HawkPartners Hotel Digital Insights July 2012

Digital Marketing Innovation in Hospitality

July 2012

For more information contact:

Jennifer Anthony [email protected] 703-304-4585

Brooke Hempell [email protected] 678-602-6058

Scott Wilkerson [email protected] 301 951-7046

2

With over half of bookings done online, major hotel brands need to innovate digitally to sustain leadership

0%

20%

40%

60%

2006 2007 2008 2009 2010

OTA Brand Sites

% of Major Chain Hotel Bookings Online (U.S. 2011)

9% 10%

12%

16% 17%

•  OTAs were estimated to cost hotels $2.5 billion in 2010, capturing $40–120 per booking, vs. the $2–6 cost to hotels when booking is done at their own sites

Source: “Distribution Channel Analysis: A Guide for Hotels,” HSMAI Foundation, January 2012

3

Four key elements drive digital innovation within the hotel space

Digital Innovation

Mobile

Web Site Digital Marketing

Social Media Innovation/optimization

of smartphone & tablet marketing •  Availability/functionality/

popularity of apps •  Robustness of mobile site

Effectiveness of brand site •  Site technology, search &

navigation •  Reservations & service •  Rewards/loyalty •  Property/destination guides

Search, display, and email marketing efforts •  Innovativeness of content •  Frequency, integration w/

social media, presence on emerging platforms

Brand presence, community size, & user engagement •  Major platforms: Facebook,

Twitter, YouTube

Source: Adapted from “Digital IQ Index: Hotels,” L2 Think Tank, March 2012

4

A recent study rates Four Seasons, Hilton, and Marriott ahead of other major hotel brands in their “Digital IQ”

Competitor L2 2012 Digital IQ Index Rankings Rank Digital IQ Rationale

1 150 •  Website delights, with strong visuals, curated itineraries and user reviews •  Cohesive online experience, with multiple social communities •  Experimental approach to digital, with staff contributing content

2 149 •  Leveraging IT on-property to deliver digital guest experience •  Highest score in search marketing •  Largest/fastest growing Facebook Community

3 143 •  Robust online booking engine •  Co-founder of Roomkey.com – driving effort to bypass OTAs •  Strong mobile experience in-room and on the go

4 137 •  Mobile standout, including use of targeted mobile advertising (e.g., to business travelers accessing an airport’s WiFi service)

5 133 •  Forward-thinking Foursquare initiatives and site relaunch

6 131 •  Innovative use of social media, bolstered by guest-supplied photos

7 128 •  Highest rating for branded site •  Partnership with Bazaarvoice to integrate guest opinions in Facebook

8 125 •  Considered “strong but safe”

9 116 •  High LOVE factor, photo contest sparked strong user generated content across channels

Source: “Digital IQ Index: Hotels,” L2 Think Tank, March 2012

5

The travel industry boasts the highest share of mobile commerce revenues

54%

63%

10%

12%

20%

68%

66%

46%

44%

22%

iPhone

website

Android

iPad

Blackberry

Mobile Adoption Rates % of Hotel Brands on Mobile Platforms

2012 2011

Sources: “US M-Commerce, by Industry,” ABI Research, as cited in press release, December17 2010; “Digital IQ Index: Hotels,” L2 Think Tank, March 2012

Blackberry

iPad

Android

Mobile Website

iPhone

Mobile

Other 12%

Entertain/Tickets

3%

House wares

6% Office

Supplies 7%

Books/Music/DVDs

9% Apparel

13%

Computers/Electronics

20%

Travel 30%

US Mobile Commerce Revenue by Industry (2010)

•  Hotels have moved quickly to optimize their web sites to offer mobile booking functionality (with biggest jumps in Android and iPad-supported applications)

6

A new generation of mobile apps enables easier booking and quick access to property-specific information and deals

Mobile

“Native booking module makes it easy to browse and book hotels”

SPG Account Info & Latest Offers

24X7 Cust Svc

Starwood Choice Hotels “Quickly find & book 6,000+ properties anytime, anywhere”

