Hotels Strike Back: why OTAs are no longer in the drivers seat

As we stride into February, we’re starting to see which of the big hospitality marketing trends predicted for 2017 are beginning to stick. We’ve debated the effectiveness of interacting with guests via mobile-based chat bots, whether we should be increasing marketing spend with digital influencers and have been excited about the potential of VR experiences. Putting these to one side however, I think the most prevalent seismic shift we’re seeing is from hotels looking to take back control of consumer behavior by encouraging direct bookings.

For years, online travel agents (OTAs) like Expedia, Booking.com, and more recently, travel site aggregators such as Trivago, Kayak and Tripadvisor have aggressively pursued consumers with their high-visibility advertising tactics and very large marketing wallets. As an ancillary sales channel, the OTA would market the hotel to a customer on their website, and in return for a confirmed reservation, collect a handsome referral commission – anywhere between 10-30% of the total booking value. While the larger hotel chains have had some bargaining power over how much they cough up, it’s usually the smaller, independent boutique hotels that come out of the relationship worse off. You could argue it’s a small trade off, since the visibility and additional advertising given to the hotel helps them get in front of a qualified buying audience. But does the value equation really stack up?

What started as a relationship of convenience to keep occupancy levels buoyant, has since morphed into less help and more of a hindrance. Aggressive pricing tactics, fluctuating commission structures and inventive display tactics aimed to best showcase only those hotels willing to foot an additional premium have been a wake-up call for many proprietors. As margins get ever-so slimmer in one of the most competitive consumer sectors out there, it’s no longer making economic sense to just handover revenues. Hotels are starting to fight back.

One of the other existing problems with the OTA model is the fact that the hotel never really owns the relationship with the guest. Or at least not until they arrive onsite. I’m sure you’ve been somewhat perplexed when a form is thrust in front of you at check-in, asking you to complete the very same details you’ve already provided to Hotels.com. It’s because in most cases, OTAs only hand over the bare essential information required to create a booking in the hotel’s PMS (guest name, dates, payment details, et al). So taking in to account future marketing promotions, the only way the hotel will be able to maintain a detailed CRM profile on a guest introduced by an OTA, is by asking guests to volunteer an email, postal address or mobile number at check-in.

In an interview published by Hot Topics as part of their 2016 CMO Annual, Virgin Holidays CMO Claire Cronin talked about the importance of regaining control of the customer experience across the different buying stages. From the point of consideration through to purchase, Cronin wants to take ownership of that journey, and a result, they’ve cut out the middleman. You can now only buy a Virgin Holiday through Virgin.

And they’re not alone. Intercontinental Hotels kicked off 2017 with a message to their IHG Rewards Club to announce their decision to award member benefits only to those guests who book direct and not through other travel booking sites. The Accor Group has had a long-standing policy where they don’t award Le Club loyalty points for bookings made through a 3rd party site. And many of the major hotel chains have started offering member-only rates to drive direct bookings, using the ‘closed-group’ nature of membership programs to undercut OTAs without infringing rate parity clauses. Technology partners like The Hotels Network, GuestFolio and TripTease are also doing their part to help hotels fight the good cause.

So what becomes of the OTA? Only time will tell. It’s not surprising to see the likes of Expedia attempting to reel-in the customer base by launching their own loyalty program. What I would say is underestimate the power of their marketing prowess at your own peril. I’ve always viewed many of the popular OTAs as best-in-class marketing agencies operating under the guise of a travel agent. They invest heavily in UX, understand the importance of glossy imagery, produce slick e-commerce interfaces, use effective in-app messaging and continue to pioneer radical approaches to getting the customer over the finish line. Far from writing them off, I fully expect to see the next wave of technology-driven marketing innovations to be pioneered by OTAs, which makes for exciting times ahead indeed.

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