When the CEOs of Expedia and Marriott International gave separate talks at the Skift Global Forum last month, they downplayed the competition between hotels and online travel agencies, but there’s a little more to the story than they let on.
Expedia’s Dara Khosrowshahi said the conventional wisdom is “a mischaracterization that this is a war,” while Arne Sorenson of Marriott added, “The tension in the relationship is not really there.” I would argue slightly differently. There is a creative tension between hotels and OTAs. But it’s something we should get comfortable with, because it’s not going away and it’s actually moving hotels in a positive direction.
First, as Lodging editors have noted, Expedia has been at the forefront of major OTAs trying to move beyond merely distribution and into more services provided to hotels. Expedia is now helping Red Lion Hotels Corporation grow its rewards program by advertising loyalty rates in its listings on the OTA, and it is helping Marriott sell vacation packages. Elsewhere, Booking.com acts as a white-label booking engine for hotels in certain foreign markets and offers very basic revenue management to independent hotels through its BookingSuite.
At the same time, the story of this year has been hoteliers’ efforts to drive direct bookings by publicizing loyalty rates. Ads from Hilton Worldwide, Hyatt Hotels and Marriott have been viewed as a shot across the bow of Expedia and Priceline. The OTAs thus far have said they’re not too worried about direct-booking campaigns’ effect on their bottom lines.
Hilton and Marriott alone won’t re-order the hotel industry overnight by offering guaranteed discounts to their loyalty club members, no matter how much money they spend to advertise these programs nationally. But I don’t think we’d be seeing this wave of OTAs diversifying into services and partnerships if it weren’t for hotel brands starting to get much more focused on pricing, distribution and loyalty marketing.
A colleague of mine observed that much of what he heard leading executives discuss on the main stage at The Lodging Conference last month was distribution and revenue management, not real estate and the financial markets. That in itself is an important development.
That shift in hotels’ mentality around technology and marketing is significant — and at least 10 years overdue. Many hotel companies large and small are starting to tackle these distribution issues head on. If they previously had loyalty programs, they mostly had let them stagnate instead of reimagining them for the future.
More than a few hoteliers are starting to broach new ways of partnering with OTAs that make sense for all parties involved. It could be a smart move.
First and foremost, you need to have a coherent strategy for creating value for customers. If you’re presented with an opportunity that makes sense with your go-to-market strategy, experimenting is a good thing. If OTAs are going to innovate faster than a hotel company can, you’re short-changing your brands by dismissing out of hand something that might drive truly incremental revenue.
The key, as always, is to maximize the profitability of each new initiative. If a new kind of partnership with an OTA comes with favorable commissions for acquiring new customers, it is worth keeping as an option in your revenue strategy. Smart hoteliers will also focus on ways to encourage those new guests to book direct for future stays.
So while the war metaphors might be inappropriate and overblown, maybe we should take a different view of the hotel-OTA competition. A little tension between partners might serve both sides well.