SC DUETTO MARCH 1 of 2 nologo
2 years ago
 

So many options, so give them a reason to book a hotel direct

I keep hearing today’s consumers want choices. That’s why they’re shopping 13 or 22 sites or however many the latest research says they shop before booking a hotel room.

I believe those numbers, but I think that’s the wrong conclusion. They don’t want more choices; they want better choices. They want a good experience and the best price without visiting 21 other sites to get there.

NB: This is an analysis by Patrick Bosworth, co-founder and CEO of Duetto. It appears here as part of Tnooz’s sponsored content initiative.

According to a study from the Hotel Asset Managers Association, third-party commissions rose at twice the rate of revenue from 2009-2012.

Customer acquisition costs in the hotel industry are on average 15% to 25% of total revenue, more than four times the 3% to 6% seen in airlines and the 4% to 6% in car rentals.

Those numbers are staggering. All of them point to one conclusion:

Hotels are not providing the best prices and booking experiences for consumers. The online travel agencies, metasearch sites and intermediaries such as Google are doing a better job and have created the belief that the best prices are with them and not the hotel itself.

Of those 22 sites being shopped, one of them is certainly the website of the hotel eventually booked. The fact that many consumers are leaving and booking elsewhere demonstrates what a huge opportunity this is for hotels.

Consumers would be happy to book directly if given a reason. Brand.com websites and hotel booking engines have become a very homogenized experience. Consumers believe, and have been trained to believe, that the best prices can be found at third-party sites.

Expedia spent nearly $3 billion on marketing last year to help make that case.

It’s no wonder recent data from TravelClick showed in the fourth quarter last year OTA channels saw the largest growth in bookings, up 12.7% year over year, while brand.com bookings went up by only 6.8%.

Hotel direct bookings via calls and walk-ins will continue to decrease as consumers become even more tethered to their digital devices, meaning the fight for online bookings is more important than ever.

Hotels can’t match the money Expedia and Priceline spend on marketing and they don’t have the technology expertise in-house to match those multi-billion-dollar companies, either.

But they do have what travelers crave – they control the hotel rooms, the guest experience and the hospitality. They need to do a better job of using all three to their advantage from the point of booking.

It was a step in the right direction when several of the major brands began offering free wifi to customers as part of their loyalty programs. But hotel companies could be doing even more through their rewards programs to win new customers and turn them into loyal guests.

Instead of offering points and rewards, why not offer more personalization and better rates than anyone else can? These special prices could be discreet if customers logged in to view them, meaning parity agreements wouldn’t be broken.

By offering discounts and inducements every day of the year and without the need to respond to special offers and redeem points, hotels could alleviate consumers’ anxiety and confusion.

If customers always knew where to find the best deal – at the hotel website – they wouldn’t shop around.

OTAs are a valuable and important channel for hotels, but owning the customer from the point of booking must become a priority for hotels.

Building a base of loyal customers who know they’ll get the best deal at the hotel’s website is the first step.

NB: This is an analysis by Patrick Bosworth, co-founder and CEO of Duetto. It appears here as part of Tnooz’s sponsored content initiative.

NB2: This is part one of a two-part series. Read the next installment to see how hotels can merge marketing and revenue management to drive loyalty and profitability.

NB3: Multi-screen image by Shutterstock

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  1. NotSaying

    The hotels I have called refuse to match the prices I find online through third party agencies. Here is just one example from today! Today I found examples where a Aloft Buffalo occasionally sells room for just under $60 on Priceline (this information was on Bidding Traveler and another site). Park Sleep Fly will sell an Aloft Buffalo room for $119 per night including 21 free days of parking at the hotel. So I thought, well, why wouldn’t the hotel want to keep all that money for themselves. I decided to call the hotel and try to negotiate a price around $80. I thought that seemed like a good offer considering how much they are probably giving up to Priceline and Park Sleep Fly in third party commissions. Well, I did not even get to try to offer any price because the hotel refused to even speak to me at all about it. I first called and left a message for the hotel manager asking him to call me because I was interested in whether he could offer me a good price to stay there for three nights. I never received a return call. So then I called and spoke with the front desk clerk and asked her if they ever match online prices from third parties. She said they absolutely never do that and that their direct website price is their price. Their website price right now is $134 for the nights I am looking at. But $119 through a third party site. This is why people just don’t bother to go direct to the hotel. When you look at their website prices, the prices are just too much. If you screw up the courage to call and ask personally if they can do a better price, they just shoot you down. Most people don’t like being rejected or embarrassed so they wouldn’t even make the attempt I did to call and ask.

