The power of package bookings for hotels

Hotels are always looking for new ways to drive demand – and packages have been a solid vehicle to do just that. Packages, or combined hotel, airfare and/or car bookings, offer valuable benefits to hotels, as well as consumers, but there’s a lack of industry information around how hotels can strategically manage this demand.

Between the first quarter of 2016 and the first quarter of 2017 alone, there was over a 35% increase in demand for package stays in the UK and that demand is likely to continue growing in the years ahead.

Historically the traditional package booker was often a travel deal seeker. Today, budget and luxury travellers alike find package booking both cost and time efficient. These travellers also tend to take more trips and/or spend more than those who buy just a flight, hotel or other single component.

Expedia took a deep dive into more than 12 months of its first-party data, comparing package demand to standalone hotel demand from global points of sale inbound to UK properties. Here are our key insights:

Packages drive increased revenue – Average Daily Rates (ADRs) – a common performance metric for hotels – for UK package stays were higher versus standalone stays by an average of almost 20%. This shows a substantial rate boost for hotels – and an incentive to include their hotels in package offerings.

Packages equate to longer stays, and booking windows – UK package bookings typically have almost twice the length of stay than a standalone hotel booking, making them an attractive source of incremental demand for hotel partners. Package demand also typically has a booking window more than one and a half times longer than standalone hotel bookings, providing more opportunities for hoteliers to upsell to consumers – both prior to check-in and on-property.

There are fewer cancellations – Since the hotel stay is commonly linked to a non-refundable flight, packages tend to have lower cancellation rates compared to hotel-only bookings. This is especially important for hoteliers, particularly during a time when consumers are paying for travel insurance or potentially booking refundable, standalone hotel stays in a separate booking to get the most competitive rate.

Less decline in ADRs – Consumers have been bombarded with information pushing last-minute bookings for great deals or discounts, but how can hotels benefit and drive incremental revenue with packages? Expedia’s data shows that package demand can benefit hoteliers – while still delivering a great value to consumers. As the booking window shrinks – from six months to 30 days out from stay – the ADR drops for standalone room nights, but actually increases for packages.

So how can hotels be even smarter about their package offerings? Here are four quick tips:

• Hoteliers should try to load package rates a minimum of three months in advance, to take advantage of the lowest flight prices, offer the best value to customers, and avoid the discounting that inevitably happens for last-minute hotel deals.
• Know how your market fits in: Hotels in major metro markets and near airports or convention centres are likely to benefit the most from packages. From a global perspective, the top five countries booking packages into the UK were the US, Germany, Italy, Netherlands and France.
• Almost all travellers who search for both a flight and hotel within a 90-day period start their search with a flight. By far, the most popular package combination is lodging plus air, accounting for 99% of demand. A deeper look at the package breakdown by traveller origin reveals that UK travellers booking a domestic package are slightly more likely to include a car rental, in comparison to inbound travellers.
• Differentiate yourself: With the typical package booking paid for in advance, the customer likely has more funds available to spend on-property, whether at the restaurant, bar, spa or on activities. There are numerous ways that hotels can stand out from their competitors and attract more ‘looks and books’ – target guests with special discounts, promotions and complimentary amenities leading up to their arrival.

Helen Maher, Director Market Management, London