Can hotels win the direct booking wars? Or are the online travel agencies (OTAs) like Booking.com and Expedia just too big to fail?
Those are two questions no doubt weighing heavily on the minds of executives on both sides of the so-called direct booking wars.
On one side, you have the hotels, consisting of global players like Hilton and Marriott, as well as smaller, independent brands and properties. On the other, you have the OTAs, made up of Expedia, Priceline Group, and increasingly, Ctrip, as well as hybrid challengers such as TripAdvisor.
All of these entities are vying for guests to book with them and, for many years now, it’s seemed like the OTAs have had an edge and the commissions to keep them at the top in this constant struggle between the two.
Morgan Stanley Research estimated that the global hotel industry saw revenues of $570 billion last year and of that amount, brands took home about $11 billion for branding fees. OTAs, on the other hand, collected $16 billion in commissions.
Within the past year, however, hotels have started making bigger moves to try to get whatever market share they’ve lost to OTAs, along with those extra costs related to those steeper 15 to 25-percent commissions.
They’ve launched multi-million-dollar ad campaigns, as Hilton did with “Stop Clicking Around.” They’ve unveiled discounted rates for members of their loyalty programs, hoping these lower rates will elicit more direct bookings and build their loyalty membership enrollees.
While it’s still rather early to call the battle just yet, it’s never too early to start preparing for the many battles that lie ahead in these direct booking wars. Getting more direct bookings is just a start for hotels. If they really want to win the war itself, they’ll have to do much more than that to keep the customers they have, and acquire more in the process.
Be the Ultimate Negotiator
This is easier said than done, but it’s essential for hotel companies to try to negotiate the best possible commission rates they can from the OTAs, as Hilton and Marriott did last year.
When Marriott and Hilton renegotiated their contracts, they got the OTAs to agree to lower fees and eliminated last room availability, also allowing them to offer lower rates to their loyalty members.