    I think these hotels are being really stupid. They are giving all their best prices to third party websites and splitting money with them and then keeping ridiculously high prices on their own direct websites. I don’t understand this. Does it benefit them financially to do this? I would love to hear an explanation from the hotel industry about how this pricing scheme is better for them. I guess if it were not better, they would not do it. But frankly, isn’t it driving many people to AirBnB and causing people just to not stay in hotels unless they have to?

    We would travel more if it were not for the outrageous price of hotels. Often, we choose to do a staycation because we just can’t justify paying hundreds of dollars to sleep somewhere that isn’t a sleazy dive full of meth heads and bedbugs. Last month, I spent countless hours day after day looking for a good hotel deal within a 6 hour drive of us and finally gave up. Instead, we stayed home for free and bought season passes to an amusement park that is just an hour away. Season passes for two of us cost much less than the price of a decent hotel for three nights. This of course means that we will hardly use a hotel this year because most of the time, we will use our season passes locally instead for fun unless we find a good travel deal. We found great airfare going to Buffalo which is why I was hoping to find a good hotel price somewhere that hasn’t had people chainsmoking in it and shooting up heroin.

    Most of the people I know only vacation where they can stay with family or they staycation. I guess other people are using Airbnb. My boyfriend just uses hotels when they are paid for by his work for business. I don’t see how regular middle class people afford hotel prices. The only cheap hotels are places that should be demolished and then burned to kill the mold and bedbugs.

    I worked in a hotel for about a month as a clerk but hated how mean my coworkers were so I quit. I was astonished at their pricing decisions. Once, a father and little girl came in. He wanted a hotel. His other option was sleeping in the car. He looked really desperate. They both looked exhausted and on their last legs for the day. They had been driving since early and had another long day drive ahead of them. He needed a decent price close to $100. I really wanted to give it to them. I was new and in training so could make no decision. The senior employee with authority refused to give them the lower price even though she could have. And yet, earlier that week, I had watched her give that better price to a guy who was buying a room for a homeless guy. So it was all up to her idea of right and wrong. She felt sorry for the homeless guy who was by the way absolutely filthy. I thought, my God, somebody has to sleep in that bed after that guy has been in it. Ugh. But she had no heart at all for a little girl and her father who were broke and down on their luck. That little girl had not much choice about her life circumstances and I personally think she deserved the good rate more than the homeless guy or at least as much as the homeless guy. That was one of the reason I quit. my coworkers were just mean, nasty *$*&Y#es frankly. That was just one example of the meanness I saw in a month there that made me quit. They were pretty nasty to me as well. We were the only hotel within a half hour drive. I saw the desperation in his face and in the little girls. I know they ended up sleeping in their car. I thought about offering them to stay at my house to sleep and shower the next day but I knew I would get in trouble. I should have just done it and then quit and clocked out.

    Anyway, basically I think hotels make really weird pricing decisions in every way possible. It find it all bizarre.

     
  2. Patrick Bosworth

    Thanks everyone for the feedback. I’m glad the story struck a chord. This is a very real challenge — and huge opportunity — for the hotel industry. David, I agree that hotels need to own the customer after the initial booking, but I also believe they can do a better job of fighting for that first booking, too. As others pointed out, there are new solutions and strategies out there that can help. As technology continues to mature and improve within lodging, more advanced solutions and integrations among systems will lead to even greater functionality for hoteliers. Everyone is absolutely correct: There is no easy answer, but the first step is realizing the current pace of increasing acquisition costs is unsustainable longterm.

     
  3. Richard Vaughton

    Good article and clear opportunity. Scale, brand and spend are challenges. We are seeing same thing developing in rentals.

     
  4. Eran Savir

    Great article Patrick,
    Hoteliers can indeed do many things to increase Direct Bookings, from introducing points, rewards and perks to using new technologies such as http://www.bookingdirection.com to provide the OTA web experience on their hotel’s website and stop shoppers on their website, making them book directly with the hotel.

