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Tuesday , November 21 2017

The power of packages

Teresa Matheson from the Expedia Group shared her exclusive tips to help hoteliers strategically manage package offerings to attract diverse travellers and optimise revenue.

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.

While the traditional package booker was often a travel deal seeker, today’s budget and luxury travellers alike find package booking not only cost effective, but time efficient as well.

To help New Zealand hoteliers better understand the nature of package demand and the opportunities they present, we deep dived into more than 12 months of Expedia’s first-party inbound data, comparing package demand with standalone hotel demand for travellers visiting New Zealand.

What did we uncover? In short, packages not only attract a diverse range of travellers, they are a great way to maximise revenue and secure longer booking windows.

Four fast facts about packages

1. Package demand is on the rise

Travellers visiting New Zealand are increasingly combining multiple products (air, hotel and/or car rental) to save time and money. In the past 12 months, packages booked to New Zealand increased almost 30 percent year-on-year.

2. Package travellers tend to take more trips and/or spend more

According to Phocuswright’s 2016 report, Destination Unknown: How U.S. & European Travellers Decide Where to Go, travellers who book package deals tend to take more trips and/or spend more than those who buy just a flight, hotel or other single component.

Unlike dedicated single-supplier websites, OTAs with package offerings give travellers the ability to efficiently compare a wide range of products in a single place. An OTA like Expedia enables comparison shopping within a particular segment (air, hotel or car rental), allowing travellers to save time and money when they combine multiple products.

3. Packages drive increased revenue

Overall, Average Daily Rates (ADRs) – a common performance metric for hotels – for package stays were higher versus standalone stays by an average of 10 percent. This shows a substantial rate boost for hotels – and an incentive to include their hotels in package offerings. Destinations such as the West Coast and Taupo had standout ADRs and generated the biggest gap compared to standalone prices. The package ADR for West Coast was nearly 20% higher while rates for Taupo were almost 15 percent more than standalone rates. It’s also interesting to note that package travellers from Japan and Australia generated a 10 percent higher ADR compared to standalone demand.

4. Packages equate to longer booking windows

Packages lifted booking windows by 1.3 times for New Zealand hoteliers. On average, packages were booked 45 days in advance whereas standalone stays had a 35 days booking window. Interestingly, Auckland, Wellington, Rotorua and Taupo had similar booking windows (just under 40 days), while Queenstown and Christchurch had the longest booking windows at 55 and 60 days respectively.

For hoteliers, longer booking windows mean more opportunities for them to engage with and potentially upsell travellers prior to check-in.

Figure 1: Average Booking Window for 12 month period ending Q1 2017

figure-1-300x201 The power of packages

But how can hotels can be smarter about their package offerings? Here are some simple tips to help your package offerings pack a punch!

  • Understand and embrace the air connection

As air prices decline, package offerings should be a strategic consideration as hoteliers can capitalise on more attractive combined savings from air and hotel components. For destinations in New Zealand, average air ticket prices steadily decline closer to stay, dropping 50% for bookings made the week of travel vs bookings made 3+ months in advance. However, ticket prices increase dramatically for last minute day-of departures (surging back up 50%). This trend shows that hoteliers should try to load packages rates in advance rather than holding out for last minute bookings, to take advantage of the lowest flight prices, offer the best value to consumers, and avoid leaving empty rooms on the table due to cost-prohibitive flights.

  • Know who’s booking package and how this fits with your sales strategy
  • Engage guests to increase your bottom line

With the typical package booking paid for in advance, the consumer likely has more funds available to spend on-property at the restaurant, bar, spa or other activities. By engaging with your guests in the lead-up to and during the stay, it’s more likely they will indulge in these extras.

For example, a US-based Gallup study indicated on average that engaged guests spend USD$588 per stay, versus USD$457 per stay per average guest and USD$403 per stay per disengaged guest.

  • Keep up to date with seasonal trends and events

Expedia group has an army of Market Managers that know the intricacies of their market across New Zealand. This on-the-ground team works with hotel partners every day and provides tailored advice to help each partner achieve their business goal – from seasonal trends and events to different campaigns and promotions. Smart hoteliers can also input package options that deliver a compelling offering that meets the specific needs of their target travellers.

About Teresa Matheson

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