Hotel chains have spent the past two decades trying to get their customers to bypass online travel agency websites and book direct, to avoid paying Expedia and Booking.com high commissions.
Meanwhile online travel agency sites are where people go when they don’t know where they want to stay and want to search their options. They pick the site mostly based on advertising, and they complete their booking on the site they happen to be searching when they’re ready to commit.
- One of the tools hotel chains have had in this fight is their loyalty programs. Customers who have a brand preference book direct because they won’t get elite status credit, benefits, or points if they book through an ‘OTA’.
- Meanwhile hotel chains try to convince customers they’ll get a better price avoiding the OTAs. That’s sort of true, sometimes (compared to Expedia or Booking) but often not true (compared to ‘membership’ sites that market lower rates).
- Ultimately though if a customer doesn’t know they want to stay with Hilton, they don’t start at Hilton.com and it’s tough to get them to use OTAs for search and then move over to the chain’s site.
It’s interesting to see both hotels and OTA sites shifting out of their respective boxes somewhat. For instance Expedia and Accor are partnering on points-earning flight and hotel packages.
Accor has partnered with Expedia Group to launch a new Flight + Hotel site, which will allow customers to “seamlessly add flights to their hotel stay”.
For members of Accor’s ALL loyalty programme it will mean points can be earned on both the hotel and flight portion of packages purchased through the Flight + Hotel site.
Details on points earning have yet to be announced, but Expedia said that the site will launch in Australia later this year, followed by the UK, France and Germany.
Expedia spends a lot to acquire one-off customers. They’re realizing it can be cheaper to sell subsequent trips to people that have already purchased from them (loyalty matters) and they’ve gutted their loyalty program throughout the years.
Meanwhile if Accor is ‘early in’ with this partnership they may gain higher purchase likelihood from Expedia’s eyeballs than other chains.
It makes sense to start with travel packages. And not just because “package customers cancel 75 per cent less, stay twice as long and book twice as early compared to non-package travellers.” Instead, packages allow for opaque pricing, hotels can offer discounts without showing how much exactly that discount is compared to direct booking. Packages are lucrative products for OTAs.
Ultimately I don’t have a lot of confidence that either hotels or OTAs will shift tremendously. They have decades of muscle memory built into their current models. Expedia hasn’t really innovated at all to deliver more value to customers in the past 20 years, that I can see, and they’ve done little with their loyalty program except make it worse. So while there’s an opportunity in loyalty, and to work together closely with a chain to deliver value to the booking site, hotel, and customers, it strikes me that the current places aren’t well positioned to capitalize on it.