Instant Book | Is this the Beginning of the End for Direct Hotel Bookings?

Imprimir
February 2017
by Paul Mulcahy, Senior Vice President Commercial and member of the Executive Committee at Mövenpick Hotels and Resorts


What is the future of the OTAs’ new direct booking model?  As Mövenpick’s Paul Mulcahy explains, it poses a further threat for  hotels,  as  they  will  continue  to  lose  control  over  more  and  more  of  the  guest  online  customer  journey  and  thus  their  ability to brand build and differentiate themselves relative to the competition

Given what we know now, it seems ironic to remember the buzz at the dawn of the Internet which predicted that the web would accelerate B2C commerce, cutting out the middleman and making it easy for consumers to have a direct relationship with a company or supplier. As we now know, in fact the opposite has happened in the hotel industry, where the middleman is alive and well and achieving the type of sustained growth that is unlikely to abate.

The reasons for the strength of intermediation in the hotel industry are well documented and are normally associated with the fragmented and disorganized nature of the hotel world, a characteristic that gave OTAs the foot in the door they needed to organize disparate content in an easy format for guests, while at the same time providing a strong online user experience, at least relative to what was being o ered on hotel brand websites.

Despite consolidation on the OTA side, there is no doubt that the middlemen are taking more and more share of the guest relationship across the customer journey away from hotels. While hotel brands have finally reacted, there is a long way to go before they claw back some of what has been lost or at least protect what they have. Current “Book Direct” campaigns, which try to educate guests as to the benefits of direct booking, are good examples of hotel companies leading the charge. However, one has to question how long this increased marketing spend can be sustained, a spend that – while significant – is dwarfed relative to the billions spent by the OTAs.

The hotel intermediary landscape took on yet another turn in 2015 with TripAdvisor and Google launching “Book on TripAdvisor” and “Book on Google”. This new model allows users to complete their booking on Google and TripAdvisor without leaving their respective websites (or apps), with the booking then being pushed directly via the central reservation system to the hotel and the subsequent booking confirmation originating from the hotel. These programs were launched in tandem to their original cost-per-click meta-search programs where users are sent to a hotel or OTA website to complete their booking. Both TripAdvisor and Google tout direct booking as a way for hotels to increase direct bookings, where hotels have full control of rates and availability and only pay when a booking is made, as opposed to meta-search where the hotel pays per click received, regardless of whether a booking is subsequently made or not.

While TripAdvisor markets direct booking as a way for hotels to increase direct bookings, this model is a long way from a hotel book direct initiative. At its simplest “Book on Google” and “Book on TripAdvisor” is e ectively an OTA-type mode where hotels pay anything from 12% to 15% commission. This model brings the booking process upstream and away from the hotel branded site, which in my view reduces a hotel’s ability to build brand equity and ultimately increases guest engagement for Google or TripAdvisor.

In many ways there is no di erence between a hotel giving a white label of its online booking engine to Google or TripAdvisor, and allowing these companies to rebrand it without the hotel being really able to di erentiate itself from its competition. It also gives yet another reason for prospective guests not to visit a hotel’s brand website and thus further drives the commoditization of hotels. Of course it can be argued that since the confirmation email arrives direct from the hotel, there is a good opportunity to maintain a pre-stay contact engagement strategy with the guest, di erentiating this channel from a booking made via an OTA where o en the guest details and email are anonymized.

Download full article in pdf