Hotel revenue:
A recovery guide for travel agencies

COVID-19 has transformed travel, and agencies across the world are adjusting to a new industry landscape. Despite the upheaval of the past six months, new opportunities are emerging, and with domestic travel returning fastest, your agency can accelerate recovery through hotel sales.

Before COVID-19 impacted air ticket revenue, hotel was already the most profitable sale of an itinerary, with multinational agencies’ accommodation revenues reaching ten times that of air. However, until now some agencies have viewed hotel as an attachment to an air booking, rather than an independent revenue stream. Others have not explored the opportunities and potential that come with hotel sales altogether. By changing the focus from attachment rates to driving hotel sales, travel agencies could be looking at a longer-term shift in revenue models.

While a resurgent accommodation sector is a welcome return to revenue generation for some agencies, it represents a challenge for many. Some agencies already struggle to integrate hotel content and real-time information (such as itinerary changes) into their offerings. And now, they are contending with even greater content needs, as hotels seek to communicate their safety measures to reassure nervous travelers.

The good news for travel agencies on this front is that the pandemic has added to your value proposition and made the trusted advice and guidance you can offer more valuable than ever. Our research shows that travelers are more likely to use travel agencies than before the pandemic — given your ability to objectively share insights on safety measures, plus support with any changes to travel plans.

In this guide, we’re exploring how your travel agency can benefit from the domestic travel demand, within the context of travelers’ renewed appetite for information and guidance.

We’ll cover:

• the key trends and changes taking place across the hotel sector
• the first commercial opportunities to aid your agency’s recovery journey
• how your agency can earn revenue with the most relevant hotel content — including safety measures, reviews, personalization, and more
• How GDS capabilities can support your agency’s recovery journey.

Some of the facts and figures included here are drawn from Travelport’s new Guide to travel recovery — which includes views from travelers, agencies, and hoteliers

Let’s begin by looking at what’s changing in the hotel industry, and what agencies should know as we approach the end of this turbulent year.

Hotel guests have new demands

Hotels have been working hard to overcome the challenges presented by COVID-19, so that they can welcome guests back on-site. Meanwhile, travelers have also identified a wide range of measures that they want to see in place before they will consider booking a hotel stay.

Source: Travelport Guide to travel recovery

In the past, value and location may have been travelers’ top considerations when booking a hotel. Now, safety is a much higher priority, so your agency needs to access this information easily and within your workflow and communicate it to potential bookers.

What’s interesting is that we’re seeing large hotel groups starting to brand their safety policies and position these as unique differentiators. Some of the world’s leading hotel brands have implemented cleanliness policies, such as:

• IHG’s Clean Promise
• Hilton’s Clean Stay
• Accor’s ALLSAFE.

Beyond hotel groups, we’re also seeing recommendations from trade and government bodies. The American Hotel & Lodging Association (AHLA) has released six recommendations it hopes will become standardized across the country and has the support of several major hotel groups, including Hyatt and Loews. The ‘Safe Stay Guest Checklist’ includes:

1. Face coverings in indoor public spaces
2. Social distancing in common areas
3. Contactless options where possible, including reservations, check-ins, and payments
4. Only essential daily cleaning
5. Contactless room service
6. Avoiding travel if unwell or contact with an unwell person

Other guidelines have been developed specifically for the hospitality industry by the World Travel and Tourism Council (WTTC) and the World Health Organization (WHO) to facilitate a return to business. However, the challenge is that measures and legislation still vary widely from nation to nation, even city to city. For example, July 2020 saw Sydney, Australia adopt behaviors that were very close to business as usual — while Melbourne, in the southern state of Victoria, re-entered a strict lockdown, which is still ongoing. To reassure customers, agencies will have to show that hoteliers are marrying not only local regulations with the usual expectations of a hotel stay, but also customers’ concerns over adequate hygiene preparations.

For travel agencies representing hundreds of hotel brands, it takes heavy-duty support to ensure customers have all the information they need to buy with confidence. To strengthen your sales position, your agency needs a technology partner that can provide this information within your workflow.

Digitization

In the new age of physical distancing, digital experiences are helping consumers to feel safe. Digitization within the hotel industry was already growing before COVID-19, with virtual menus, mobile room selection and check-out, conference room booking, and event scheduling becoming more commonplace. Digital experiences are going to be even more critical in the future, as social distancing looks set to stay in place for some time, driving the adoption of contactless technologies in hotels around the world.

Source: Travelport Guide to travel recovery

Many hotels are adopting apps and alerts to manage their COVID-19 response and meet customer expectations. For example, mobile and desktop-based software packages now allow hotels to manage their preventative maintenance, room inventory, and cleaning checklists. Concierge apps have also been suggested to help maintain social distancing.

Hotels recovery outlook

The COVID-19 situation is complex and dynamic. The travel industry has no benchmark for comparison, and so the jury is out on how long recovery may take.

