Phenomenon?
Today, Dynamic Rate Marketing is the most complex marketing category from management and technological perspective. Real-time hotel inventory availability and pricing feed constitute only a small part of the complexity of DRM. The most complex aspect is the technology needed to manage ad spend (budget) - per property and per meta search publisher - on a daily and monthly basis, real-time bid management, conversion and ROAS tracking, campaign monitoring and ongoing optimizations and reporting on the property level.

Most of the major hotel brands participate in one or another dynamic rate marketing format, mostly in meta search and dynamic rate display advertising. Mid-size and smaller brands, independent hotels, resorts and casinos need to partner with a specialized digital technology and marketing firm like HeBS Digital in order take advantage of next gen digital technology capabilities needed for this next gen marketing category.

The following example of HeBS Digital's proprietary MetaSearch Gateway illustrates the complexity of the digital marketing enablement technology platform needed for real- time campaign, budget and bid management and to access real-time inventory availability and pricing:

Is DRM a Distribution Channel or a Marketing Format?
I believe one of the biggest misconceptions in the industry today is that dynamic rate marketing, including meta search marketing, is a distribution channel – a "set and forget" initiative. The popular belief is that once the hotel is enabled on a meta search platform like Google HPA or TripAdvisor, or launches dynamic rate banner advertising, the job is done and the bookings will keep on coming.

Dynamic rate marketing is neither a distribution channel, nor is it a "set and forget" initiative. DRM is a key component of the hotelier's direct online channel efforts. As mentioned, it is a complex online advertising category that utilizes CPC and CPM formats. DRM requires daily – quite often hourly – ad spend and bid management, instant response to what other advertisers are doing, monitoring of budget spend on a daily basis and monitoring of rate parity (that is often abused by the OTAs), in addition to real-time room availability and pricing feeds.

For instance, since only the top three positions on TripAdvisor and the top two for Google Hotel Finder matter on any property profile page on these sites, just being enabled for meta search means nothing since OTAs will push the property down or out of the top featured listings. This is why branded hotels rarely see themselves in Google Hotel Finder meta search pricing menus or among the top three featured advertisers in the TripAdvisor meta search menu.

Why is DRM a Must Have for Hoteliers?
As mentioned, DRM provides tremendous value proposition to travel consumers. By adding real-time availability and pricing and enabling rate shopping in hotel advertising, travel consumers are now provided with everything they need to research and book their hotel stay.

On the other hand, DRM provides hoteliers with a powerful new tool in their efforts to shift share from the OTAs to the hotel website. By participating in various DRM initiatives, hoteliers are leveling the playing field with the OTAs and giving travel consumers the chance to book directly with the hotel and generate incremental revenues at more than acceptable ROAS (return-on-ad-spend).

In the same time, DRM provides proactive hoteliers with a major competitive advantage over their comp set.

By not embracing the new dynamic rate marketing, hoteliers will lose potential guests to the OTAs as well as their more savvy competitors.

What Should Be the Hotelier's DRM Action Plan in 2014 and Beyond?
First and foremost, partner with a DRM-savvy and DRM-enabled digital marketing and technology firm to map out your hotel company's concrete DRM action plan.

Realize that Dynamic Rate Marketing is already here, and here to stay. You must accommodate DRM in your existing marketing budgets for 2014, and include it as a prominent line item in 2015 budgets.

Begin by participating in meta search marketing, starting with TripAdvisor Meta Search and Google Hotel Finder/HPA.

A natural next step should be launching dynamic rate retargeting (banner and text ads) via GDN to target users who have already visited your website and are already familiar with your product and services.

Consider dynamic rate email marketing to improve email conversions and improve the credibility of your campaigns.

To attract new guests, consider launching dynamic rate display advertising campaign to address business needs such as weekend or seasonal occupancy, utilizing travel ad networks like Adara Media and Sojourn.

When considering a website redesign, demand that your website design vendor equip the new website with Content Management System (CMS) technology that has dynamic rate capabilities to serve dynamic rate promos on the desktop, mobile and tablet versions of the website, similar to HeBS Digital's proprietary CMS Premium 6.2. Such dynamic rate marketing enabled CMS technology opens the next chapter of "smart" dynamic content personalization and one-to-one marketing on the hotel website.

About the Author and HeBS Digital
Max Starkov is President & CEO of HeBS Digital, the hospitality industry's leading digital technology +website design, full-service digital marketing and website revenue optimization consulting firm, based in New York City (www.HeBSdigital.com).

HeBS Digital has pioneered many of the best practices in hotel Internet marketing, social and mobile marketing, and direct online channel distribution. The firm has won over 250 prestigious industry awards for its digital marketing and website design services, including numerous Adrian Awards, Davey Awards, W3 Awards, WebAwards, Magellan Awards, Summit International Awards, Interactive Media Awards, IAC Awards, etc.

A diverse client portfolio of top-tier major hotel brands, luxury and boutique hotel brands, resorts and casinos, hotel management companies, franchisees and independents, and CVBs are benefiting from HeBS Digital's direct online channel strategy and digital marketing expertise. Contact HeBS Digital's consultants at (212) 752-8186 or[email protected].

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