Around twenty-five years ago, in a slightly rundown office in Enschede, Holland, a small group of friends were getting ready to launch their new business. It was a slightly different business to many contemporaries. At that time, it was only going to ‘exist’ on and in a relatively unknown and unheralded technology called the ‘world wide web’.
Their business idea? A ‘site’ on the web (the word websites came a couple of years later) that was a hotel directory. They were going to link the customer directly to a range of hotels and allowing them to compare the prices, facilities and locations of the accommodation.
It sounded viable – after all other directories had started to pop-up on the web – but those other directories didn’t really make any money. How would they be different? Well, unlike other directories they also wanted to enable customers to use the site to make a direct reservation with the hotel of their choice – without picking up the telephone.
“So far, so good” had been a phrase they’d heard often when speaking with potential investors in their business, this was rapidly followed by “but how are you going to make any serious money?”
Well, in addition to the directory listing fee, they’d charge another ‘small’ fee for each reservation that was placed on through their site.
“Small?” – “How small?”
They were looking at between 5 and 15% of a reservation, not a massive figure but they knew that with some effective marketing, once they started to get a number of hotels in their directory things would get easier – momentum was key – word got around quickly in hospitality and hotel owners would be fearful of their competition having an advantage – however slight that was.
After all occupancy was all that mattered.
The small group of friends in Enschede instinctively knew this – that’s why they started Booking.com
Occupancy is all that matters – right?
In those twenty-five years since, the success of Booking.com has confirmed that occupancy is all that matters.
We’ve seen new terminology and business lexicon – where were Online Travel Agents in 1996 (and we won’t include holidays on Teletext in that!)? We’ve seen businesses come (Expedia) and go (Hotels.com). We’ve also seen new markets be created by start-ups that have changed the hospitality space forever – Airbnb anyone?
... the success of Booking.com has confirmed that occupancy is all that matters
What a great time it has been to be an accommodation provider! And look at Holiday Parks, they are now part of that amazing period with listings on Booking.com and Airbnb – it’ll get even better!!
Well, we do know that the development and growth of Online Travel Agents and new markets in the digital space has maybe not created so much of a paradise as we all originally thought.
You see as occupancy is all that matters to them and by default you. Booking.com and others were able to increase visibility and reach and then they were able to increase reservation fees – after all when your competition was present ‘online’ – you had to be right? You couldn’t afford not to be – any slight advantage is key.
And if you were not getting a huge number of reservations, well you could pay another fee to have your accommodation placed in more prominent locations online – more eyeballs = more reservations – it was obvious, wasn’t it?
And then of course, you were encouraged to invite your guests to say how wonderful their stay (and your accommodation) was. Get them to post it online – on the Booking.com website maybe or how about this new friendly Trip Advisor site? The best way to do that is to invest and offer guests an incentive to do so – maybe a discount voucher or such like?
Goodness – well if occupancy is all that matters – the cost of achieving high rates was a little more work with a little more cost than expected; and was certainly a little more than what you were led to believe.
Going it alone – Holiday Park direct bookings
How about if you built your own website and took your own bookings directly – then you wouldn’t need to use sites like booking.com? Perfect.
So, you’d need:-
- a budget to build a website that can take reservations directly
- a budget to promote it
- a budget to manage it
But… you’d still need to be listed on the directories because your competition was there too, and you’ve built up a reputation on Booking.com and Trip Advisor.
Your holiday park bookings continued to come through Booking.com. You were taking some reservations on your park website but only around 10% of the total – its ok though at least you weren’t paying fees on those. But then Booking.com and the payment providers got a little smarter and you start to see an increase in fees because you are not releasing as many places to them as you were before.
Occupancy is all that matters – but it costs.
The digital guest journey
The front end of the guest journey has been digitised, monetised and work-flowed. It’s been made efficient, easy to use, one click, like, share, follow – your occupancy rates have undoubtably increased, you may even have calculated that the fees you pay to the online travel agents have delivered a significant return on investment.
Occupancy has been digitised. Your guests are followed, tracked and scooped up online. They are delivered to the gates of your holiday park, all from the comfort of your office desk – or even mobile phone.
Experience is the new growth factor for Holiday Parks
So, if occupancy is high, more accommodation is needed, more facilities, more investment in offline must be made. The guests stay has to be made more memorable (it’s all about the experience), so not only do they return, they tell their friends (ideally on social media) – and the flywheel gathers momentum again.
But the number of available accommodation units (however fast new ones are built and installed on site) restricts the occupancy revenue growth – putting prices up works in the short term, but with the sheer volume of choice (and visibility) presented to potential guests – that will only be justified for a period.
And are you able to make sure that the park investment is proving as justifiable but more quantifiable than the money you’ve spent on attracting guests to book? If occupancy really is all that matters, surely what guests get up to when they are on your park is equally important?
A reshaped Holiday Park market
So, as we reach this point – one starts to question whether occupancy really is all that matters? Has it been ‘rinsed’ so much that year on year revenue growth in occupancy metrics is becoming more restrictive and harder to achieve? Where we find ourselves as holiday parks is a market that has been completely reshaped, maybe even reframed in this digital world.
We have seen and even discussed in this piece where considerable investment in the pre-stay (online travel agencies and investment in in-house online booking systems) has delivered significant revenue stability and even certainty to the hospitality sector and clearly holiday parks have also seen some benefit from this increased choice and visibility.
The impact of Covid-19 pandemic
However, this stability has been tested throughout the last 18 months with the Covid-19 pandemic and, both inside and out of the parks market, its impact will continue to be felt for several years to come. As we know, even though holiday parks are opening again, capacities have been restricted – so although percentage occupancy rates are high, the lower capacity impacts the bottom line and revenue. Add into the mix the credit notes from last year and an increasing number of last-minute cancellations – what may first appear to be a boom time – does in fact have significant challenges.
Despite those challenges the uncertainties over foreign travel provide a boost to the UK parks industry with many holidaymakers taking their ‘main’ holiday in the UK, – some are doing so for the first time in several years. This not only provides an opportunity for new customers, (and turning them into) regular ones, but also shines a light on the prospect of utilising technology to maximise growth and revenue opportunities across the guest experience.
Digital has transformed the approach to increasing occupancy – why not use it to increase loyalty, advocacy, retention and on-site spend of guests?
So, whilst Occupancy is crucial – maybe, experience is the answer to sustainable growth in the holiday park sector?