This week’s musings, reflections and observations about travel affiliate marketing…

1. I think several of the recommendations proffered by distinguished Center for Hospitality Research at the Cornell University School of Hotel Administration as to how hotels and resorts worldwide can maintain rate integrity and avoid price wars carry particular relevance and importance for travel affiliates.

In their report titled Hotel Revenue Management in an Economic Downturn: Results from an International Study, the Center for Hospitality Research presents both the results of an insightful survey they undertook of hotel revenue managers from around the world and commentary from senior hotel revenue management executives on the survey’s findings at the School’s revenue management roundtable event held in Singapore earlier this May.

The survey, (of which a complimentary copy is available here), sought to capture the changes in revenue management that have come about due to economic challenges that have wreaked turmoil in the hospitality industry between 2008 and 2009.

The Singapore roundtable participants agreed that pricing power has shifted considerably toward the customer as a result of the deep discounting that many hotels have put in place because of the huge drops in occupancy.

Among the key strategies and tactics the Cornell Hotel School recommends hospitality companies implement to help turn this situation around include:

  • Create strategic partnerships with “…particular distribution channels.  If you give certain distribution channels a higher commission (whether travel agents or third-party intermediaries) they may be willing to deflect a higher proportion of their business to you.  Your costs would go up, but you not need to cut rates,” the survey’s authors note.
  • Develop additional market segments as an “…economic downturn is a good time to carefully examine your marketing plan and determine whether there are other small or price-sensitive market segments which can be developed for your hotel.”
  • Offer targeted rates cuts to “…select market segments.  Building effective rate fences that limit the discounts to specific customer segments is key to an effective discounting strategy.”

If you are a hotel or resort executive, and you’re thinking about who might make good strategic partners to help you identify and develop new market segments and niches, or craft targeted promotional rates and fences to attract more ‘hard to reach’ or price sensitive customers to your chain or property, TravelDividends suggests that travel affiliates should be on the top of your potential partner list.  In our opinion, no other distribution channel has a better understanding of the needs and buying criteria of their customers, the competitive dynamics in the travel segments and niches they specialize in, as well as intimate knowledge of what works and doesn’t work in online marketing than travel affiliates.

2. While on the topic of surveys, I think that the just-released travel consumer survey, Vacation Confidence Index, reveals some very interesting statistics that both travel suppliers and travel affiliates can use strategically to help boost both their top and bottom lines.

Conducted by leading market research firm Ipsos Public Affairs on behalf of travel insurance giant Access America, this travel consumer focused survey finds that despite two-thirds of Americans believing that vacations are “…very important or important,” one in four (23%) of those who place a premium on vacation travel “…are not planning to take a trip this year, even with an array of attractive deals beckoning them to hit the road.”

According to Daniel Durazo, Director of Communications for Access America, the disparity between those wanting to take a vacation and those actually taking a trip, has created “…a large ‘vacation deficit’ among Americans, and an opportunity for travel suppliers to woo reluctant travelers with great deals and promotions.”  We agree with Mr. Durazo’s point about the potential opportunities that travel suppliers can leverage as a result of the consumer’s ‘vacation deficit’, but respectfully add that travel affiliates can also benefit from this dynamic.

There are several other major findings in the The Vacation Confidence Index which TravelDividends thinks travel affiliates can use to fine-tune and improve their product portfolios and marketing campaigns. Chief among these are:

  • Americans believe unprecedented numbers of travel bargains are available; 72% of survey participants agreed we are in a “…great time to find travel deals.”
  • Survey participants also gave specific examples of the kind of travel deals they would value most:
    • Free or discounted tickets to attractions or cruises was voted tops by 24% of all respondents
    • An equal number mentioning free hotel nights or kids-stay-free offers
    • Another 2% identified hotel upgrades as particularly attractive
  • The demographic groups that placed the highest value on vacations were Hispanics (77%), parents of children under 18 (73% said vacations were important), followed by those with at least some college education (72%).
  • At the time of the survey (July 16-20), 37% of respondents reported they had taken a vacation this year, while another 29% felt confident they would take a vacation in 2009; (TravelDividends thinks this latter statistic suggests that there is still a very large cohort of would-be travelers that travel affiliates can target for vacation offers right now).
  • When asked to name the best places to find travel deals, 57% of survey participants mentioned the Internet, either online travel agent (OTA) sites or search engines such as Google.

Given that the survey was underwritten by a major travel insurance supplier, let’s not forget that in times like this, travel insurance is almost a pre-requisite of any traveler’s vacation, and that travel suppliers and travel affiliates can make a tidy profit from selling trip cancellation, medical emergency and evacuation coverage, among other insurance plans in conjunction with their core travel products.

Although Access America does not sell its plans through the travel affiliate channel, there are plenty of other travel insurance companies that do.  If you don’t offer travel insurance to your customers, TravelDividends strongly suggests you reconsider your position.

If you are a travel affiliate or a travel supplier, what are your reactions to the survey findings? How would you use this data in your business?  What adjustments would you make to your product portfolio or marketing campaigns?

3. Keeping the insurance theme going, I think that Lufthansa Airlines’ (LH) offer to compensate travelers if their summer vacation is ‘washed out’ underscores the point we made in last week’s Things I Think I Think post that other travel companies should copy Mexico City’s tactic of offering tourists free travel insurance to help resuscitate the City’s flailing travel industry.

In its press release announcing the plan, the German flag carrier said that for every day that it rains more than 5mm a day, Lufthansa will give their customers that travel to any one of 36 European and worldwide destinations  €20 ($28), up to a maximum payment of €200, or $280 for the duration of their trip.  Destinations on LH’s route network that are covered by the insurance plan include cities such as Barcelona, Istanbul, Madrid, Rome, Dubai, Cairo, New York, Tel Aviv and Washington, DC.

The so-called “sunshine insurance” is available on flights booked until August 18, for travel during September and October.  Travel affiliates that sell LH should pounce on the airline’s consumer offer with an eye towards leveraging in the market place it to increase their sales of long-haul airline tickets on the carrier.

TravelDividends won’t be surprised if more travel companies jump on the insurance bandwagon in the weeks to come…so watch this space.

4. I think that United Vacations new package tour discounts hit the sweet-spot for the types of deals consumers identified in the Access America Vacation Confidence Index survey.  Under the ‘Fall Sale‘ program announced last week, travelers can avail themselves of considerable discounts off published prices for most United Vacations packages scheduled through December 31st, providing that the booking is made by September 15th.

For example, a 3 night package at the four-star Luxor Las Vegas, including flight from Los Angeles, and a $25 food and beverage credit, is now priced at $224 per adult. In Cancun, Mexico, $429 per adult will get you 4 nights at the all-inclusive three and a half star Oasis Cancun, including flight from Chicago O’Hare and, and a ‘kids stay free’ option for up to two kids (ages 12 and under).  Prices obviously vary based upon the travelers departure gateway.

For more information about United Vacations Fall Sale, click here.  For details about their travel affiliate program, visit the travel affiliate FAQ page on their website.

If you have any thoughts, comments or questions about this week’s ‘TITIT’ column, please drop us an email…as always we appreciate hearing from out readers.

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