Hotel chains want you to book directly through them because it costs them less to make a reservation themselves than it does to pay a commission to Expedia or other online travel sites (or travel agents).
A dozen years ago hotel chains started to focus on driving their most frequent consumers to their websites by limiting points-earning to reservations made directly, limiting elite stay-earning, and in some cases even limiting points. While individual hotel treatment may vary:
- Major chains do not offer points-earning on room rates booked through many third party channels.
- Major chains do not offer elite qualifying nights for these third party bookings.
- Starwood, Hilton, and IHG exclude members from receiving elite benefits on such stays.
For both a chain’s best customers and for infrequent guests, they also had to make consumers believe they’d be able to get the best deal by booking direct. That’s why chains offered ‘Best Rate Guarantees’ though those are so fraught with fine print and gotchas that they’re more marketing spin than offer that most consumers are able to benefit from. (Which isn’t to say they aren’t really, really value for those who learn to play the game.)
The latest effort in the ongoing battle to reduce distribution cost is the discount for booking direct.
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. (Arguably they could have offered these ‘member-only rates’ even before that.)
So in the fall Hilton 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. Then in February Hilton expanded the discount offer worldwide and is promoting the idea that guests should “stop clicking around” and book at Hilton.com.
Here’s what happens when you ‘book direct’ with Hilton:
Hilton’s commercials tell you that booking direct is so alluring!
Marriott matched Hilton last month with member discounts promoting the idea that you’ll pay less booking direct with the chain than through an online travel agency. But the discounts are generally just 2% – 5% so less than what a AAA discount will get you. (I pay for my AAA membership and get good value out of AAA rates, but many people book the rates without even being a member.)
Today Hyatt introduced member-only discount rates and in some cases they’re bigger discounts than what Hilton and Marriott are offering, but still not better than AAA rates. And they’re not available worldwide.
Today, Hyatt Hotels Corporation (NYSE: H) announces the launch of an exclusive discount for Hyatt Gold Passport members, rewarding loyal guests with an up-to-10-percent discount for bookings made through Hyatt.com or the Hyatt mobile app.
The Hyatt Gold Passport member discount, available beginning today at Hyatt hotels in the U.S., Canada and Australia, strengthens the value for travelers who book directly with Hyatt and builds guest engagement.
Park Hyatt Abu Dhabi
Here are the two key things to know about Hyatt’s new effort:
- Hyatt’s member discounts will be ‘up to 10%’ so potentially better than the 2% – 5% we mostly see with Marriott and Hilton. But they may not be better, since the amount of the discount is determined by each individual hotel.
- The member discount will be available only in the U.S., Canada, and Australia. I had hoped this would be worldwide, because most international Hyatts don’t offer a AAA discount. AAA usually gets you 10% off, these discounts are useless when they don’t match AAA or aren’t available where AAA isn’t.
The first rate I pulled up was a month from now at the Hyatt Regency Austin. The ‘member discount’ was 5% off of the ‘standard rate’ (formerly known as Hyatt Daily Rate and also known as Best Available Rate or BAR). It’s the same as the advance purchase rate, but cancellable. The AAA rate, though, was 10% off and cancellable.
At the Park Hyatt Melbourne, where there’s no AAA rate and the member discount is 10%, this will be useful to members without corporate discounts. (Hyatt had been testing a 15% member discount in Australia that ended March 31.)
The other piece of Hyatt’s announcement is that:
later this year, the enhanced Hyatt mobile app will provide guests who book direct the ability to make on-demand requests by communicating instantly with Hyatt on services like Messenger or text messaging.
Online travel sites are useful as one-stop shops to compare options for consumers who don’t know up front which hotel they want to book. Their technology is at least marginally better than that of the major chains. They compete to show consumers what they want as quickly as possible. So they provide a better booking experience.
Telling consumers that they’re going to pay more for that better booking experience is only one piece of the puzzle. The other important piece is to give consumers the booking experience to help them find the right hotel for them, at the right price.
Gold Passport Diamond Room Service Breakfast at the Andaz 5th Avenue
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 get them a small piece of the way there. But 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.