Retina display graphics

Access to special deals

Marriott “Just one tap away on your iPhone or iPod Touch”

GPS functionality to find hotel near current location

Browse city guides, maps, hotel photos

Sources: “Top Five Hotel Mobile Apps,” Inventorspot.com, iTunes App Store, Hotels, July 2012

7

But many hotels lag behind guest expectations for current, easy-to-understand web site content and rate information

Source: HotelMarketer.com Infographic, May 2012

Web Site

8

Curated content is a powerful way for hotels to keep travelers on their web sites for longer

5.14

5.41

5.25

5.38

5.31

5.47

6.12

6.04

6.20

6.24

Average Time On Web Site (in minutes, by Content Feature)

Concierge/Staff Tips

Curated Itineraries

Photos of Local Attractions

Guest Testimonials

Photo Galleries 94%

52%

27%

17%

15%

% of Hotel Brands (w/Feature on Website)

Source: “Digital IQ Index: Hotels,” L2 Think Tank, March 2012

With Without

Web Site

9

Recognizing the value of unbiased ratings, Starwood was the first major hotel brand to offer online ratings & reviews

Web Site

Starwood launched Ratings & Reviews in October, 2011 with direct mail campaign •  Recent guests received an invitation

to rate their hotel experience, rather than traditional satisfaction survey

Reviews are displayed directly with hotel property booking pages, making it easier for consumers to find relevant property-specific information

Similar to 3rd party review sites, guests can see breakdown of ratings

10

Hotels trail other prestige industries in their use of email marketing best practices

11%

35%

50% 56%

60%

98%

Use of Email Marketing Best Practices Hotel Industry, December 2011

Source: “Digital IQ Index: Hotels,” L2 Think Tank, March 2012

Email Sign-Up

Welcome Email

Additional Emails

Viewable On Mobile

Links to Social Media

Send to a Friend

Digital

Average Emails per Week

Spec Retail

Magazine

Beauty

Fashion

Hotels

Jewelry

3.2

2.8

1.2

0.7

0.2

0.1

•  Hotels take the first step of signing up guests through email, but miss out on critical touchpoints, including welcome email, and making emails viewable on mobile devices

11

Competitor Social Media

Facebook Twitter YouTube FourSquare

•  Book travel •  View or post photos •  Tab for Hilton Honors •  LGBT promotion icon

•  38K Followers •  Need to have Twitter

account to access •  Frequent updates

•  Frequent updates •  Videos of chefs

cooking, events & new room designs

•  NA

•  Video of Annual Report & Welcome

•  View & post photos •  Welcome icon for

community service

•  183K Followers •  Frequent updates

•  No link through home page

•  Old postings •  NA

•  Book travel •  View or post photos •  Welcome concierge

video •  IHG curated discussion

•  13K Followers •  Primarily travelers

posting vacation photos/comments

•  No link through home page

•  Leverages YouTube for announcements

•  Socially resp focus

•  1st hotel to partner w/Topguest to connect with location-based networks

•  View or post photos and/or reviews

•  Check events •  Use SPG points to bid

on auction events

•  91 Followers on SPG Insider (limited posts)

•  49K on Starwood Buzz (freq updates)

•  Through SPG site •  Frequent updates •  Videos of chefs

cooking & special events

•  Integrated partnership

•  SPG members earn rewards

•  View photos •  Occasional promotions,

limited activity •  No direct booking

functionality

•  No link through homepage

•  10K followers •  Limited updates

•  Few company posts •  Limited viewings

•  Some use with focus on western US properties

Differentiation in social media is increasingly difficult, as presence across platforms has become table stakes

Sources: Hotel websites, Facebook, Twitter, YouTube, Hebsdigital.com, “Converging Social & Mobile: Why 2012 is going to be the year of SoLoMo,” 3/2012

Overview of Social Media Marketing Practices

Social Media

12

Hilton has the largest and fastest growing FaceBook community

Close to 300K followers vs. 100K for SPG and 111K for Marriott

Source: hilton.com, Hilton Facebook

• Hilton utilizes its Facebook page to: - Provide another

channel for guest to book travel

- Target priority segments, like the LGBT community

- Run promotions and sweepstakes

- Provide sticky content that drives engagement, like photos

Social Media

13

New sales and communication avenues have the potential to disrupt channel practices in the hotel space

