Package your stay is the way to go

BANGKOK, 19 July 2017: Packages are emerging as a popular option on hotel booking websites extending the booking options for consumers to create their own customised travel experience.

Expedia Lodging Partner Services, Thailand director, Pimpawee Nopakitgumjorn, told TTR Weekly that packages combining hotels, airfares and car rental, offer valuable benefits for both hotels and consumers.

The latest Expedia  inbound data for 2016, shows more consumers are booking hotels and other travel essentials using the online booking space.

Its full year 2016 first-party inbound data [1], compared package demand to standalone hotel demand made by international travellers to Thailand.

In the past, package holidays were the exclusive domain of travel agents and specialists who created an itinerary, but as online booking services adopt the latest Apps the package experience is now in the hands of consumers even for multi-destination visits.

According to the data, packages bookings are emerging as a way for hotels to maximise revenue, secure longer booking windows and minimise cancellations.

More trips

While historically the traditional package booker was often a travel deal seeker, today – budget and luxury travellers alike find packages not only cost efficient, but also  time efficient.

Unlike dedicated single-supplier websites, OTAs offering packages give travellers the ability to compare a wide range of products. Consumers can comparison shop within a particular segment (air, hotel or car rental), which saves time and money when they combine multiple products.

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

More revenue

Overall, Average Daily Rates (ADRs) – a common performance metric for hotels – for package stays were higher versus standalone stays by an average of more than 5%. This shows a substantial rate boost for hotels – and an incentive to include their hotels in package offerings. As an example, there is substantially more package demand for four to five star properties in Phuket and Koh Samui as compared to standalone hotel demand in these beach destinations.

Longer stays

Package bookings typically have almost twice the length of stay than a standalone hotel booking, making them an attractive source of incremental revenue for hotel partners. As illustrated by figure 1, major Thai markets and resort destinations have a noticeably longer length of stay for packages compared to standalone hotel stays.

Figure 1: Average Length of Stay

Expedia’s package demand to Thailand generated nearly two times longer booking windows (60 days) when compared with standalone hotel bookings (35 days). While Bangkok and Pattaya have similar package booking windows averaging 55 days, resort destinations such as Phuket and Koh Samui have longer booking windows of over 65 days.

For hoteliers, these longer stays and longer booking windows mean more opportunities for them to engage with and up-sell customers – both prior to check-in and on-property.

Fewer cancellations

In package bookings, since the hotel stay is commonly linked to a non-refundable flight, packages have half the cancellation rate of a hotel-only booking. This is especially important for hoteliers, particularly during a time when consumers are paying for trip protection [travel insurance] or potentially booking refundable, standalone hotel stays in a separate booking to get the most competitive rate.

Notably, destination markets with the lowest cancellation rates for packages include Phuket, Chiang Mai and Bangkok at under 5%, and Koh Samui at less than 5%. In comparison, a busy market like Pattaya has a slightly higher package cancellation rate of over 5%.

To tighten on packages, Expedia suggested four key strategies for hoteliers:

Embrace air connectiona  

As airfares decline, package offerings should be a strategic consideration as hoteliers can capitalise on more attractive combined savings from air and hotel components (comparing average price 91+ days in advance of stay vs bookings made the week before travel [2].

This trend shows that 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 consumers, and avoid the discounting that inevitably happens for last-minute hotel deals.

Know who’s booking

From a global perspective, the top inbound package drivers to Thailand are Hong Kong, Malaysia, Singapore, Japan and Australia followed by US, UK, Germany, France and Italy. Amongst them, travellers from Australia and Malaysia generated the longest booking window, averaging 72 and 63 days respectively.

Thai hoteliers looking to target travellers with the longest stay should focus on driving package demand to Expedia’s travellers from Australia as their average length of stay approximates eight days per trip.

To secure a safe base of demand with low cancellations, Thai hoteliers can focus on travellers from Malaysia, Hong Kong and Singapore as they typically have cancellation rates below 5%, well below the average Thailand hotel cancellation rates.

Extra spend

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 on activities. It will come as no surprise to Thai hoteliers that highly engaged guests are likely to boost the hotel’s bottom line. For example, a US-based Gallup study indicated on average that engaged guests spend USD588 (approximately THB20,060) per stay, versus USD457 (approximately THB15,590) per stay per average guest and USD403 (approximately THB13,750) per stay per disengaged guest [3]. There’s a demonstrable benefit to ensuring guests are engaged with the hotel from the moment they confirm their stay.

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(Source: Expedia)

[1] Based on Expedia group full year 2016 package demand data

[2] Based on average ticket prices for flight departures L12M ending Q1 2017

[3] Gallup, ‘Engage Your Hotel Guests by Taking Care of Their Well-Being’ November 2014®, a travel website, offers travellers a wide selection of hotels, airline tickets, activities and travel services at attractive rates.