From watching markets across the world, it’s clear that recovery will be complex and is unlikely to be linear. However, there is a common global trend of domestic leisure travel returning fastest, which is good news for agencies driving revenue through hotel sales. Given this recovery in domestic travel, our hotel partners are optimistic. In our Guide to travel recovery, hoteliers shared positive views for the recovery period ahead:

1. 77% expect full recovery to be achieved in less than three years.
2. 32% expect a ‘new normal’ to be established in less than 12 months, with 42% expecting domestic travelers will be ahead of that curve.
3. There is consensus that leisure (52%) will return to normal ahead of business (26%) in the first year and that families (19%) and solo travelers (21%) will be the first customer segments to return within 3-6 months.

Taking the UK as an example, property experts Knight Frank and some boutique hotel chains share this optimistic outlook. They expect a V-shaped recovery, with occupancy growing in Q3 2020, speeding up into Q4, with a focus in the UK on London and Edinburgh’s cultural centers. While hotels such as Red Carnation lament the lack of American tourists, the UK’s non-urban domestic market has experienced a “record high”.

Multiple factors set to influence demand

Several factors are influencing consumer demand for hotels.

Location: Travelers are choosing hotels outside of urban areas (we explored this data in our recent webinar [LINK]). People want to avoid crowded areas where social distancing is more difficult. Our hotel partners also noted that properties in drive locations are faring better while people are opting for domestic. The heat maps below demonstrate the shift from hotel bookings in urban locations in June 2019, to suburban in May and June 2020. This can be seen in cities across London, in the UK; and Washington D.C., in the US.

Price/star rating: Will there be more demand for premium or budget hotels? Our research with our hotel suppliers found varying views. Some expect budget and mid-level brands to benefit more in the early stages of recovery, due to the economic impact many consumers are experiencing. However, this may mean that budget hotels will need to rely on promotions and offers to drive demand.

Some premium brand hotels are concerned about losing high-value customers. Those who previously booked premium products could switch to more affordable alternatives in an economic crisis. The opposing view is that this segment would be more willing to continue to pay a premium if cleanliness policies/sanitation is guaranteed.

Your agency should monitor variance in demand as domestic travel continues and be prepared for when business travel starts to return.

All eyes on APAC

Many travel agencies are watching Asian markets carefully to see the response over the near to medium-term. As the first market to be severely impacted by the pandemic, it may be one of the first to rebound fully. Marriott Hotels expect East Asia to lead recovery, and millennial travelers will drive that recovery. Colliers International's Hotel Insights Q3 2020 report predicts a U-shaped recovery, varied across countries in the Asia-Pacific region.

Meanwhile, governments and destination marketing organizations are doing what they can to help rebound. For example, the Singaporean Tourist Board and other associations have invested in a $45m nine-month domestic advertising campaign to boost tourism. The hope is that some of the $34bn spent by Singaporeans on international travel will be spent internally, to help bring revenues closer to the $27.7bn tourist spending the nation enjoyed last year.

As travel agencies get back to business, they are finding ways to operate through the pandemic and beyond. This means evolving their value proposition and reimagining the booking process in ‘the new normal’. Many have reopened their doors, and where restrictions have prevented this, others are reassessing their business model to go digital and bring more operations online.

The pandemic has shown that the most resilient travel companies are the ones who have diverse offerings and appeal to the broadest range of customers. The more components of the trip your agency can sell — including hotel and transportation — the more they can increase overall revenue, critical customer satisfaction scores, and retention rates.

Domestic travel means hotel stays

From our recent research, we know the focus for agencies in the near-term will be on domestic hotel sales within the leisure travel sector. This is being driven by people visiting family and friends as restrictions lift or taking some much-needed time off in their home destination. Many countries are also actively driving domestic tourism, encouraging citizens to reduce the spread of COVID-19 and support their local economies by taking staycations. Some are engaging destination marketing organizations’ support to drive this, and in certain locations, staycations are even being subsidized by the government.

This pivot towards ‘staycations’ is reflected in the data. Using the US as an example, while demand for most modes of travel (including air, cruise, and rail) has dropped by at least 70%, car is holding relatively steady with only a 3% decline, according to AAA. In our recent webinar, we shared that our data also shows that drive locations are up, resulting in a faster bounce-back among one-to-three-star properties, compared to four-and-five-star.

Hotels beat air for margin

Hotel sales have been an increasingly attractive source of revenue and yield for some time, offering agencies higher margins than air. Take Expedia, for example. It is one of the largest air retailers globally, yet in 2019 it generated just 8% of its revenue from air ticket sales and 68% from hotel sales. But with revenues from international air travel significantly down, and domestic travel overtaking international, agencies have more incentive to explore this lucrative revenue stream. In fact, 86% of travel agencies place hotel commissions as one of their three most important sources of income, ahead of airline commissions (70%) and transaction fees (64%).

