Research shows that travel packages attract high-value guests who book earlier, stay longer and spend more than those who book standalone rooms. We’ll explore the data and provide tips to help you maximize package performance as part of your distribution strategy.
What are travel packages?
Travel packages are a single booking and payment transaction containing at least two of the three major travel products—flights, hotel rooms and car rentals—typically at a bundled discount for travelers.
Hotels who incorporate OTAs into their distribution strategy, have the opportunity to bundle their rooms in package promotions that deliver results against key performance metrics, including higher average daily rates (ADR) and revenue per available room (RevPAR). Packages can be targeted to specific markets, limited to travelers booking a specific period in advance, staying a specific number of nights or within a specific date range. Research shows that travelers who purchase packages book earlier and cancel less frequently than consumers who make standalone bookings. Specific benefits include:
Expedia Group research shows that ADRs for package stays are higher than for standalone stays by an average of 30%. This is a significant rate boost for properties—and an incentive to include hotels in package offerings.
One reason may be the perceived overall value of a package discount, allowing hotels to successfully upsell consumers. For example, in Hawaii – where package demand is high – package travelers typically book a higher-priced room type—an ocean view room versus a courtyard view room. While the ADR for an ocean view room is more expensive, if it is more deeply discounted than the courtyard room, consumers are more likely to choose the higher category room.
Booking windows on packages are typically two times longer than standalone bookings, providing more opportunities for hoteliers to upsell travelers – both prior to check-in and on-property. As a leading resort destination, Hawaii has one of the longest booking windows for packages (67 days out), just short of New York City at more than 68 days prior to travel. Additionally, package bookings typically have twice the length of stay, reducing operational costs at the hotel and giving travelers more opportunity to spend on-property.
The most common travel packages include a hotel room linked to a non-refundable flight, resulting in slightly over half the cancellation rate of a hotel-only booking. Claudia Turriziani Colonna, a Revenue Manager, at Flemings Mayfair in London said, “We tend to see an average of around 50% fewer cancellations for package bookings than for standalone reservations.”
As the booking window shrinks – from six months to within 30 days out from stay – the ADR reduces for both packages and standalone room nights, but the difference in the decline is significant. On average, ADRs for packages dropped 18 percent, while the ADR decline for standalone room nights during the same booking window period is 34 percent - almost double that of packages.. Incorporating packages into your distribution strategy has the upside benefit of more profitably filling your rooms last-minute.
Five tips to maximize travel package performance
Now that you know what the benefits of hotel packages can be for your property, here are our top tips to make the most of your booking opportunities.
1. Understand your market
In general, travel packages perform best in top tourist destinations, both domestically and internationally. Resort destinations, beaches and islands have a higher percentage of package bookings than non-resort areas. Hotels in major metro markets and entertainment destinations, near airports or convention centers are also more likely to benefit most from packages.
2. Offer Origin-Specific Packages
If you know where your guests are traveling from, you can leverage packages to drive more business from that market. For example, if you know a high percentage of guests responding to your “stay seven, save 20 percent” international package come from a specific location, offer a higher discount, “stay seven, save 25 percent” to tap deeper into that package-heavy market.
Another tip: Don’t miss out on the shorter international packages. Many promotions focus on seven-plus nights, but they lose out on the four-to-five-night stay, which is often more common. A tiered discount strategy, with discount increasing with nights booked, can ensure you capture every length of package.
3. Be aware of package booking periods
Booking periods in your top origin markets may vary widely. In North America, Boxing Day in Canada and Black Friday in the US are top days for travel deals and bookings. Europeans tend to travel during summer holiday and Chinese travel heavily during golden week in October. Knowing packages have longer booking windows, properties can keep costs down by only targeting them to travelers in markets booking 60-plus days out.
4. Know your travelers
Understanding the travel habits of consumers in your top origin markets will help you get the most value from packages. Do they tend to book 5-star or 3-star? Prefer beach or city properties? Are they sightseers, shoppers or both?
OTA analytics tools and account management teams can help you gain the insight you need to build an attractive package. If your market is a draw for luxury travelers who love to shop, like many from the Asia Pacific region, you may want to include complementary transportation to high-end shopping districts. In markets with multiple destinations that require travelers to drive, you may want to offer flight-hotel-car packages.
Also, with longer stays and bookings typically paid for in advance, package guests often have more money to spend while they’re at your hotel—at the restaurant, bar, spa, evening activities or room upgrades. Don’t miss your opportunity to upsell before and during their stay.
5. Keep an eye on dropping prices and rates
Like hotel ADRs, airline average ticket prices (ATPs) start declining 10 months out, hitting their lowest price one to two months prior to booking on average, with an uptick one-month out from booking. This trend shows that hoteliers should try to load package rates a minimum of three months in advance, to take advantage of the lowest flight prices, offer the best value to consumers, and avoid the discounting that inevitably happens for last-minute hotel deals.
And with airline price increases expected to slowdown in 2020, hoteliers have an opportunity to capitalize on travelers interested in combined savings from air and hotel pricing. If airlines begin competing aggressively on fares to your market, a package offering should become a strategic consideration for you as it may allow you to stand out to those travelers searching for more affordable airfare.
Another tip: Keep aware of currency conversion rate changes related to top origin markets. If your currency strengthens versus the currency of your target market, the same discount that worked in the past may no longer have the same value to the customer. Conversely, ADR growth can be felt more.
Build a better distribution strategy with Expedia Group
If using travel packages fits into your distribution strategy, take time to explore the tools and insights Expedia Group provides to help you be successful. From information on guest origins to real-time market pricing, from year-over-year performance data to benchmarking against local competitors, we strive to make decision making and optimization easier and give you more time to spend with guests. If you’re ready to try packages with Expedia Group, sign up today!