Millennials, OTAs, Digital Marketing, CapEx and How to Capitalize on Them

SAN DIEGO—Bob Rauch, president of RAR Hospitality, based here, is committed to putting the customer first; so much so, he’ll rise early in the morning for a 15-mile run with travelers staying at one of his hotels. “If I’m in a city where my staff knows I’m at the hotel, I will offer to run with a guest at the break of dawn. If it means I have to run with triathletes or barely a 12-minute mile, I’ll push myself and spend that time with a guest,” said Rauch.

For Rauch, it’s this type of personal engagement—he calls it “wow customer service”—along with other hospitality insights he teaches to staff members at his properties nationwide and students taking his online courses on entrepreneurship at Arizona State University—and writes about on his website, “Any knowledge I have, I want to engage with people. It’s vital that I pass these lessons on to my team because I can’t be at hotels every day. I want them to use me as a role model in how to treat guests and how important they are,” he explained.

His simplest lesson: Keep guests in focus by giving them what they want—personalized experiences that create value. By surpassing expectations in unexpected ways, hotels can not only generate repeat guests, but positive reviews on TripAdvisor and a selfie with their new “running buddy” on Instagram.

In a conversation with Hotel Business, Rauch shared more insights on what hoteliers should expect in 2016, and how to best capitalize on them right now: 

Invest in CapEx

Word on the street is RevPAR growth will remain steady. According to PKF Hospitality Research, U.S. hotels will see long-run average RevPAR growth through 2018. But, Rauch doesn’t see the ride continuing for much longer.

“We’re not going to be able to outpace inflation, in my opinion. New supply coming in is one reason. The sharing economy and anybody connected to Airbnb, Expedia and, as well as other services in the OTA space, are clearly impacting us. It will occur much more in 2017, when RevPAR doesn’t outpace inflation. We’ll run another 6% RevPAR growth in 2016, but I think it will go down to as low as 1-2%. I would love for them to be right, but the chances are 1 in 20 to carry this growth for three years or more,” he said.

Rauch advises to prepare for a dip and proactively invest in needed CapEx. “When it goes below the pace of inflation, we as an industry—and I hope we don’t do it—but we tend to lower our rates. Once you do that, you have the same amount of guests beating up the property. If you’re not remodeled and don’t look fresh, you can lose market share. If you don’t spend the money now, new supply will eat your lunch,” he said.

Mind the Millennial Mindset

Rauch considers Marriott Corporation Chairman Bill Marriott to be the brainchild who urged the hotel industry to take a serious look at this hyper-digital generation. He noted it’s not just the younger guests that crave innovative technology during their hotel stay—it’s everyone.

“We need to be mindful of them. Marriott said that 10 years ago. He pointed it out and understood the demographics of the world,” he said. “My biggest concern was for the brands; if they’re not smart, they will design something for the Millennials and forget the Baby Boomers. But, luckily, the Baby Boomers want to be like the Millennials, so it worked out perfectly. It’s a mindset. You can cater to guests ages 18-69 because they all want to be tech-savvy and connected. There are a couple of exceptions where maybe an older customer still needs written directions, for example, but they’re in the minority.”

Dig Into Digital Marketing 2.0

Today, Millennial-minded travelers carry a complete tech shop in their hands, and the increased use of mobile devices among all travelers created a paradigm shift in the industry. Rauch advises building a comprehensive library of digital content tailored for the customer to drive engagement and find ways to personalize these digital interactions.

“Using digital tools such as allows us to get in touch with our guests that from the moment they make a reservation, we are able to begin that conversation with them. Whether it’s through Facebook, LinkedIn, Pinterest or Periscope, we want guests to develop a relationship between the hotel and their friends,” he said. “It’s not just about the hotel, it’s the destination, and we keep that relationship going until we get a review from the guest. You can encourage feedback by starting the loop with pre-travel, then intensify the personal engagement upon arrival with mobile check-in, sharing what’s available locally, offering discounts to nearby attractions and making the whole travel experience seamless.”

Optimize Your Channel Mix

According to Rauch, there are ways to use OTAs without relying on them as a primary resource. Knowledge is key, and he urges hoteliers to mine their data to understand the true costs involved.

“Why give a third party inventory, if I know I’ll fill rooms without them? It costs 15-30% to pick up a guest off a third party. We must know what our demand and pace of demand is for rooms. We have to be able to determine in advance what we’re going to do and how to set the rates intelligently,” he said. “I want to try to get as many guests as possible, who are repeat guests, so I don’t have to advertise for those. I can email a special, if I need to create more demand or I’m behind the pace. The cost is only if I give a discount, but still cheaper than using an OTA at 15-30%. You can do things for repeat guests. One of the tricks is to convert every OTA guest into a direct channel guest. Ask the question: What does the guest really want? It could be free parking, WiFi, breakfast—offer an upgrade and that’s one way to convert them. Go beyond personal engagement, it costs very little and you’ve removed the expense of paying the OTAs.”

—Corris Little