Gift cards light on revenue, boost exposure for hotels
 
Gift cards light on revenue, boost exposure for hotels
16 JULY 2020 8:41 AM

Some hotels are selling gift cards for future stays to bring in cash during the pandemic, but sources said this hasn’t been a huge success thus far.

GLOBAL REPORT—In a demand slump during a pandemic, some hoteliers have pivoted to selling gift cards for future stays, when leisure and business travelers re-emerge.

It’s a strategy that could be in play for the short term at certain types of properties, despite varying levels of success as a revenue-generator, sources said.

Jeff Osborne, president of Greenwich Hospitality Consulting, said the concept has not been very lucrative thus far for hotels. Two of the firm’s hotel clients promoted and sold gift cards online and through direct as well as other promotional channels.

“Sales were not strong,” he said. “In general, what we found was that people would rather have the excitement of a real booking with plans and dates, as opposed to the purchase of a voucher for the opportunity of a future stay.”

Gift cards will remain a product to sell and promote, but will not be a mainstay revenue producer, he said, noting that the circumstances required hoteliers to think creatively.

“Disposable cash was tight for most everyone around the world and people were careful about how they spent their money during the lockdown,” he said. “There was no end date insight and the economy, though now on its way to being fully open, remains significantly impaired from that of 2019.”

Adrian Mooney, director of sales at Kilkea Castle Hotel & Golf Resort in County Kildare, Ireland, said, “this was suggested as a significant savior for cash-strapped hotels and other tourist-related outlets. However, while we did see a small uplift year-on-year in voucher sales, it did not take off as expected."

He said consumers might have feared that a hotel would not come out of the pandemic “and thus render the vouchers worthless.”

“There was also some naivety around this topic,” he said. “The notion that large swathes of the public, who were already cash strapped themselves, were going to somehow come to the benefit of hotels is this manner was a little misguided.”

Gift cards for future hotel stays can serve as the equivalent of an advance purchase reservation, but without set dates.

Resorts have the most luck with this strategy, and it can help with both cash flow and inducement of demand, said Robert Rauch, founder and CEO of RAR Hospitality.

“Gift cards are forever in certain states, meaning they never expire even if the card says they do,” Rauch said. “Gift-card sales are on the balance sheet, cost some dollars to create, and must look enticing and be merchandised.”

Gift cards could possibly be used in hotel package pricing, he said.

“I’m a big believer that as average rates come down markedly this year, the reset of the industry will be to package more product rather than deeply discount,” he said.

A cruise ship, for example, sells berths at a base rate and then adds in drink packages, excursions, personal services and room upgrades, Rauch said. That is the only way to get back to 2019 rates, as guests this year and next are likely to be led by the leisure sector, he said, noting these guests are the ones most looking for value-added promotions.

Packages might include a meal program, choice of spa services and attraction tickets, at a package price so that each cost is hidden.

Mexico Grand Hotels did not get the revenue results it wanted from offering gift cards, but did get some good exposure for its the properties, said Gabriel Ibarra, sales and marketing director.

The promotions “showed (the public) relevant content and empathy with our audience,” he said.

This kind of strategy gives guests a good sense of flexibility when booking directly with the hotels, Ibarra said.

“For us, it is a new strategy that we have implemented and will definitely stick with for a while as another business opportunity,” he said. “It will complement our primary sales strategies and is leading us to have more flexible policies due to new travel behaviors.”

1 Comment

  • Robert Rauch July 16, 2020 12:08 PM Reply

    Always happy to provide input for Laura Koss-Feder and HNN!

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