Travelers are turning to agencies for guidance

Our recent research found that travelers are more likely to use travel agencies than before the pandemic. This is made up of 33% of travelers increasing their preference for agency support, against only 18% less likely, with the remainder the same as prior to COVID.

Source: Travelport Guide to travel recovery

Travelers are turning to agencies for assurance on safety (65%) and their ability to change or cancel a trip if required (23%). So, as travelers get back on the move, they’ll be looking to you more than ever before to guide them on their hotel stays.

Young travelers (18-38) make up the most significant increase (39%) among those now more eager to book through a travel agency. There is an additional commercial opportunity for agencies, as this segment is expected to be among the first to travel — so it’s vital your agency is ready to meet their needs with comprehensive hotel content.

Source: Travelport Guide to travel recovery

Now that we’ve reviewed the data and trends, we’ll look at some of the practical ways your agency can start to drive hotel revenue. What follows is a list of tools and techniques you can use to meet travelers’ changing needs, improve efficiency at your agency, and increase your value to your clients.

Provide safety and policy information

With safety top of mind for travelers, it’s now vital to your value proposition that your agents can find, and communicate, safety and policy information during booking.

Agents need to know about the latest updates on hotel policies, such as social distancing requirements, regulations, and amenity restrictions, as well as information on government restrictions on travel.

Since these are constantly changing, agents often need to look at many different sources for the most up-to-date information before making a booking. However, some desktop tools have consolidated such information from airlines and hotels, delivered via an APP plugin. Hotel providers can also use Travelport’s best practice guides when updating their Room and Rate description.

Some hotels are also using booking platforms and advertising services to communicate their cleanliness and hygiene policies and procedures. These banner ads and sign-on messages within the GDS can help you and your team stay up to date on the latest news, offers, and changes.

Deliver detail and choice in booking

Booking a hotel is often an emotive choice — even for a business traveler. Choosing a hotel needs a greater depth and breadth of information to support the decision-making process. Property location, amenities, points of interest, dining options, loyalty schemes, and traveler recommendations are all considerations. Delivering that level of detail to individual customers — and getting the suggested offerings right the first time — can be challenging for travel agencies using multiple websites to find this information.

As we enter recovery, the customer experience is more important than ever. Indirect intermediaries such as Booking.com, Skyscanner, or HomeAway set the benchmark for this, especially on mobile. These online travel agencies (OTAs) attract customers with a wide choice and creative ways of bringing their destination to life. Shots of swimming pools, gyms, restaurants, and views plus real customer reviews, maps, and tour videos are all compelling — all examples of ‘rich’ content that encourages people to travel again.

This content is also available in the GDS. Agents can show it to clients, whether in-person or virtual, and it provides a wealth of contextual, at-a-glance information to the agent themselves who can then make quick decisions on behalf of a customer. With all the necessary information in one place, travelers can book with confidence without resorting to protracted internet searches.

Use dynamic pricing and promotions

Some hotels have experienced an uplift in bookings from domestic travel in recent months, during the peak vacation season. However, it's clear that foreign tourism, which hoteliers rely on throughout the rest of the year, will remain a challenge for some.

Cutting prices alone is not going to push up demand for accommodation and, in the longer term, could damage future brand loyalty. Instead, hotels are focused on adding value that matches traveler needs. This includes three nights for the price of two and special packages, such as chef-created in-room dining experiences. Even something as simple as offering far greater flexibility around booking modifications and cancellations is likely to give greater confidence as travelers remain uncertain over whether locations will stay out of lockdown.

In addition to driving demand through communication, your agency should be looking at pre-selling promotions with hotel partners, offering packages with a special insurance inclusion and free cancellation policy, and promoting seasonal travel. Consortia programs have taken a lot of the legwork out of this process, with pre-negotiated rates that are both extremely competitive and commissionable — which brings us to our next point.

Optimize rates and commissions

Travel agencies often choose to book their clients’ rooms via aggregators with the expectation that these rates are better than going direct. But overall, this is less profitable and diminishes the travel agency’s control over the booking, service quality, and value propositions to its customers. Plus, the agency only receives a portion of their commission, not the full hotel commission rate, compared to a standard 8%-12% through their GDS. When booking through an aggregator, agencies are effectively disintermediated, as the hotel believes their relationship is with the aggregator rather than the agency.

By using a GDS, your agency remains in control of the relationships, margins, and, perhaps most importantly, their hard-earned customer data. When booking via an aggregator, any information such as email addresses is second-hand. Should any issues arise, hotels will not share information with the agency, as it wasn’t the source of the booking.

