Hotel chains want you to ‘book direct’ so they don’t have to pay commission to online travel agencies like Expedia or Orbitz, or other intermediaries. Yet hotel chains are spending even more on commissions than before they launched their latest book direct efforts.
There’s been a push for over a decade to get customers to skip travel agency websites, with two initial strategies:
- Leveraging their most frequent guests to book direct by refusing to offer elite qualifying credit on third party bookings and in the case of several chains refusing to even acknowledge a member’s hard-earned status if they booked through a third party.
- The introduction of porous ‘best rate guarantees’ that increasingly became marketing promises will little reality behind them — better rates were often found on third party sites but with inclusions like breakfast or parking, or for room types a chain’s website were showing as sold out, and so chains denied those guarantee claims.
Chains do pay lower commission rates than they did a decade ago. But they’re investing in trying to drive down those costs even further.
They used to say ‘you won’t pay a lower rate anywhere else’ now they say ‘you’ll pay a lower rate if you book through us’. Hilton calls it ‘stop clicking around’.
Hilton’s commercials tell you that booking direct is so alluring!
They don’t usually say it, but many hotels will also assign the worst rooms to those who don’t book direct, here’s what happened when I booked a Marriott hotel through an OTA last year.
Since I wrote last summer that the book direct push didn’t seem to be moving the needle, in fact OTA bookings were up, it’s not really a surprise that hotel chains are seeing a rise in commission expense.
CBRE Hotels’ Americas Research recently released its 2017 edition of Trends in the Hotel Industry and, perhaps, the biggest trend in the report is that U.S. hotels are being much smarter about their finances than ever before.
…“The one expense item that really stood out was the 6.8 percent increase in commission payments made to travel agents, OTAs, and other intermediaries,” said Woodworth. “This is consistent with what we are hearing from our clients.”
This data seems to suggest that, despite the major direct booking pushes made by the hotels within the last year, that their efforts may not necessarily be curbing the amount of commissions they are paying to third-party distribution channels.
Third party travel agency sites serve a value creating purpose for consumers (even if most online travel sites are shockingly bad, or at least have failed to improve as much as I’d expect).
Hotel chains need third party travel agency sites because those sites help travelers figure out where to stay. If you know you need a hotel in Fort Lauderdale, not that you want to stay at the Hilton, you aren’t going to go to Hilton.com. Hilton.com doesn’t help you figure out if you should stay at the Hilton or the Hyatt.
And as much as hotel chains would love it if you’d use those travel agency websites to figure out where to stay and then leave to book on their own sites that’s a transaction cost which is difficult to push onto customers even for a 2% discount that consumers aren’t likely to know about (they don’t see it when searching Expedia) or believe is real.
Expedia Dancers Don’t Provide Customer Service. Flickr: Juggernautco
There’s plenty of space to do online bookings better than Expedia does, after all:
- Expedia is charging hotels to skew their search results so may veer away from trying to actually best match consumers to the hotel they’ll most want to book.
- Customer service can be an Alice in Wonderland upside-down nightmare
- Expedia has about the least-rewarding and least trustworthy loyalty program
For hotel chains to shift consumers to book direct, they need to:
- Show consumers the product that best meets their needs
- Offer consumers the best price on that product
- Give them the best user experience
So far the discounts on their own hotels only gets them a small piece of the way there. They need to improve their websites. A daring chain might buy another booking site and leverage their technology to let consumers compare their hotels with hotels in other chains and non-chain properties and offer a real best rate guarantee. In other words, a hotel chain would become a quality OTA to beat the OTAs.