When you search for hotels through online travel agency sites, you only thought you were the customer. It turns out you’re the product. Expedia now lets hotels bid to have higher placement in search displays. So Expedia monetizes your eyeballs, selling a better likelihood you’ll book a particular property to hotels with a product they call Accelerator.
Expedia’s advantage is that they have a lot of people searching. People go there, they’re likely to book, and that audience is worth something. So Expedia seems to have moved from doing its best to find customers the best deal, to a model where they’re selling customer eyeballs to advertisers (hotels).
That works while they maintain their market position and traffic. But to maintain their market position and traffic they have to do a continually better job at helping customers navigate through the complex world of travel, making it easy to find what the customer values most.
This has been the key struggle for years. Online booking put the brick and mortar travel agent out of business for basic air and hotel transactions. But something was lost in the process. It takes a lot of knowledge and reading to understand what among myriad options is best for a specific trip and specific set of consumer preferences. Not all travel agents were good, but the good ones were valuable guides. That guidance got lost.
So online booking sites did their best to provide mass customization. They knew they had to give the customer what they wanted, right away or they risked losing that customer to a competing site.
Four years ago Orbitz got into some publicity hot water when it turned out they were showing more expensive hotels to mac users compared to PC users. This got misreported as “Orbitz charging Mac users more for hotels” when in fact what they were doing was trying to better match hotel choices to users based on the data they had. Mac users spend more, so they showed higher priced properties to Mac users. It was a very crude way of getting at this idea of recommending to consumers what they actually want.
Of course Expedia is acquiring Orbitz. There are fewer sites as there are fewer airlines and fewer hotel chains — though competition remains fierce with Priceline Group sites like Booking.com. And this doesn’t ultimate worry me, because if Expedia stops making its mission to solve the needs of consumers and tries to sell consumers instead they’ll be playing right into Google’s hands who will clean their clock.
Expedia already can be tough to deal with. Hotels aren’t paying the commissions they were during the Great Recession. And online booking sites are losing out to hotel chains in deals that allow those chains to offer lower rates on their own sites.
Hilton managed to negotiate deals with the major online travel agency sites that no longer require the chain to give third parties “rate parity” — in other words, they can sell rooms for less on their own website. So in the fall they tested a small discount in a handful of cities restricted to Hilton HHonors members. The discount wasn’t great, about 5% (and so generally more expensive than AAA rates), but it was more about the model than the amount.
Hilton expanded the discount offer worldwide this week and is promoting the idea that guests should “stop clicking around” and book at Hilton.com. Not only is there a discount available but you earn Hilton HHonors points, something that’s excluded on third party bookings (though you also forego third party rewards such as from Hotels.com when you book through Hilton — and if you aren’t loyal to Hilton, those may be more rewarding).
Here’s what happens when you book direct:
.. at least according to Hilton’s commercial that they spent $1.3 million to air 49 times between February 15 to 17.
Ultimately online travel booking consolidation can be seen less as exploitive and more as desperation. Hotel chains are consolidating, and they’re paying less. Booking sites are trying to figure out ways to extract revenue as their income per booking is declining and as they face new competition from Google and from other potential competitors in mobile.
Still, it’s a risky move that Expedia makes. And the competing claims Expedia makes about it underscores that point.
“Customers want to see hotels that meet their needs from the start,” says Expedia Inc. spokesperson Sarah Waffle Gavin. “Expedia offers a one-stop shop to search for and book various hotels based on rate, availability and service for the dates and location travelers are interested in. Our results are customized to show listings we predict will best meet the needs of our shoppers, and every search comes equipped with various filters to adjust content even further for things like amenities, neighborhood, or VIP status, to name a few.
“Overwhelmingly, we hear from suppliers that they care deeply about sort placement,” Waffle Gavin said. “Particularly in competitive markets, a small bump in sort position can have a big impact on a hotelier’s conversion. At Expedia, we’ve refined our algorithms over the last 20 years to prioritize sort by Offer Strength, Quality Score, and compensation. This combination has provided the greatest customer satisfaction, demonstrated by bookings. What’s more, by building a marketplace where the hotels with the best deals and positive hotel reviews are at the top, we generate the highest returns for our supplier community.
Expedia simultaneously says that they provide the best judgment for consumers, independent of whether hotels are paying. But that hotels can improve how they’re displayed to consumers if they pay.
By keeping it ‘only one factor’ and potentially even just a tie-breaker they walk a tight rope in a competitive space.