The rise of metasearch and its effect on distribution

by Ed Watkins, Contributing Editor | October 05, 2016

The next big thing in hotel distribution might be metasearch, says Cindy Estis Green, CEO and co-founder of Kalibri Labs. While metasearch has been a factor in hotel distribution for a while, it might soon become a dominant player in the market.

cindy estis green“It surprises me that there isn’t more of a focus on the rise of metasearch,” she says. “It’s not that the online travel agencies aren’t dominant and very strong in the marketplace, but this is what is coming, and it is coming fast and furious.”

She notes that Google has designs on the hotel booking market and could become a strong competitor to existing OTAs.

“Google is in plain sight and is being very aggressive about creating some of their new products, which are direct competitors to the OTAs,” she says. “But the question remains what this all will mean for hotels.”

Estis Green is lead author of an update to a 2012 publication titled “Distribution Channel Analysis: A Guide for Hotels.” The new study, “Demystifying the Digital Marketplace,” will be released in three parts, with the first section due for release this month.

We spoke with Estis Green about metasearch and other trends in hotel distribution and revenue strategy:

What’s driving the rise of the metasearch—the technology or consumer demands? 

A lot of it has to do with consumer demand. Everybody wants things on their mobile devices. People haven’t talked about it so much in terms of bookings; it has been more for other conveniences, but I think it is going to move into the realm of bookings rather quickly.

Google in plain sight is launching its Trips app and their Destinations app. They have made it clear they want to come in and take over the booking of hotels, the role that OTAs have had. The OTAs aren’t missing it, but the hotels aren’t talking about it as much.

What should hotels, and specifically revenue managers, be doing to prepare for the rise of metasearches?

They have to keep an eye on what is rising and what is falling in their markets. TripAdvisor might be small but it is growing; it might be single digit but Expedia was single digit one time in the early days.

They have to be extremely aware of not only what is coming into the five hotels they think they are directly competing with, but also the demand coming into their overall markets. Which models are growing and which are shrinking? Models meaning opaque or merchant model or last-minute travel, or whatever it is that’s popular in that market.

And if you’re in a market where Airbnb is a factor, you need to know whether is it affecting you or not. If previously during big leisure events or weekends you counted on a certain level of business and now the supply has been expanded 20% because of Airbnb, what do you do? How can you make your hotel more attractive? You have to understand who you are competing with.

[bctt tweet="Hoteliers must be aware of the role metasearch sites are playing in the demand mix, says @estisgreen #revenuestrategy" username="OptimizeDemand"]

Are there other areas of the business ripe for disruption?

Everyone thinks corporate business travel is going to keep going the way it has been going, but very soon—the next couple of years— we will have some very dramatic changes in the way that segment functions.

In what ways?

We’ve all known about rate scanning sites like TripBam, and now there are five new companies in the space, one of which is being launched by the guys who started Priceline, that are meant to provide incentives to travelers to self-police themselves on business travel and then share the savings between the traveler and their companies.

That’s going to be disruptive to the travel management companies and disruptive to the hotels and the airlines because the travelers are going to do what they can to reduce their costs to try to increase their cut of the savings.

What effect will these disruptors have on corporate travel programs? 

It’s not just about giving free things away. Hotels are being commoditized by third parties and if they don’t differentiate themselves on the experience—some kind of service that’s differentiated, memorable or distinctive—it’s just going to be a price war.

If you can’t offer a differentiated product and all you have is price, that’s not a good position to be in.

There’s a lot of buzz about loyalty club room discounts and what the chains are doing. What is the long-term effectiveness of those schemes to decrease cost of customer acquisition?

There has to be a reason to book direct. If you build around discounts only I don’t think it is sustainable. That’s my point about differentiated service. You have to make it so easy for someone to come back directly and so convenient.

It’s like Amazon and its one-click purchase. The hotel industry has to get with that kind of program. It has to do more along the lines of what Amazon has done with recommendation engines and prompting the consumer, having a lot of the work done for them for the bookings, making suggestions. That’s just for the booking part. Obviously, the in-hotel experience can be differentiated also.

Owning the customer relationship: What are the keys for hotels to own that relationship in a world dominated by third parties? Is it the experiences or are there other things they can do?

It’s the in-hotel experience, but it is also the pre- and post-stay experience. Hotels need to think about the ways they interact with guests to build that kind of relationship. Finding ways to communicate with the guest, like using recommendation engines and other technology solutions. Amazon sends me recommendations all the time. They have gotten to know me and the things I’m interested in.

If you start mining travel habits, you start getting other data about travelers and types of travelers and you start learning and using what you learn to be able to make a recommendation; that’s relationship building, where you show that you understand what someone is interested in and you convey that and you communicate back and forth. There has to be more of a dialog between hotels and their guests, and that’s pre-, during and post-stay.

You’ve said that commissions are growing at a rate of twice the rate of revenue growth and that was during some really good years for the hotel industry. What is going to happen as the hotel industry enters a slowdown?

We all know there’s going to be a downturn, and the downturn means less demand, and hotels may do the same knee-jerk reaction of last time and every other time where you think you can discount your way out of it. It doesn’t do a thing but cripple you. It doesn’t help. Hotels need to think hard about what they’re going to do to make themselves more appealing because they’re not going to discount their way out of this. And the spiraling cost of customer acquisition will challenge the hotel’s profit margins even more.

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Ed Watkins, Contributing Editor

Ed has been covering the hotel industry for more than 40 years. He was editor-in-chief of Lodging Hospitality from 1980 to 2012. He then joined Hotel News Now as an Editor at Large, until his retirement at the end of 2014. Ed still contributes to several publications and is a member of the advisory boards for the hotels schools at Michigan State and Penn State.

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