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10
August
2016

Why major hotel chains have started pushing back against OTA programs now

By Lisa Shields

08 : 13h
0

Travelers have been using websites like Expedia, Travelocity, and Booking.com for many years to find and reserve hotel rooms, book flights, and rent cars. For a long time, hotels used to just live with these systems, but now, it's time to fight back.

Based on the research done by Hilton Digital Key in 2014, 35% of leisure bookings and 50%  of business bookings are made through Online Travel Agencies (OTA). Many big hotel chains have had to live with the fact that online travel agencies charge very high commissions for reservations  made through their websites. These commissions usually range between 15% and 20%, which is unreasonably high. In the early stages of the evolution of these platforms, such commissions were justified, because it was too difficult and expensive for hotels to build their own platforms. As time went by, though, OTAs took almost all of the market share and left hotels with no option than to absorb the commission cost.

However, now that  technology has made it so much easier to build their own platforms, hotels are doing everything to reduce these commissions, which also gives them the chance to get in direct touch with their guests. Thanks to this direct communication, hotel management can build profiles of preferences, needs and spending habits of their guests, which will make it easy to attract them in the future.

In order to motivate travelers to make bookings through their own platforms, hotels are offering them a range of benefits, such as:

  • Online check-in options
  • Free breakfast
  • Free internet connection (Wi-Fi)
  • Ability to select a specific room, etc.

Another thing that is beneficial for hotels is the fact that recently, in the hotel industry,  new regulations were established in order to prevent the merger of two large OTAs, Expedia, and Orbitz.

In order to get into a successful battle with the OTAs, many large hotel chains, like Hilton and Marriott, have started creating their own reservation platforms and promoting them through heavy advertising.

Hilton’s strategy against OTAs

Why major hotel chains have started pushing back against OTA programs now

To compete with online travel agencies, Hilton introduced several beneficial services for its customers. For example, the giant started to make use of the Digital Key app, which helps its guests to check-in with the app and eliminate the time wasted waiting in line. According to Geraldine Calpin, who manages the digital marketing of Hilton Hotels, the app was adopted by the customers very quickly, and now it’s being used by more than 1 million users per month.

Another thing that Hilton offers its direct booking guests is the chance to select the exact room that they want. This is a feature, which is similar to the airplane’s seat-map function, as guests have the chance to see the plan of the hotel’s floors and choose the room they would like to stay in.

Recently, Hilton’s CEO Chris Nassetta explained that they have secured 3 main concessions from OTAs during their negotiations: first of all, they will eliminate last room availability for OTAs. Secondly, they will lower margins to adequate levels and thirdly, they will have the right to provide Hilton’s loyal customers with preferential treatment. Hilton HHonors, which is their rewards program, now offers 10 % off the published rate and additional bonus points, which guests are free to use for things like wifi, concerts, additional nights and so on.

Moreover, Hilton has introduced its ad campaign called “Stop Clicking Around” and generated more than 4 million views on YouTube. According to iSpot.tv, from Feb 14 to 16 it got 48 spots with a budget of approximately $1.2 mln.  

Marriott’s strategy against OTAs

Marriott is the next big hotel chain that created its own game for competing with OTAs. Marriott arranged for some of its rooms to be booked directly through travel review platform TripAdvisor. Though TripAdvisor gets a commission, it charges only half of what Expedia would do.

In April 2016, Marriott launched its new hotel rates for Marriott Rewards loyalty members. This program is going to be available for more than 4000 hotels globally. In addition, if guests find a lower rate on other platforms than the one available on Marriott platform within 1 day of their bookings, then Marriott will provide that rate and will give 25 % additional discount. With this strategy, Marriott wants to destroy the myth that people can get the low rates only on online travel agency websites.

In addition, in order to promote its strategy, Marriott launched its “It pays to book direct” campaign in August 2015 which generated more than 7 million views on YouTube.

Such campaigns and strategies are created for one big reason, which lies at the core of the technological evolution of registration platforms. In the 1990s, it was really difficult and challenging for hotel chains to have their own booking platforms, as it was too expensive to invest in such technology. Now, when it is much easier for hotels to have their own digital footprint, this kind of strategies are needed to create a higher return on investment in the long run.

Tips for hotels to fight the OTAs

Why major hotel chains have started pushing back against OTA programs now

  1. Invest in meta-search engines: Thanks to the powerful meta-search engines, potential guests have the chance to get information about your hotel’s location, prices and  reviews. If implemented correctly, meta-search engines can shift a guest’s focus away from OTAs back to hotels. The reason is that if people can find all of the necessary information on the hotels’ websites, there will be no need for them to make bookings with an OTA.
  2. Collect guests’ email addresses: Getting your guests’ contact information, including emails, is crucial for a successful battle with the OTAs. If you have email addresses of all of your current, past and potential guests, then you will be able to easily promote your hotel to all of them. In this case, you can keep them informed about any special offers or promotions that you are running. The biggest benefit is that there will be direct communication with your customers.
  3. Incentivise direct bookings: Guests’ experiences depend on hotels, and hotel managers must use this to their advantage in order to generate more direct bookings. Hotels cannot simply provide lower rates than OTAs because they offer rate parity, but they can make their guests’ experiences more valuable, which is something OTAs cannot do. For instance, hotels can offer some incentives like mobile check-in, late check-out, free breakfast and so on.

Efforts like these can pay off soon. Based on the survey done by travel marketing firm MMGY among 3000 travelers, it was revealed that though OTAs were still popular for making price comparisons, there was a huge decrease compared to 2014 in how often people made reservations through such websites. This is the right time for hotel chains to push back against OTA programs.

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