Hotel owners are tired of online travel agencies (OTAs), like Expedia and Priceline, cutting into their profits by charging hefty commissions. To counter the growing trend of consumers booking through these third-party sites, big hotel chains have launched marketing campaigns to encourage customers to reserve rooms directly through their websites.
Hotel conglomerates like Marriott and Hilton, are spending serious cash on ads to encourage direct booking, and they’re also starting to offer exclusive perks to customers who don’t go through a third-party, according to a new report from The Wall Street Journal.
Last year, Hilton launched its “Stop Clicking Around” campaign, promising “an exclusive discount on room rates by booking directly through its brand websites.” The ads also touted other benefits of direct booking and the Hilton loyalty program including, “free room nights, free Wi-Fi, and the ability to check-in, choose your own room from a digital floor plan and use a Digital Key.” It was the biggest marketing campaign Hilton has ever run.
Around the same time, Marriott (with newly acquired Starwood) began expanding the perks of its loyalty program, without offering them to travelers who book through an OTA, according to travel news site Skift. “Some hotels are even saying privately that they plan to reduce their room allotments to online travel agencies in 2016,” writes Skift Executive Editor Dennis Schaal.
“When consumers book directly with the hotel and establish that relationship from the beginning, hotels can provide services and amenities that the OTAs can’t because that’s our business — guest service,” said Vanessa Sinders, SVP of government affairs for the American Hotel & Lodging Association, in an email to GeekWire. “Booking direct is also the surest way for guests to get what they want and need and often the better value too.”
OTAs are growing much faster than the U.S. hotel market. Last year, OTA lodging bookings in the U.S. surpassed hotel website gross bookings for the first time, according to a report from travel research firm Phocuswright. That growth is almost entirely concentrated in two companies: Bellevue, Wash.-based Expedia and European competitor Booking.com, which is owned by Priceline Group.
Sarah Gavin, vice president of global communications at Expedia, said via phone that “the business model that has been most successful is providing consumers choice and value.” She added, “When you think about what that is like from a consumer experience, we are not motivated to put you in any individual hotel whereas hotel chains are just motivated to get you in their hotel. We just want to get you to the right hotel.”
In marketing campaigns and the press, both OTAs and hotels are making the case that they provide better service to consumers.
“While the online travel agencies are a partner to the hotel industry, many consumers are unaware that in reality, only two companies control the U.S. marketplace: Priceline and Expedia,” said Sinders, of the Hotel & Lodging Association. “When it comes to the guest experience, the hotel industry invests in the relationship it builds with their customers from the start of the shopping experience all the way through the guests’ arrival and stay at the hotel. In contrast, the online travel agencies’ relationship ends with consumers the moment they provide their credit card information to book their reservation.”
Phocuswright analyst Douglas Quinby says in the firm’s report that the direct booking and loyalty campaigns may have the desired effect on consumers, to a degree, but he doesn’t think they’ll work on the coveted millennial generation.
“Millennials are price-sensitive, favor choice, and have a penchant for boutique and alternative accommodation experiences,” he says. “In addition, the extreme price focus of these campaigns risks reducing the value of the loyalty program to price.”
Owners of hotels under big chains, like Marriott and Hilton, have to pay fees to those brands and to OTAs when customers book through those channels. If something has to give and consumer preferences are trending toward smaller boutique accommodations, it could spell trouble for the big hotel brands.
“You’ve heard it all before: private accommodation, boutique hotels, authentic local experiences,” writes Quinby. “Today’s and tomorrow’s travelers want something more, and the big brands of the future need to reinvent their portfolio today. Some are further along with this than others.”