Way back in the swinging sixties of the internet age (about five years ago), the roles of the major players in the travel industry were quite simple. Google was for search, TripAdvisor was for reviews, and Expedia and Priceline were for shopping for hotel rooms.
Today, as these companies look for new ways to satisfy shareholders’ insatiable appetite for growth, they are increasingly delving into each other’s territories, and traditional roles are changing.
The question is, will travelers follow? And how can hotels adapt to the new playing field?
It’s not always easy to determine where the big players are heading, but comments made by executives during quarterly earnings calls, when they must explain financial performance and reassure investors, are often revealing.
Growth of Alternative Accommodations
One of the most ominous signs for hotels industry is the proliferation of the so-called sharing economy, which turns people’s homes into miniature hotels.
After years of tremendous growth, Expedia and Priceline have experienced a slowdown in hotel room bookings and are turning to alternative accommodations as a source of growth.
Last year, Expedia purchased vacation rental site HomeAway, which owns VRBO, and announced plans to “expand aggressively” in this market. During Priceline’s first quarter 2016 earnings call, interim CEO Jeffery Boyd reported that the company lists over 400,000 alternative accommodations. “We couldn’t be more enthusiastic for these types of accommodations,” he said.
And let’s not forget about Airbnb, whose listings make up an estimated 8 to 15% of hotel room supply in major cities in the U.S., according to a study from Bank of America Merrill Lynch late last year. (qz.com.)
The growth in alternative accommodations has been made possible by a combination of technology, which allows travelers to shop, compare and book offerings online as easily as hotels, and by guest reviews, which remove a lot of the risk and worry out of staying in a stranger’s home.
As the comfort level increases, the non-hotel sector will continue to expand beyond leisure travelers and vacation destinations to business travelers and urban destinations. The next great frontier? Group travel.
How big is the threat? Think about it. If every traveler rented out their home while on the road, there would be little need for hotels. Hotels may lament the commission they pay to OTAs, but it’s better than no booking at all.
The hotel industry may not feel the pain of a few points in lost occupancy when travel is on an upswing, but when things slow down everything falls under greater scrutiny, and that’s when people lose jobs and brands lose contracts.
The Push for Direct Bookings
Ironically, the move toward alternative accommodations by OTAs has been partly propelled by hotels. The big brands have finally found the cojones to stand up to OTAs and use loyalty clubs as a workaround for rate parity restrictions.
Marriott, Hilton, Hyatt and other brands now offer incentives to travelers to join their loyalty programs and book direct, including lower rates than those found on OTAs, free Wi-Fi, loyalty points and online check-in. They are spending millions in advertising to teach travelers that the best deals are found by booking direct. The campaigns have even hit mainstream media.
A Google survey found that the top reasons travelers book on OTAs include lower prices or better deals, past positive experience or recommendations, familiarity with the brand name, better tools and options, loyalty and rewards programs, and “It’s what came up at the top of a search engine results”. (The 2014 Traveler’s Road to Decision.)
If hotels want to attract more direct bookings, these are the areas where they need to compete.
A New Booking Model
Meanwhile, TripAdvisor and Google are trying to change traveler behavior too by allowing travelers to book a room without leaving the site. The booking is passed on to the hotel for completion, and the hotel pays a commission of approximately 12% to 15% of room revenue.
Read rest of the article at: Hotel Online
