Why Offering Local Tours and Activities Is A Huge Revenue Opportunity for Hotels

Background:

Offering local tours and activities - i.e. experiences in the destination - is a multibillion dollar business, with the OTAs 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. Expedia currently has 4,000 suppliers providing 27,000 tours and activities worldwide. Airbnb, through its Experiences offering, has been rolling out tours and activities in many of its key destinations with the goal of bringing its offerings to 1,000 cities. Recently, Booking.com acquired Fairharbor.com and TripAdvisor acquired Bokun.com, both cloud-based software platforms that enable local tour and activities operators to make their services bookable online.

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.

This sector is greatly fragmented, consisting of millions of small, independently-owned operators. This explains the lack of businesses offering bookings online. They simply do not have the resources available for online booking systems and website technology.

Another reason is travel consumer preferences. According to a new consumer report from Arival, which surveyed U.S. adults planning a trip this summer, only 24% of travel consumers will book most of their activities before departure. The rest book while in their destination. Travel consumers are not fully convinced that booking tours and activities in advance brings any value in the form of better choice, better service, unique offerings, meaningful savings, etc. It is no surprise that 85% of activities are booked while on location - many of the best local tours and activities are simply not available online!

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.

Travelers are fully onboard: 98% of survey respondents (tnooz) said having "local experiences" in a new city was important.

The direct online channel offers limitless opportunities for the hotelier to present the hotel as the "hero of the destination" and the perfect choice to stay while exploring all the destination has to offer such as museums, galleries, family attractions, shopping, dining, nightlife, entertainment, and more. Combine this with a strong website merchandising program, focused on the uniqueness of the hotel product and its value proposition, and you have a successful strategy!

Hotels are local businesses and this is a major advantage over the OTAs when selecting and contracting local tour and activity operators, monitoring their performance and customer service, and ensuring timely payments.

So, 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.
• Hoteliers know their local neighborhoods and immediate destinations far better than the "far and away" based OTAs.
• Hoteliers know the local tour and activity providers much better than the OTAs. In many cases hotels have been using trusted local operators for many years now.
• Locals unite: local properties can connect to local operators on an emotional level, as local business operators, something that is completely absent in any big OTA-small operator relationship.

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.

In the same time, there is a strong direct revenue benefit for hoteliers:

• Bundling local tours and activities with hotel accommodations: city tour, family, museum, theater, shopping and weekend packages, girls and romantic getaways, etc.
• Referral fees and commissions from sale of local operators' tours and commissions. Hoteliers can easily negotiate a reasonable commission for offering a local operator's tours and activities: advance sales, at the front desk and by the concierge. Typically, the OTAs are charging local tour and activities operators commissions to the tune of 20%-35% to enable and sell their offerings on the OTA online platforms, so there is plenty of room for negotiating a fair reward for the hotel.

Action plan for hotels to launch local tours and activities:

Hoteliers are uniquely positioned to offer tours and activities and work closely with fellow local business operators. So, where should they start?

1. Develop the product:

Based on property specifics such as location, bandwidth, and richness of the local destination, create both:

• Packages bundling together hotel accommodations with local tours and activities.
• Experience add-ons, which can be added to a hotel reservation, in advance, upon arrival or while the guest is on property.

In both cases the packages and special offers around activities and attractions in the destination should be tailored to fit the demographics and preferences of the hotel guests.

Case Study: Local Tours and Activities Offered by a Full-Service Hotel in New York City:

• Bloomindale's Shop Till You Drop package
• Build-a-bear workshop Fun package
• Stand Up Comedy Package
• Manhattan Museum Package
• NYS Super Sale Package (Room + 20% off 4 attractions)
• Guggenheim Museum Package
• Gotham City Government Package
• NYC Business Traveler VIP Package

This property is one of the very few hotels among the 600 plus hotels in New York City to offer this extensive range of local tours and activities. Partnering with local tours and activities operators could easily solve all the logistics of delivering the local tours and activities product to the hotel guests.

It is also important to make the service delivery of tours and activities convenient and attractive to the hotel guests:

• Offer local tours and activities starting from the hotel or with a pick-up point near the hotel.
• Offer guaranteed departure of local tours and activities, for example:
  • City Tour, leaving daily from the hotel lobby.
  • Museum Tour, leaving Friday, Saturday and Sunday.
  • Shopping Tour, leaving daily from the hotel lobby.

1. Promote the experiences throughout the guest lifecycle

Hotels are uniquely suited to proactively offer local tours and activities throughout the hotel guest lifecycle, at all touchpoints in the Dreaming, Planning and Booking Phases, as well as during the In-Stay and Post-Stay Phases:

In the Dreaming Phase:

• Include local tours and activities in the property's marketing messaging in digital marketing campaigns, including paid search, online media targeting, social media and multichannel campaigns.
• Include local tours and activities in the CRM marketing automation promotions, sent to past guests and loyalty members.
• Present the property as the "hero of the destination" in all public relations pieces, pressers, and during visits by social media influencers.

In the Planning Phase:

• On the property website, create Local Travel Guide - destination guides featuring local places of interest, tours, activities and attractions to influence travelers, making the hotel the hero of the destination for advance bookings. An added benefit is that typically these Local Travel Guide have tremendous SEO value that will boost the organic search engine rankings, bookings and revenues.
• In the Special Offers section of the property website, include detailed descriptions and imagery of the local tours and activities offered by the property, including pricing, schedules, etc.
• Promote the local tours and packages throughout the merchandizing platform on the property website: via opening promotional slides, Featured Offer banners, marketing messages, lightbox reminders, etc.

Case Study: Travel Guide on an Independent Hotel Website

Here at HEBS Digital, we include a comprehensive Local Travel Guide on every website we launch for our clients. HEBS Digital worked with an independent hotel to create comprehensive neighborhood guides surrounding the hotel, and after just 30 days live, 57% of visitors came to the guide from search engines. But this Local Travel Guide played an even greater role in the planning phase with 60 bookings initiated in the same timeframe inspiring travel planners to consider booking the accommodations.

In the Booking Phase:

• Run tours and activities promotions on the property website, including via opening promotional slides, Featured Offer banners, marketing messages, lightbox reminders, etc.
• Promote tours and activities via direct-response marketing initiatives: paid search, email marketing, social media postings, Limited time Offers, etc.
• Include local tours and activities as add-on booking upsell options:
  • in the CRM reservation confirmation
  • in the CRM pre-stay messaging

In the In-Stay Phase:

• Upon check in, hand all guests a flyer describing all of the local tours and activities offered by the property
• Include local tours and activities in the CRM in-stay messaging
• Feature local tours and activities on the Guest Portal - version of the property website for on-property guests
• Promote and sell local tours and activities via the front desk and concierge

In the Post-Stay Phase:

• Include local tours and activities in the post-stay CRM messaging and ongoing drip campaigns and marketing automation promotions, targeting past guests and loyalty members.

Conclusion:

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 OTA. 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 (Kalibri Labs).

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.

Revenue Management Guest Experience