It took a diverse panel — one online travel agency, two mega hotel brands and three hotel technology firms — to unpack the complexity of “Getting the Best ROI in Distribution” at the 38th annual NYU International Hospitality Investment Conference.
The industry experts in the session, which took place at the Marriott Marquis in New York, acknowledged the important relationship between hotels and their distribution partners like OTAs, which remain an important customer acquisition channel. But the ongoing tensions caused by rising costs and disruptive technologies became apparent, spurring conversations about which strategies would help hotels and OTAs alike.
Expedia Senior VP Melissa Maher framed it not as a battle between OTAs and hotels, but between competing hotels.
Some hoteliers did not completely share that view.
“There’s a key component of driving revenue through an OTA, and that’s where your hotel lands [in the order of search results],” said Stephen Fitzgerald, VP of OTA and wholesale for Hilton Worldwide. He added that his company’s listings on Expedia had routinely fallen down the sort order — particularly since the February debut of Hilton’s “Stop Clicking Around” campaign to drive direct bookings — and in some cases had been stripped down to a basic description that appeared unbookable to an OTA user.
“We wish we could control more in the sort order, but we can’t,” he said.
[bctt tweet="#NYUHospitality panel talks ROI from #distribution, with @Expedia @Marriott & @HiltonWorldwide."]
Maher responded to the charge that Expedia’s Marketplace model caused a “dimming” effect for hotels like Hilton and Marriott, which are aggressively marketing their direct-booking channels, saying that the OTA’s proposition to hotels and consumers has not changed.
“It’s as simple as, the algorithm we’ve worked on for two decades gives exposure to the best rates and inventory,” Maher said. “We’re champions of consumers. We want to make sure what is put in front of them are the most competitive rates.”
Lower, fenced rates don’t stack up as well in Expedia’s measurement of a hotel’s “offer strength,” when compared to competitors’ publicly listed rates, she said.
Hotels court direct bookings aggressively
Until more recently, hotels had not been as proactive as they should have been in courting direct business, said Cindy Estis Green, co-founder and CEO of Kalibri Labs. If hotels rely too much on OTAs for their bookings, they lose leverage with those distribution channels and face higher commissions and costs, she added.
“For us to bring percentages down is not just a matter of hotel brands needing to negotiate better with OTAs,” Estis Green said. “They need to take control of their business mix, understand demand in their markets and understand every type of acquisition cost in those markets.”
Estis Green shared recent Kalibri Labs research that found loyalty members who book direct produce an average lift to hotels’ room revenue of 9%, compared with customers booking a hotel room through a third party. When the data included ancillary spending, that revenue lift rises to 18%, she said.
“It’s not surprising that those people loyal to the brand buy the product more often and spend more money,” Estis Green said. “They’re more engaged and involved. It’s true in any industry, and hotels are no different.”
Better Distribution via new Hotel Technologies
To drive those direct bookings and loyalty club sign-ups, and more importantly engage with the guests, hotels should make use of hotel technology innovations that are continually being developed around loyalty and revenue management, said Debra Stock Wolman, senior director of sales at Duetto.
“Hotels need to look at different data sources, such as web shopping data, to truly understand the conversions from their own websites,” Stock Wolman said. “Whether your hotel is independent or branded, you can’t make the best decision on how to optimize your brand.com channel if you don’t know all the right information and where it’s coming from.”
Such technologies also help hotels manage their profitability, added Alexander Pyhan, VP of global distribution for Marriott International.
“Technology plays such an important part, but until a few years ago, we couldn’t articulate that,” Pyhan said. “Now we have cost of sales data for every single booking. Revenue management tools are crucial for hotels to understand the cost of sales to make better distribution decisions.”
Panelists agreed that better control of acquisition costs would lead not only to a more profitable mix of distribution channels, but also to better pricing decisions, which would bolster Net RevPAR.
“The future is pricing every reservation in real time,” said Ravneet Bhandari, CEO of LodgIQ. “From an owner’s perspective, one thing that gets ignored is the amount of expertise OTAs have. They’re masters at digital conversion.”
Stock Wolman agreed that smart hotels should look to OTAs, not only as a partner in customer acquisition but also as an example of how to optimize technology for consumers.
“There are many new tech players in the space, so keep an open mind,” she said, “because that’s what Expedia has done so well. They’re a technology company that makes it easier for customers to book. It’s more important than ever for brands to invest in their technology, to compete with OTAs.”