Potential Disruptors in Digital Marketing

Consortium-Controlled Booking

Flash Sales Social Networking Sites

• Direct booking hotel search engine with better terms than most OTAs - Opportunity for hotels to gain

back some of $2.5B in OTA annual commissions

• Drives down costs & enables better customer experience

• Launched January 2012 by Choice Hotels, Hilton, Hyatt, IHG, Marriott & Wyndham; Best Western followed

• Total gross billing from 3 major daily deal sites represented 8.5% of all travel vendor billing for 4th Q 2011 ($71.5M)

• Pros: data mining resource • Cons: - Cannibalizes sales - Erodes rate parity (“The Law

of Unintended Channel Share Loss”)

- Does not drive significant bookings

• The fastest growing social networking site - businesses create Google + pages to engage customers - target by topic of interest - offers platform for visitors to

recommend hotels - measure pages by type of

interaction • ~2/3 of hotel brands had a

presence on Google+ in 2011

Sources: “Digital IQ Index: Hotels,” L2 Think Tank, March 2012; hebsdigital.com, “Another Look at Flash Sales Sites,” 3/2012; Tnooz.com, “Do Flash Sales level the Playing Field for Independent hotels,” 4/2012; Google +

Social Media

14

It is unclear if travel flash sales remain a disrupter, or a focused way for smaller independents to increase reach

Tour Operators; 5%

Vacation Homes/

Timeshares; 9%

Branded Hotels; 12%

Inns and B&Bs; 32%

Independent Hotels; 42%

• Flash sales provide Independents and Inns with another lever to drive demand

• 12% branded hotel participation raises questions: - Are independent property owners using flash sales on

unsanctioned basis? - Do chains turn a blind eye at the corporate level to give

owners flexibility? - To what extent does this practice violate pricing parity

agreements?

Breakdown of Flash Sales Travel Deals from Groupon, Living Social and Travelzoo

Source: ”Travel’s Daily Deal: Distribution Disruption or Flash in the Pan?,” 4/2012; PhoCusWright Market Research and Yipit, based on 4Q2011 flash sales deals for accommodations

Social Media

15

The marketing success of flash sale providers may inspire hotel brands to up their digital email campaigns

Sample Flash Sales

• Built on email list of consumers interested in receiving travel deals

• Largest publisher of deals on the internet, with over 25 M subscribers

• Publishes Top 20 deals by location, each researched by Testing Center

• Weekly, members-only flash sale with exclusive deals of 50% or more off handpicked hotels in top destinations worldwide

• Deals must be purchased within 72 hours, need to register as Orbitz member to receive Insider Steals by email

• Partnership creates email subscriber base of 50 M potential travelers

•  “Groupon Getaways” offer discounted deals to properties within Expedia’s network of 135,000 hotels

Uncertain if this model is sustainable and what the impact will be on major hotel brands: •  Do flash sales prompt repeat business? Additional spend on ancillary services? •  Is there additional opportunity to drive new bookings through email outreach? E.g.,

by inspiring unplanned getaways •  Or, will customers be content to wait for next flash sale?

Social Media

16

How to Learn More

About HawkPartners! Sample Hospitality Clients

HawkPartners is a marketing consulting firm that works at the intersection of market research and marketing strategy to help industry-leading, Fortune 500 clients make fact-based decisions. In the hospitality space, HawkPartners works to help our clients understand their customers and competitors, and to develop game-changing marketing strategies."

Founded in 2003, the firm is headquartered in Cambridge, MA, with additional offices in New York, and Washington, D.C."

www.hawkpartners.com!

•  Please contact us to learn more about our perspective on digital marketing:

Jennifer Anthony: [email protected] 703-304-4585

Brooke Hempell: [email protected] 678-602-6058

Scott Wilkerson: [email protected] 301 951-7046