More than 1.18 billion people traveled internationally last year, and Asia-Pacific cities collectively claimed almost 25% of those arrivals. This year, growth rates are expected to be 5% to 6% and the total spending on travel and tourism should grow by over 50% over the period from 2015 to 2026, according to the World Travel & Tourism Council. The upward volume in travel comes with an intensification of digitally-powered customer engagement and decision making. Digital has become a borderless fact of life for luxury hotels in Asia and around the world, but most are still struggling with turning their customers online habits into a profit.
With this article, we’ll dive into the rising importance of direct online bookings for luxury hotels. We’ll see in particular how best to create differentiated digital experiences and remain relevant in an ever-increasingly competitive industry.
The Importance of Luxury Hotels Brand Sites and Direct Online Bookings
It has become clear within the last few years that the relationship between hotels and online travel agencies (OTAs) may not be mutually beneficial. While the contribution of OTAs to hotel sales have continued to increase, making up 12% of all reservations last year, the OTAs commissions have substantially increased in parallel, from 4% in 2010 to 15% on average in 2018, going up to 30% in some instances.
OTAs are effectively the most costly booking channel for luxury hotels. But OTAs also offer high-end hotels a significant exposure to their affluent audience. From a hotel customer behavior point of view, the OTA model seems to be preferred, especially for millennials who are used to aggregate sites.
Recently, however, there has been noticeable push back from luxury hotels as significant efforts have been made to drive direct bookings on their own hotel brand sites. Most notoriously, Hilton launched a campaign aptly called “Stop Clicking Around,” alluding to the well-known statistic that global travelers browse an average of 38 websites before actually booking.
The battle between OTAs and hotels is expected to come to a head in the next few years. In the meantime, as many digital marketers scramble to increase direct online bookings, and thus profitability, the question of how luxury hotels can differentiate themselves and remain competitive is more important than ever.
Luxury Hotels Are Creating Opportunities Through Global Networks and Strategic Partnerships
Increased competition has spurred the formation of new alliances. Last year saw a few bold moves from the biggest players in the hotel industry. Marriott announced it would acquire Starwood Hotels and Resorts Worldwide for $14.4 billion, while AccorHotels purchased Fairmont Raffles Hotels for approximately $2.9 billion.
Newly formed networks signify the start of global partnerships that come hand-in-hand with opportunities to revamp outdated digital capabilities, consolidate reservation systems, expand global customer databases for CRM, as well as enrich hotels’ loyalty programs.
