Hospitality Sales and Marketing Association International
Hospitality Sales and Marketing Association International
 
Hospitality Sales and Marketing Association International
Will Direct-Book Strategies Impact OTAs?

A recent Morningstar study, “Hotel Direct Booking Campaigns Won’t Hurt Priceline and Expedia Says Study,” asserts that the impact of major chains’ direct-booking campaigns on online travel agencies will be negligible.

HSMAI’s Digital Marketing Council recently discussed key issues the study might not have considered, and what hoteliers should be doing, when it comes to their channel and pricing strategies, to drive bookings, revenue, and profit.

Did Morningstar Get It Right?

  • The study assumes an average brand.com member discount of 10%. From the brands’ perspective that is a significantly high estimate, and that makes me skeptical of the rest of the study. If their numbers are off, then their conclusions are skewed.
  • We’ve seen different analyses of the profitability to the hotel in light of the discount.
  • Today’s direct-booking campaigns aren’t a short-term play, but a long-term one. If all you’re doing is discounting, the shine of that will wear off quickly. The value-add that augments this strategy, and is not factored into the study, is all the value hotels provide those guests after the booking (from mobile services to wifi to more).
  • The study took a myopic view of one aspect of the hotels’ strategy, layered on a short-term perspective, and then drew conclusions.
  • Management companies generally are not particularly happy with the discounts of today, but know that all are taking a longer view.
  • It’s not just about the first booking, but the multiple bookings that take place after that.
  • The study does acknowledge that there is a degree of incrementality in the discount strategy, but doesn’t factor in the on-going and long-term impacts of loyalty. For example, very frequent travelers are not the most price-sensitive, but are highly sensitive to superior degrees of recognition – and incrementality plays a big role here. More incremental business will be derived from this movement than the study gives credit for.
  • It is not clear whether the study looked at the components of the traveler as reward-level mix, which would be needed for the incrementality argument.
  • While the study was looking at share shift (and profit loss thereof), it would be interesting to understand how member rates are impacting overall market share and RevPAR.

Advice for Driving Bookings, Revenue, and Profit

  • First and foremost, start by understanding where your business comes from so that you can adjust your strategies if you don’t like what you see. Through which channels (brand.com, OTAs, meta, etc.) does what percentage of your business come? For those largest pieces of the pie, focus your attention on understanding what is driving them, and the digital trends and developments happening there.
  • As you’re getting a handle on your channel contribution and share-shift opportunities, be sure to understand the impact of the profit “trade down” from the loyalty discounts experienced by retail segments.
  • It’s hard when you’re looking at tomorrow and the next day, but owners and GMs must commit to keeping the long-term view, and sharing that view with their teams. Intermediation costs have been a big issue for a lot of years…now that we’re doing something, remember that it’s not just about what the first booking costs you, and don’t get nervous!
  • Make sure you clearly understand what your brand’s strategy is and what they are doing, and support it on-property at your hotel.
  • Tighten up your core business fundamental: hospitality.
    • Recognize your loyalty club members, especially newer members, to keep them coming back. If our front line employees (for example, at the front desk or in the restaurant) are not recognizing them, they will not stay loyal.
    • Customer data and control of it is part of the long-term play. At the hotel level, at the front desk, intercepting guests who booked via third parties and capturing their contact information plays a big role in controlling the customer relationship.
    • Emphasize your loyalty program and ALL the benefits that are wrapped into it, not just the discount. At the same time, understand the shifting trends around loyalty program reward levels, including the average mix of members at all levels.
    • Pay attention to the impact of the guest experience, reputation management, and social media on your hotel’s booking and pricing power.
  • While hotels would rather all reservations come via brand.com, there is still a place for OTAs in our strategy. They have enormous marketing budgets and can indeed help identify new customers for us. (Think about those infrequent travelers for whom OTAs make it really easy to book.) It is our responsibility to win those customers over and move them to direct bookers in the future.
  • Be very deliberate about the programs in which you participate and what discounts you offer. If you’re offering similar discounts to those of the book-direct programs, you’ll loose leverage with your loyalty members.

About HSMAI’s Digital Marketing Council

HSMAI’s Digital Marketing Council connects travel marketers in a way that leverages interactive customer engagement as a marketing medium while increasing the awareness of emerging issues, opportunities and trends. This is accomplished through a wide range of information sharing, networking and educational opportunities. 2016-2017 members include:

  • CHAIR: Holly Zoba, CHDM, Senior Vice President of Hospitality Sales, Signature Worldwide
  • Shaun Aukland, Senior Account Executive, Google
  • Aimee Cheek, CHDM, Director of eCommerce, OTO Development
  • Robert Cole, Founder-CEO, RockCheetah
  • Chris Copp, VP, Global Digital Marketing, IHG
  • Erica Eyring, CHDM, Director, Account Management, Expedia Media Solutions
  • Isaac Gerstenzang, CHDM, Assistant Vice President, Corporate E-commerce, Destination Hotels
  • Loren Gray, CHDM, Founder, Hospitality Digital Marketing
  • Jamie Hansen, CHDM, Director, Marketing, Best Western Hotels & Resorts
  • Carolyn Hosna, CHDM, Sr. Corp. Director, Marketing & Distribution, White Lodging
  • Jay Hubbs, III, CHDM, Senior Vice President, eCommerce, Remington Hotels
  • Michael Innocentin, Executive Director, Digital Marketing, FRHI Hotels & Resorts
  • John Jimenez, CHDM, Portfolio Director of eCommerce, Interstate Hotels & Resorts
  • Chris LaRose, VP, eCommerce Americas, Hilton Worldwide
  • Sarita Mallinger, Regional Director, Digital Marketing, Kimpton Hotels & Restaurants
  • Delana Meyer, CHDM, Corporate Director of eCommerce and Marketing, Crescent Hotels & Resorts
  • Amy Mierzwinski, CHDM, Principal , John Fareed Hospitality Consulting
  • Anna Paccone, CHDM, eCommerce Director, National Sales, Pillar Hotels & Resorts
  • Shawn Paley, CHDM, Director, Global eCommerce & Digital Services, Marriott International
  • Donna Quadri-Felitti, CHDM,PHD, Director and Associate Professor, Pennsylvania State University
  • Chris Rockett, SVP Sales, Milestone Internet Marketing
  • Darlene Rondeau, Vp, Best Practices, Online Merchandising, Leonardo
  • Mariana Safer, CHDM, Senior Vice President, Marketing, HeBS Digital
  • Kevin Scholl, CHDM, Director of Digital Marketing, Red Roof Inn
  • Dave Spector, Partner, Tambourine
  • Dan Wacksman, CHDM, Senior Vice President, Global Distribution, Outrigger Resorts
  • Christine Beuchert Williams, Sr. Director of Marketing & Ecommerce Strategy, Marcus Hotels & Resorts