Consumers Still Believe OTA Rates are Cheaper

by Jason Q. Freed, Managing Editor | July 11, 2016

Five trending hotel news stories and Duetto’s Take on how they will impact your hotel Revenue Strategy.

1. Direct-booking strategies doing little to sway price perception

In a new study cited by Tnooz, a whopping 75% of consumers said they believe they get the best hotel room prices by booking through online travel agencies. That's enough to make a revenue strategist go screaming into the night.

A deeper dive into the 25% who believe direct booking is better reveals some interesting clues hotel marketers need to leverage in their messaging. Perceived lower rates is the No. 1 reason direct bookers do so, but other factors cited include ease of booking (mentioned by 54% of direct bookers), loyalty points (19%), smoother check-in process (16%) and a better chance for an upgrade (13%).

Duetto’s take: Before now, the perception of OTAs as a less expensive and better booking channel was somewhat acceptable — third parties were doing much more advertising and their user experiences were much more enjoyable.

But since the industry’s biggest brands have rolled out loyalty discounts, hotels have put a significant amount of marketing clout behind their direct channels. And until rate parity restrictions go away in the U.S., brands are free to continue promising a Best Rate Guarantee.

Regarding best price, the message couldn’t be more clear. We think more consumers will begin to understand rate parity, at least at face value, and realize that room prices are pretty similar no matter where you book. Improving user experience is the next step. But unfortunately, unless Room Key or someone similar get their act together soon, OTAs will continue to have a lock on aggregation and metasearch.

2. Marriott eyes millennials in direct-booking bid

Company executives recently pulled back the curtain on Marriott International’s campaign to get consumers to book directly by positioning it as a way to influence more millennial travelers.

According to Tnooz, during a recent panel discussion, a Marriott executive said, "It is important that the brand positions itself in the minds of millenials as the place to secure their hotel stays before they form specific types of booking behavior (i.e. using online travel agencies)."

It's important, he said, because the company anticipates 76% of its guests will be millennials within four years, and those in that demographic are seeking experiences, rather than just a place to stay. As a result, the company's direct-booking marketing campaign emphasizes the experiential joys of staying at a Marriott.

Duetto’s take: The folks at Marriott are a crafty bunch. Or they're able to spin a good yarn. Regardless, they’re attacking the problem outlined in Headline 1 head on: They’re hitting consumers at a young age to help them understand that booking direct is best and most cost-effective way to go.

Some other hotel suppliers, outside of the main four or five megabrands, remain slow to truly understand the importance of capturing bookings direct. We think part of the problem results from how hotel staff is incentivized when the website generates better than expected revenues. Too often, employees don’t understand the cost of distribution and that OTAs are much more expensive than direct reservations.

3. Who has the upper hand in the upcoming RFP season?

It's nearly time for travel buyers to begin negotiations with their hotel partners for 2017 rates. Given the buzz circulating that the hotel industry is ready for a downturn, will buyers be able to achieve an upper hand in these discussions?

And while many corporate travel buyers believe they have the advantage, many hoteliers and analysts see a different scenario, one in which hotel occupancy is at its historical peak and, despite the noise, a true downturn isn't on the immediate horizon.

According to this story, the scales seem to be somewhat balanced: The hotel industry is generally holding steady but has the potential to weaken, and business travel seems to slowly be returning. This should make for some interesting negotiations this fall.

Duetto’s take: Although there's been a marked weakness in U.S. corporate travel so far in 2016, the good news is that it seems to be rebounding, with the latest TravelClick data indicating a pickup in business transient bookings for the third quarter of 2016. 

Corporate negotiated rates are a big deal for hotels, and buyers should continue to be treated well. Revenue strategists should look toward corporate business to provide a solid base of nearly half of all inventory before filling in with group and transient

As occupancy is expected to remain flat next year, hotels that can shift corporate business to their property will win in the long run. Here are five additional ways to combat stagnant rate growth.

[bctt tweet="5 trending #hotel #RevenueStrategy articles and @OptimizeDemand’s take"]

4. Behind one OTA's overwhelming success

Booking.com, Priceline’s big-dog online travel agency, has become a brand of its own. According to third-party data cited in Tnooz, the OTA’s leading source of visits is direct traffic.

So despite spending hundreds of millions of dollars on digital marketing, the site is so well-known (and presumably trusted) that consumers go to it without being prompted.

As points of context, the site registered more than four billion visitors between June 2015 and May 2016. During this period, the site’s peak month was August 2015 when it had 474 million worldwide visits on both desktop and mobile web.

Duetto’s take: This is bad news for travel providers worldwide. In the United States, hotel suppliers are just beginning to understand the massive power behind Booking.com, and as the OTA grows brand awareness in the United States, things will just get worse.

To compete, hotels must adopt their own in-house CRM and yielding strategies. Guests must be nurtured from pre-booking through the booking process to post-stay. Recognize them immediately and reward them for their loyalty. Try to get to them before Booking.com does.

5. Business travelers love mobile technology

A new study by the Global Business Travel Association shows 78% of business travelers in the U.S. prefer using self-service technology to manage their travel. The numbers are similar in Canada, Italy and Spain, while slightly lower in Nordic countries and Germany.

The research also points to a dichotomy in how business travelers safeguard their personal information. While they enjoy the pampering of personalized travel experiences, they're generally unwilling to provide much information beyond frequent flyer or hotel loyalty numbers, preferred airline and hotel brands and aircraft seat preferences.

Duetto’s take: It's not just kids and millennials who are mobile junkies. Count business travelers among those who can't function on the road without mobile technology.

For many years, business travel was an easy segment for hotel marketing. And those travelers were generally willing to pay rack rates, or close to it. Not so much anymore. Today, business travelers have many more avenues through which to evaluate their choices, compare prices and book rooms.

As a result, hotel marketers and revenue managers need multiple strategies to connect with business travelers on the distribution platforms they want to use.

Stay up on hotel Revenue Strategy news and discuss industry tech trends in the Hotel Revenue Strategy Leaders Group on LinkedIn.

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Jason Q. Freed, Managing Editor

Jason joined Duetto as Managing Editor in June 2015 after reporting, writing and editing hotel industry news for a decade at both print and online publications. He’s passionate about content marketing and hotel technology, which leads to unique perspectives on hotel distribution and revenue management best practices.

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