     
  5. David Turnbull

    Patrick, great article, but I would change the 2nd to last sentence to owning the REPEAT customer from the point of booking. OTAs spending power and scale, as you alluded to, mean that they are likely to always win the battle of finding first time customers faster, quicker and often time cheaper than hotels own direct initiatives – this isnt a signal of defeat but rather acknowledgement that consumers crave choice as much as they demand deals. But more fool the hotel who doesnt have the CRM, systems and pricing in place to retain them via brand.com for the 2nd stay…

     
    • Patrick Bosworth

      David, I agree with you wholeheartedly that the fight for the repeat stay is absolutely critical. One change that many hotels need to make is to create clear incentives for hotel staff, particularly at the front desk, to capture contact information of guests at check-in (email addresses really) so that the hotel can include the stay data and contact record in a CRM or even a simple spreadsheet “database” in simpler operations. This also allows hotels to determine the extent of the problem of repeat guests booking through third parties since the email address can be used as a unique key to merge profiles and link trips. How many hotels today are capturing 90% or more email addresses at check-in? Some companies have figured it out but just be sure to monitor so that the guests are not being pressured unnaturally.

      However, it is worth noting that even for first-time guests, the data indicates that in many many cases the consumer is visiting the hotel brand.com website at some point during the shopping process. This is a clear example of the billboard effect at work but it only benefits the hotel company if they are able to convert a meaningful amount of that traffic for guests’ first visit to a hotel.

       
  6. John Chan

    Patrick, you are very right. Hotel people should see the commission paid to OTA as introductory fee, not an on going booking cost. Hotels need to have the similar tools to offer the booking experience to returning or friend referred guests. My company is offering this PMS and IBE combined services for independent hotels, but hotel operators still have not found this as critical enough to seriously into. It is the norm here.

     
    • Patrick Bosworth

      John, thanks for the comment. Yes, the ability to refer a friend is a helpful feature and having a well-integrated PMS and IBE/CRS is essential.

       
  7. Charlie Osmond

    I think there is a place for unique ‘book direct’ offers – a neat example of that are free entries into a sweepstake (“for a free upgrade, drawn daily”) that I’ve seen a few Avvio clients offer.

    BUT, I do not agree that it is *necessary*. Our testing has shown that demonstrating a hotel is no-more expensive than OTAs drives the same increase in conversion (around 35%) as demonstrating it is cheaper. We do this by showing three OTA prices on the booking engine. I think guests just want to know there’s no need to trawl the web to get the best price.

     
    • Patrick Bosworth

      Charlie, great thoughts. It could be that consumers are not motivated enough by a sweepstakes to materially change their behavior which might be why the discounts did not boost conversion meaningfully (assuming I am understanding you correctly) but it could work and is worth testing. I totally agree that providing a “meta”-style experience on a brand.com website, and in some cases even showing competitor properties as well, can be a very powerful tool. It addresses the consumers’ anxieties around choice and low prices, and increases the likelihood that they will not bounce from the site. I am seeing a growing number of booking engines offering these sorts of product features and it seems like a positive trend.

      As with any of these ideas, including the small handful I shared in the article, the most important thing is to have a rigorous approach and to test what works best for a given hotel and customer segment. Obviously, if direct inducements through discounts or service offerings do not meaningfully increase conversion, then a hotel should keep experimenting with other ideas. Being nimble and disciplined are key organizational competencies to thrive today.

       
  8. Eivind

    A good read! Hotelliers need to turn around or eventually we’ll all be working for Expedia or Priceline the way acquisitions are speeding up these days. Rule # 1: A hotel should never provide hidden rates for the OTA to display to their growing number of followers, but always provide best rates at brand.com. Neither accept rate parity or LRA agreements. Rul # 2: There is no easy solution. Don’t fall into the arms of OTA by making your hotel dependant on their bookingflow. Maintain your own booking portal!

     
  9. Anil Varghese

    @Patrick, good article and spot on! On our sales calls, we still meet hoteliers who can’t understand what the direct booking fuss is all about. “Why fix it when it ain’t broke” is their reaction 🙂
    Offering the ‘best rate guarantee’ on hotel’s own website is key: 1. It helps your guest save time and money; 2. It can help build a habit in guests to check direct site first; 3. More direct bookings will reduce your dependence on OTAs over time.

     
  10. Evan from buuqit.com

    Patrick, Great article and it’s saying what I have always believed. That guests need to be re-educated to book direct. Hotels also need to be educated on this fact also, until then were stuck paying crazy commissions for far too many bookings. Two things to consider 1. Hotels need to offer the best deal via their own website 2. Guests needs to start looking at the hotels own website to start learning of this fact, unfortunately many book via the OTA without checking the hotels own website first.

     
 
 

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