While research has shown that the pandemic has not made customers as price-sensitive as expected, they are still seeking the best deal. Within the GDS, travel agencies can access competitive rates, embed their negotiated rates, and access competitive consortia programs like THOR to find the hotels with the most favorable rates, yielding the best revenue. This level of control is a big advantage for your recovery journey. And, for those regions where agents have no partnerships, the GDS often holds its own negotiated rates in the system, like Travelport Exclusive Rates, so travel agencies can always find their customers the best deal.

Leverage your data, tools, and partnerships

GDS technology can give travel agencies supporting data, tools, and key partnerships to leverage in their commercial and operational activities. Available data includes valuable trending analysis, production insights, and competitive rate data. Example tools include the latest desktop software and supporting tools like negotiated rate audits or access to consortia programs. And finally, as agencies shift focus to hotel transactions, they may need support related to commission processing, bill back, and virtual credit cards.

With additional demands and reduced resources, more than ever, agents need these tools and features within their GDS platform to avoid leaving their workflow.

Use graphical capabilities

As travelers consider booking, they want to know more about their options and visualize them. GDS technology allows agents to access travel content with interactive and graphical capabilities, which makes consulting with clients using their own search functionality much more user-friendly. It is also fully compatible with the more native systems like cryptic, allowing agents to switch between them where necessary. This means agents can explore every option for their client quickly and efficiently. They can deliver the most comprehensive accommodation service, encouraging higher initial spending and greater loyalty down the line.

Explore integrated mapping

Integrated mapping in the GDS gives agents access to over 334 global hotel brands, including detailed hotel descriptions and features — all within a single workflow. Mapping allows agents to zoom to street level to see where hotels are located, while linking to availability information in the GDS in real-time. This helps avoid disappointment when a customer sees a property that fits the bill but has no availability. This is particularly important in the era of COVID-19, as some properties may not yet be able in a position to welcome visitors, even if local regulations have given the green light.

Access the latest reviews

Accessing hotel reviews ‘on the spot’ is vital for travel agents, especially when you consider that 83% of TripAdvisor users will 'usually' or 'always' reference TripAdvisor reviews before making a hotel booking. Now, travelers seek more reassurance than ever before — from agencies and fellow travelers who have firsthand experience of staying at a hotel. Undecided travelers want the full picture, and reviews are where travel customers generally dedicate so much time when conducting their own research, potentially leading to them booking via an intermediary.

A GDS that gives the agent instant access to reviews reduces the risk of the customer conducting online research, and potentially finding information in conflict with the agency’s advice and promoting a switch to another travel provider.

Grow your online presence

Having a strong online presence and digital strategy will be highly valuable to your agency from now on — particularly as restrictions may be reintroduced in some shape or form over the coming months. As people seek to limit their in-person interactions, online will be more valuable to both agencies and their customers, motivating them to refocus marketing and digital advertising. This will require guidance to maximize the effectiveness of their campaigns.

Find out more about optimizing your digital marketing strategy during recovery in our guide and on-demand webinar.

Personalize your offering

Global Traveler research conducted by Travelport in August 2019 revealed that 35% of travelers are increasingly frustrated by companies failing to remember their preferences, an increase of 4% on the previous year. Since the impact of COVID-19 will be felt across the industry for some time, the ability to identify customers’ needs from their first post-lockdown booking experience could be valuable in creating personalized, differentiated experiences. Knowing that their agents both have access to and understand this information is a powerful tool to engender loyalty.

Given the rise of domestic travel bookings, your agency should now focus on understanding domestic leisure travelers’ needs and tailor your targeted marketing proposition and offers accordingly. For example, a traveler making a trip to visit friends and relatives may have accommodation arranged already. However, if they do not, the end destination targeting will be less about the hotel itself and more about the location being near to their friends and family. To deliver this level of targeting, your agents need to know the traveler’s motivation for the trip and support more specific hotel location search results.

Travel agencies can follow the example set by hotels by providing tailored content at the time of booking that taps into each client’s distinct needs, building profiles, making the offering more compelling, and increasing the agency’s overall attachment rate.

Since the beginning of the crisis, travel agencies have been evolving their role and increasing their value to consumers by acting as trusted advisors in a rapidly changing situation.

Now that people want to travel again, the priority for agencies is to capitalize on the first commercial opportunities emerging within the domestic travel trend. Hotel sales are the natural starting point for your recovery journey.

Understanding customers’ individual needs as restrictions ease is the key to remaining competitive and, in the longer term, easing the industry back to normality and returning revenues. Reassurance, information, and attractive offers are the three pillars on which success will be built, and travel agencies have the power to influence all three.

Hotels are eager for as much of the information above to be made available to travelers at every stage of their journey. They want travel agencies to continue to be the experts when discussing travel with customers. By delivering the most convenient, yet most compliant, accommodation options to their clients, your agency can foster trust and loyalty that has the potential to extend far beyond the impacts of the COVID-19 crisis.