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Introducing the guest funnel

02 June 2022
There are several funnels used in many different types of businesses. The marketing, sales, and customer experience funnel are common examples. The idea is to start broad, work through a few steps, and then find a customer. Generally, the funnel means that there are customers everywhere in a globalized world for most products and services.
Hotel guests are not different; they come from all over the world, so the first thought is that hotels are the same as all other businesses. The impression is correct but misleading. Hotels are stuck in a specific destination and depend on the destination's travel reasons and attractiveness. Hotels cannot change society's structure, with kids in school Monday through Friday, the standard workweek for most people, and holidays (religion and school breaks). Hotels cannot change the seasons either. Therefore, hotels have to understand and adapt to demand patterns that are destination specific.

Capture demand

The top of the guest funnel is people traveling to the destination that need overnight accommodation and maybe a few locals for staycations. Therefore, hotels need to gather insights into the demand by analyzing travel reasons, stay patterns, segments, and consumer needs and behaviors. This data is readily available from benchmarking companies and the hotel PMS.
The hotel has to capture demand in competition with many other hotels. Therefore, a highly productive commercial team will capture more than their fair share of the market, while a dysfunctional silo organization will leave money on the table to its competitors.

The ideal guest

The next step in the funnel is defining the hotel's ideal guests. The hotel market is fragmented, which means each hotel has a meager market share. Therefore, it is possible to focus on guests where the hotel can match their needs. If the hotel is better at satisfying a specific target group, the hotel will attract more of these guests than other hotels. Focus on 3-5 segments and ensure that the hotel can deliver a remarkable guest experience to these guests. As a result, they will write positive reviews, recommend the hotel to others, and might even return in the future. Hotels that only deliver a standardized room to an average guest will receive average reviews, few recommendations, and probably never see the same guest again.
Guest funnel

Find the high spenders

Even if the hotel has selected 3 to 5 segments, there are probably more guests looking for hotel rooms than the hotel can accommodate. The hotel should find the guests that spend the most within the chosen 3-5 segments and focus on them. The idea here is to maximize the revenue from each guest and then a high willingness to spend help. Finding high spenders is more complex and needs more research about what the hotel needs to do to satisfy these high-spending guests. It is impossible to get them hooked without extensive information about their needs.

Attract them to book

Ideally, a potential guest can book rooms, make reservations in the hotel F&B outlets, select a timeslot for a spa treatment, and book an activity or something else on the hotel website. If the hotel only sells rooms on the website, which includes most hotels, think about how the hotel presents the rooms. Are the potential guest excited when they see the video, photos, and descriptions of the different room categories? Is there a balanced number of options, or will the guest be overwhelmed and leave instead of making the reservation? High spenders care more about the content than the actual price for the room. If the hotel targets high spenders, do not confuse them by adjusting the rate every hour. Too many rate adjustments turn them off.

Onboard the guest

Once the guest has booked a room, hotels should immediately start preparing to deliver the guest experience. Most hotels don't. They wait until the guest arrives at the front desk to check in. A better way is to prepare the guest for the experience and, at the same time, sell more products and services. Customers who buy more are more satisfied, so delivering a remarkable guest experience will increase revenue. The preparation time is the time from booking to arrival. The onboarding process can be highly personalized and also automated. Onboarding can continue at arrival and during the stay to allow the guest to spend as much as possible.

Monitor and learn

The final step is to analyze the actual outcome as average guest spend and improve all stages in the guest funnel. Follow up on guest reviews and look for potential unsatisfied guest needs. Most guests will never return, but they might write a positive review and recommend the hotel to others traveling to the destination.
While many companies keep their customers for many years and have a stable revenue stream from existing customers every month, hotels have few returning customers and often have a low purchasing frequency. Therefore, hotels must start all over and attract new guests based on the travel reason to the destination. The high churn rate in hotels is why hotels continuously need to improve the steps in the guest funnel to maximize revenue and profitability.