An Underused Marketing Tool That Reaps Financial Gain
Regardless of the state of the economy, every financial strategy should be considered to maximize occupancy, revenue and profitability during high and low demand periods. The importance of profit to owners and investors demands a critical look at an underused marketing tool – barter. Hotel executives have a fiduciary responsibility to capitalize on the value of their inventory. With unsold rooms as currency, hotels can position their brands to reach desirable corporate, group and leisure accounts. Many companies successfully use barter to strengthen brand image, pay for daily expenses and to boost demand for their properties while conserving cash to improve their profits.
A proven marketing and financial tool for centuries, barter is simply the exchange of goods and services without the use of money; for the hotel industry, this means using rooms as currency. Barter is successfully used by hotels, airlines, governments, Fortune-500 companies and privately-held enterprises to maximize the value of excess inventories.
EOA An intelligent way to monetize unsold rooms
Using barter provides hotels – from economy to luxury – with a system for selling available room inventory in a way that is consistent with their specific image. Because the typical barter client is a corporate traveler, or incentive group that is not a current customer, hotels can reach entirely new types of clients and sources of future cash business.
Trading hotel inventory through EOA is an effective means of purchasing advertising, promotions and other marketing services when funds are not available or are too costly. It is a viable option that can provide a valuable, competitive edge, especially in a volatile or sluggish economy.
We provide a one-to-one value of otherwise empty hotel rooms for services, allowing the hotel to receive full value of the traded rooms with only the cost per room involved and our membership fees, instead of credit card charges or travel agent commissions.
EOA Ideal for the hotel industry to achieve maximum profit
Since hotels have perishable inventory, bartering complements the hotels operating systems in many ways:
• Hotels require substantial amounts of cash to operate, and bartering provides a way to conserve it.
• Due to the brief tenancy of guests, hotels must continually advertise in order to remain top of mind and maximize business prospects. Therefore, bartering rooms for advertising is an attractive opportunity since ad placements, like guest rooms, are perishable inventory.
Hotels strive to attract clients that fit their target markets and build long-term relationships to attract corporate customers who may represent future cash-paying customers while creating incremental revenues. Consequently, our source of business generates a steady business stream that should not be ignored as a way to find new business.
• Newly opened hotels, which typically need to conserve cash and build customer relationships, strongly benefit from using barter. Their generally low occupancy rates and profitability make us an optimal financial and marketing strategy.
A better option to discounting on the internet, since we provide full value to the hotel and deliver mostly corporate customers
As hotels’ booking cycles shorten, there is increasing use of Internet distribution channels to sell rooms. Unfortunately, it has raised many problematic issues, including:
Price-sensitivity of customers gained through internet channels which can adversely impact a hotel’s revenue and image. Properties that typically cater to corporate executives may find that reduced-rate customers spend less on such incidentals as food, beverage and the business center, and demonstrate less loyalty to the hotel once prices rise.
While internet room distribution is designed to boost occupancy and revenues, the real challenge is to wean consumers off discount-price distribution channels as more lucrative opportunities become available.
Hotels receive full value for their rooms when sold through EOA. In addition, EOA’s supplied consumers have more incremental spend as they are not discount shoppers.
EOA Issues
Interviews with hoteliers indicate that barter is an option that’s generally “not considered” versus not “preferred.” Here are some of their perceptions about barter, as well as answers to these concerns:
1. Barter is simply not considered.
• This is because there are few organized trade exchanges in the US.
2. Concern for the quality of guests.
• This issue can be easily resolved with contractual provisions. For example, hotels can exclude tour operators.
3. Difficulty in matching the needs of hotels with those of the companies with which they want to trade.
• A hotel’s ability to directly barter with a media company is limited and complicated.
The challenges lie in matching their needs, and in the administrative issues of managing barter relationships among many different companies. This is resolved by working with EOA, which seamlessly facilitates efficient use of trade credits, manage the paperwork and reporting, coordinate reservations and the redemption of room credits, while providing expertise in specific media planning and buying that a hotel might not otherwise have.
4. Difficulty or lack of consensus in establishing the internal barter procedure and bookkeeping protocol.
• Concern for over-charging a hotel’s advertising budget with dollar-for-dollar hotel rooms, can be viewed as undermining the benefits of using barter. However, the true benefit is evident on a hotel’s cash-flow statement – which measures cash-in against cash-out – and not the profit-and-loss statement –where revenues and expenses accrue based on fair market value.
5. Concern about receiving quality advertising placements at real value.
• If a hotel is not a current cash advertiser in a particular media outlet, in most cases, advertising can be secured on a barter basis.
• Once a client is approved for barter, we will reserve the approved advertising schedule and then submit proof of performance just like ad agencies do.
The world of barter through EOA extends far beyond lodging and advertising. Hotels routinely barter for capital improvements, corporate gifts from clocks to golf clubs, and even payment of routine bills. In addition, hotel chains can apply barter to many properties, in effect setting up a national account.
In most cases, because of competition in the lodging industry, and for extra profits hotels will involve the trading of more than just their room nights. If available, hotels normally include meals and beverages and/or recreation through EOA in order to keep guests on site, and ultimately, fuel higher spending.
EOA the bottom line
The hotel industry in Alaska remains a very seasonal business. Recognition of an ever-changing operating environment should inspire hoteliers to examine all possible ways to boost sales performance.
Barter is an underused tool that can make a very significant, positive impact on a hotel’s bottom line. By converting otherwise unsold rooms into marketing dollars, hotels can continue to boost their presence through advertising when funds would not otherwise be available, or they can use trade to purchase needed hotel improvements and professional services that otherwise maybe monetarily prohibitive.
The inclusion of barter in a hotel’s annual marketing budget allows it to expand its sales effort and to dramatically stretch funds to pro actively test new markets and build awareness. Hotels can use EOA to grow their net profits while remaining under the radar of their usual cash customers and competition.