It's easy to forget that Netflix started out as an ambitious DVD-by-mail company that nearly went out of business. Back in 2011, Netflix was being savaged by the media and its stock price was plummeting. Today, it's the second-most valuable media company in the world and boasts 125 million subscribers.In the following post, we'll reveal what hotels can learn from the Netflix success story, including how to utilize personalization, consumer psychology, and an experimental mindset to compete with the OTAs, offer incredible customer service, and win more direct bookings.1. Netflix obsesses over making the right recommendationsNetflix knows it needs to capture attention in under 90 seconds. If members haven't found something to watch within that time, it's very likely that they'll move onto another activity. That's why Netflix has made huge investments in its AI-powered recommendation system.Using sophisticated algorithms, customers receive tailored viewing suggestions based on an array of factors, including what they watch, their past viewing habits, when they pause, rewind or fast-forward content, and their browsing and scrolling habits. However, what often gets forgotten is how this recommendation system has changed over time.Previously, recommendations were made based on a user's expressed preferences. But the shows and movies a user claimed to like the most was found to be a less than perfect way to recommend new content. In an interview with Wired, Netflix's former VP of Product Innovation Carlos Gomez-Uribe explained:"People would rate movies like Schindler's List high, as opposed to one of the silly comedies I watch, like Hot Tub Time Machine. If you give users recommendations that are all four or five-star videos, that doesn't mean that they'll actually want to watch that video on a Wednesday night after a long day at work."Netflix learned two important lessons: that preferences are largely dictated by context, and that people often report aspirational preferences that don't actually reflect their daily activity.Takeaway for hotels:Your guests' past preferences might not be a reliable way to predict their future preferences. For example, the purchases a guest made during a previous stay might have been influenced by their mood, their finances at the time, or the company they were traveling with. Have their preferences changed since? The only way to know is to ask.Leading up to a stay, send a short survey or questionnaire to ask your guests if there's anything you can do to further personalize their experience. Even if their preferences are exactly the same, the gesture alone will demonstrate your desire to make their stay as enjoyable as possible.The other lesson from Netflix is the huge value of a personalized service. If you personalize your hotel marketing and website to each user, you'll build loyalty among your guests by promoting the specific amenities, services, and experiences that they really care about.2. Netflix optimizes images to drive engagementIn early 2014, Netflix carried out research that showed the artwork for each title had the biggest influencer on a member's decision to watch content. In fact, artwork received over 82% of focus as people browsed the platform.This led to the company conducting extensive A/B testing to compare how different artwork affected audience engagement. The results were impressive, sometimes leading to 20-30% more views for a title. Previously, Netflix simply used the images supplied by their studio partners.Netflix has since started personalizing images to each of its members to further optimize user engagement.Takeaway for hotels:Pay close attention to the images you use to showcase your property. It's easy to rely on the same images out of habit, or a belief that they best represent your hotel. The lesson from Netflix is to avoid complacency, and that image choice can have a dramatic impact on consumer decision-making.Make a practice of optimizing your images by running A/B testing throughout the year. While you might not be able to run tests on all of your images, focus on the most prominent ones on your website, marketing, and third-party listings.Check out our in-depth guide to learn how to choose the best images for your hotel website.3. Netflix earns loyalty through a culture of convenienceIn the digital age, convenience drives loyalty. And Netflix is the perfect example of how to build supreme convenience into the heart of the user experience.From the main screen, members can go from browsing to watching a show in two steps. Any shows that a person has previously been watching are conveniently positioned at the top of their customized home screen.Netflix's 'Continue Watching' list also means that members can seamlessly carry on watching a show, rather than having to rewind and find the place they left off.Takeaway for hotels:Netflix gives modern consumers what they want: ultimate convenience. Hotel guests are equally keen for a hassle-free experience. They want the choice to self-serve and communicate on the move. So you need to make everything about interacting with you feel effortless and easy.Does your hotel provide a mobile check-in/check-out service, or a mobile payment option? Do you have a messaging platform that lets guests chat with your hotel and order services? As consumers seek convenience and frictionless interaction, having the right technology in place is vital.citizenM is an excellent example of a hotel chain tailored to on-demand culture. The brand website promises guests a 1-minute check in/check out, and 24/7 food and drinks. Guests can use their room keys to pay for food and drink at the onsite canteenM, and the receipt at checkout goes straight to a guest's email inbox.The takeaway message? Cultivating a culture of convenience should be a priority, so start today.4. Netflix knows how to keep viewers hookedNetflix CEO Reed Hastings has called sleep the company's biggest competitor. To that end, Netflix uses various tactics to keep members watching late into the night.The company pioneered the whole-season release model when it launched every episode of House of Cards (its first original show) all at the same time. This model has since led to the "binge-watching" phenomenon. Audiences get hooked on a show, which increases the odds that they'll finish the series.In addition, the auto-play function is set to 'default,' so a new episode automatically begins after the previous episode has ended. Last year, video previews (a form of specially designed video synopsis) were added to the browsing experience to help make a quick decision about watching a new title.Combined, these elements reduce friction and keep people on the platform for longer.Takeaway for hotels:The abandonment rate in the hotel industry is notoriously high. So there's real value in trying to replicate the Netflix approach to audience engagement.Plenty of seemingly modern hotel websites consistently lose bookings because of subtle flaws in their user experience, so be sure to acquaint yourself with some of the main conversion killers. It's also important to integrate social proof into your hotel website to reassure guests during the buying process. In addition, automatic price-matching widgets will ensure customers don't have to leave your website to compare rates elsewhere.5. Netflix constantly evolves (even when it's ahead)Back in 1997, Netflix was a fledgling company that shipped DVDs. At the time, Blockbuster was the market leader in the video rental industry. Fast-forward two decades, Blockbuster is long gone and Netflix is the second biggest media company in the world.How did that happen? In large part, because Netflix realized that online streaming was the future and adapted its business model. Blockbuster hesitated and paid the price.Netflix continues to innovate and improve its service. Among countless changes, the company has created more original content, overhauled its recommendation algorithm, and keeps improving its interface. It would be easy to stop still. But that isn't in the company's DNA.Takeaway for hotels:It'd be easy to forget that the Netflix success story is largely about mindset: a willingness to adapt and a relentless desire to experiment. For hotels, this lesson translates easily: be aware of your competition, stay on top of industry trends, and adapt swiftly and decisively.Just like Netflix, it's vital to realize that the needs of your guests are constantly changing. The 'on-demand' Gen Z generation is coming of age and set to outnumber Millennials within a year. As your guest of tomorrow, you need to be ready now to cater to the new expectations of younger travelers.Having the right technology in place is also crucial. OTAs continue to win direct bookings because they constantly optimize their online experiences. Hotels must do the same by investing in the right booking engine and reservations system, embracing mobile optimization, and understanding how to leverage artificial intelligence across the travel ecosystem.Applying the Netflix mindsetThe success of Netflix might appear to be a direct result of its vast financial resources. But it's worth reflecting on a quote by Netflix CEO Reed Hastings from a VentureBeat interview in 2016:"It's not Netflix that's making the changes. It's the Internet. We're figuring out every year how to use the Internet to make a great consumer experience. Every year is an experiment."The takeaway message here is that in the on-demand age, the world moves fast. To satisfy and wow on-demand travelers, your hotel needs to adapt to the marketplace, make use of the latest technology, offer supreme convenience, and be tailored to meet the personalized needs and desires of each guest.