Travel & Hospitality

Cracking the code: How hotels can gauge the why behind clicks, bookings and upgrades

By David Maisson, and Kelly McGuire

April 17, 2024 | Article | 7-minute read

Cracking the code: How hotels can gauge the why behind clicks, bookings and upgrades

In a complex distribution ecosystem where players compete to “own the guest,” hospitality companies direct significant resources to move guests toward a desired action—make a (preferably direct) reservation, join a loyalty program, sign up for a credit card or upgrade a room. Hoteliers have long operated with a general picture of what people value in their stays but continue to struggle with understanding why given marketing tactics yield specific results. Their ability to zoom in to the details behind individual and consumer cohort decisions promises to unlock significant value.

Consider a promotional email emphasizing limited room availability. Will it work because it creates a sense of urgency or because the included photo of a family enjoying time together resonates with the recipient? Or will the time of day be right, regardless of the message, so consumers are more receptive to scheduling a getaway or have an opening to check their inbox? When companies grasp the mechanisms that drive customer purchases, they can be more intentional about designing guest journeys and delivering follow-up interventions that convert. Absent this insight, they’re left to make educated guesses that may not translate into predictable success.

Cognitive science and behavioral economics bridge the gap between consideration and a sale

Hoteliers use a variety of methods, including A/B testing, to meet business goals such as driving conversions, generating click-throughs and increasing email open rates. They know which promotions result in higher conversions but don’t always know why they succeeded while others fell flat. For leadership teams working to unravel hidden drivers behind guest decision-making, cognitive science and behavioral economics provide powerful tools. They shed light on the often irrational and context-dependent basis for how people decide. Executives can move beyond traditional evaluation techniques to identify—and then address—individual choice patterns and priorities to win more business.

Think of cognitive science as attempting to create a more detailed and enriched picture of how human minds work and the variables that influence what we pay attention to, how we remember things and how we make choices. Behavioral economics applies that knowledge to business and the rationale for why consumers choose one product or promotional offer over another, even if they seem similar.

Guests optimize for something. The challenge lies in uncovering the nuanced criteria that guides their choices from one decision to the next.

Guests optimize for something. The challenge lies in uncovering the nuanced criteria that guides their choices from one decision to the next. While it’s objectively true that saving on a hotel booking offers financial value, for example, a guest may go with a more expensive option. Perhaps the dates for the cheaper room don’t align with the person’s travel plans and would mean cutting the trip a day short. In this situation, guests are no longer optimizing for cost. They’re prioritizing their time.

At issue is how we know the why behind a given decision. People aren’t standing in a hotel lobby crunching numbers to calculate the subjective value of getting the experience they want for the bucks they’re willing to spend. And even if they were, it wouldn’t matter from a practical standpoint because the next consumer likely acts from a different consideration set. What is useful is finding the patterns in how guests make choices in the moment and using them to create a repeatable choice context, the environment in which shoppers’ sixth sense leads them to lean our way. Researchers have been studying human behavior for a long time and have identified common biases and behaviors. We can take actions already proven to “nudge” people to be more likely to behave in certain ways or to explain why they act and react the way they do. We can then test how this framework operates in a hospitality context.

We see two things that can be done here:

  • Understand why a certain promotion worked better than another and translate those learnings into better designed future promotions.
  • Create a path for guests to move toward desired outcomes such as signing up for a loyalty program, agreeing to an upgrade or booking a package at the hotel with the lowest demand.

Apply cognitive science and behavioral economics to improve hospitality practices

Cognitive science and behavioral economics can yield a treasure trove of information about the myriad factors that affect where consumers choose to stay for business and personal travel. Understanding and reacting to their decision-making habits enables hospitality companies to craft persuasive narratives that present optimized options, set price and service-level expectations and favorably frame choices. Hotels can drive better marketing performance.

Applications in hospitality marketing include:

Increasing relevance. Personalizing offers means getting into the mindset of the consumer to increase conversions. The problem is, gathering the data to make truly individualized offers is difficult. And only a small fraction of potential bookers are “known,” meaning the benefits of personalization are tough to achieve at scale. If all you know about potential bookers is that they’re people, you still have a number of things you can do to increase their likelihood to book. For example, hoteliers could use framing—with a fixed reference price—to differentially tee up offers for guests to consider, given different consumer mindsets:

  • Loss framing. They can pay the discounted rate of $150/night or “lose” $50 by paying the base rate of $200/night.
  • Gain framing. They can pay the base rate of $200/night or “gain” $50 by paying the discounted rate of $150/night.

Given these two framings, people will be likely to choose differently, thus indicating why they chose the discounted rate. They’re optimizing for different things: maximizing gain or avoiding loss. By leveraging option framing as a technique for offer personalization, we can discriminately increase subjective relevance to align with consumer mindsets.

Offer sequencing and the decoy effect. By leveraging cognition science to think strategically about products, services or room options, hoteliers can present them in a way that encourages guests to select the one that’s most profitable or isn’t meeting sales expectations. With the decoy effect, introducing a third choice that’s slightly less appealing to two equally attractive options makes one of the initial offers seem better by comparison—and the one more frequently selected. Option A may be equal to Option B in value but not in detail. Option A might be a king suite with an interior view, with Option B a queen suite with a garden view. Option C also is a queen suite with a garden view, but it’s on the first floor, a location that tends to be less attractive to travelers. The original queen suite now looks like a pretty sweet deal and more likely to be chosen over the similarly valued interior king suite. 

Anchoring and price expectations. Managing price perceptions is crucial. By anchoring guests’ expectations through reference pricing—what they expect to pay based on prior experience—or showcasing higher-priced options first, hotels can mitigate sticker shock. When the perceived value of an offer exceeds other choices, they can reset a higher price as the new reference price. For a hotel that wants to book a particular room at $200/night, it will be more successful by offering the guest an opportunity to choose between discounts: Which room would you like? A $200/night room originally priced at $700 or a $150/night room originally priced at $155? Without anchoring the current price to the original price and highlighting the relative discount, any reasonable person would choose the cheaper room. However, by demonstrating the relatively higher anchor—the original price of the room—many people would end up choosing the more expensive option because it feels like a better deal.

Offering discounts rather than imposing surcharges. People are more likely to accept offers framed as a discount where someone pays less—even if that someone isn’t them—than as a surcharge requiring them to pay more. A “youth premium,” for example, requiring anyone under the age of 65 to pay an additional $50/night on top of the regular rate of $200/night would never fly. But charging $250/night for the room and giving anyone over 65 a $50/night discount flies all the time. The math is identical. The two alternatives are quantitatively identical. The difference is framing.

Leveraging consumer behavior to stand out from the crowd

Integrating cognitive science and behavioral economics into marketing programs can help hoteliers move beyond the status quo in ways that are easier to achieve and quicker to implement. By understanding guests’ conscious and subconscious motivations, they can create more effective promotions that lead to higher conversion rates, revenue and customer satisfaction. Viewing guest behavior through these lenses positions hotels to win in a competitive market. Aligning marketing strategies with guest preferences avoids the risk of wasting resources and weakening brand reputation. In a dynamic hospitality market, helping consumers make mutually beneficial decisions is essential for both short-term success and long-term viability.

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