If there’s one thing hoteliers want travelers to do before booking through an OTA, it’s to ask themselves whether they’re really getting the best value. A whole lot of people see OTAs as a convenient, trustworthy booking platform. They’re easy and fast. The review platforms are powerful, the financial processing can be trusted, and there are reasonable measures for consumer protection. It’s easy to research options, make a booking and be done with it.
Other travelers are ruthless about searching for the best deals. These people will naturally consider the advantages of direct booking, even after using OTAs to locate options. Aside from better rates, they might be looking for greater flexibility or other travel perks.
In all cases, hotels are looking to strengthen the case for direct bookings.
Part one of this post explored how much money is flowing into the coffers of OTAs, especially Priceline whose empire of booking platforms is far more valuable than AirBnb. We explored why OTAs are problematic for hotels — and also why they are necessary. When it comes down to it, OTAs are hugely influential in the marketplace. They spend billions on advertising. They allow consumers to effectively search and book in one place. They are an effective distribution channel for hotels — but their bookings come at a cost.
Now let’s get down to nuts of bolts of what hotels can (and can’t) do to encourage direct bookings.
The contractual obligation of price parity, which prevents hotels from publicly listing lower rates elsewhere (especially on their own web sites), has forced hotels to sweeten the pot in other ways. Incentivizing travelers to make direct bookings by offering free wifi or other amenities is an interesting move that many hoteliers have tried in recent years. Essentially, it’s a direct attempt to make OTA booking less attractive while technically honoring the price parity agreement. Aside from free internet, member rates and loyalty points are the most common advantages offered.
In several European countries, where over 70% of all travel bookings are completed online, governments have begun to question, and in some cases cancel, the parity agreements between OTAs and hotels, with a view toward making things more favorable for hotels and less so for OTAs. It’s worth noting that booking.com is a European company that was acquired by Priceline, and has been extremely profitable for the Priceline Group on account of the high percentage of online travel bookings made in Europe. Higher percentages of online bookings mean more commissions for OTAs.
If the percentage of travelers making travel bookings online continues to increase in the coming years, other governments may begin to question the favorability of price parity agreements — especially if there are costing local businesses dearly, while making OTAs very rich.
For hoteliers right now, the only sound assumption to make is that OTAs are here to stay — unless of course travelers put them out of business.
Stop Clicking Around
Hilton’s recent ad campaign featured the concept “stop clicking around” and basically offered its rewards members special prices that were (ostensibly) lower than rates published on OTAs. The thing about OTA price parity agreements is that they only apply to rates that are posted in the public domain. Once you’re a rewards member, that distribution channel is not considered to be in the public domain. Theoretically, hotels can use their membership programs to offer any kind of deals they want.
There have been reports, however, of hotels being pushed further down the search pages of OTAs, in retaliation for encouraging travelers to “use” OTAs for information and then bypass them as a booking channels.
Essentially, it’s a tug-of-war for brand affiliation. Hotels need to grow their membership platforms in order to gain more control over revenues. Travelers, however, need and want simplification. Nobody wants a wallet full of membership cards, everything becoming more complex. Hotels somehow have to convince the public that it’s simpler to book direct.
The only other option is for hotels to renegotiate their terms with OTAs. It may be that in the long run, price parity will have to change in order for OTAs to find their true market value. But right now, such renegotiations have only been possible with a few big hotel chains.
It’s worth looking at the idea of reviews and reputation management, and the difference between OTA and direct bookings in this respect. Booking with one of the big OTAs (Expedia or Priceline affiliates) enables travelers to submit a verified review of their experience, on the same platform where the trip was booked. With direct bookings, reviews have to be made on sites like Google and TripAdvisor.
It’s no secret that reviews have an impact on bookings. The genius of OTAs is that they don’t feel like businesses on account of the review information, and on account of their low price guarantees. They pass themselves off as benevolent observers, when in fact they are making a lot of money from hotels. The last thing OTAs want is to be used as a way to identify hotels, only for the booking to be made directly. It’s the same reason why AirBnb does not allow hosts and travellers to contact each other directly until a booking has been made. In fact, the company makes a mint by withholding information and providing a trusted review platform. OTAs cannot prevent direct contact between properties and potential guests, for the very simple reason that most OTA listings are branded. Once a guest singles out a property out, the next port of call is often the property’s own web site. People want to know if there are reasons to book directly, or whether they’re getting the best price.
If hotels cannot offer a lower direct price as a result of parity agreements, it becomes very simple:
You want the guest to trust your booking platform, the way it looks and functions.
You want the guest to feel like they’re still getting a better deal. Points, extra amenities, upgrades, and special member rates all come into play.
All about the Experience
One thing OTAs obviously cannot do is manage the experience of guests on the ground. This is where hotels have a chance to make their mark, establish brand loyalty, and even incentivise guests to book directly.
But if we assume that OTAs aren’t going anywhere in the near future, and if we assume they will not make contractual concessions in the interests of hotels unless absolutely necessary, hotels are left with the guest experience itself. And this is the possibly THE most powerful tool that the hotel possesses!
For further industry insight, please follow the links below.