Following the lead of Kayak.com, which has turned itself into a meta-OTA-type of a service for quite some time now, TripAdvisor rolled out their “Instant Book” feature over the past year or so (now called “Book on TripAdvisor”), which, at up to 15% commission, is a de facto OTA-like channel. Recently Google launched a copycat service -“Book on Google”, which is a similar OTA-like/commission-based option in their Hotel Price Ads (HPA) meta search program.
Now both Google and TripAdvisor are running two parallel tracks within their meta search programs:
A. OTA-type of a program, based on commissions of 15%, where users book on Google or TripAdvisor respectively (“Book on Google” and “Book on TripAdvisor”).
B. Meta search advertising program, based on CPC (cost per click) and advertising budgets, where after they click on the meta listing, the users are sent to the property’s own website booking engine to complete the booking.
We see similar OTA conversions from other smaller meta search players like Hipmunk, Skyscanner, and others.
What does this new type of OTA services mean for hoteliers?
I see several major issues with the OTA-type, commission-based “Book on Google” and “Book on TripAdvisor” programs:
- These programs ARE NOT “direct-with-the-hotel” bookings
- They will increase hotelier’s OTA dependency
- They will drastically decrease hotelier’s ability to generate online demand
- They will diminish hotelier’s competitive advantage online
- They will worsen ROIs and lead to increase in COS (Cost of Sale)
Here is why we believe these two new OTA-type services are bad for hoteliers:
1. “Book on Google” and “Book on TripAdvisor” ARE NOT “direct-with-the-hotel” bookings
Both Google and TripAdvisor have made numerous claims that “Book on Google” and “Book on TripAdvisor” are de facto bookings directly with the hotel. Let’s not fool ourselves: Both of these programs are not some CPA (Cost per Acquisition) advertising formats. These are pure OTA services where both Google and TripAdvisor insert themselves between the travel consumer and the hotel, take over the customer engagement and relationship, and close the deal/the booking on its own website, and get an agency commission for doing the “agency work”, similarly to all OTAs and traditional travel agents.
These new programs contradict the mere definition of the direct online channel. The Direct Channel is a “Distribution channel in which a producer (manufacturer of good and services) supplies or serves directly to an ultimate user or consumer, without any middleman (agent, distributor, wholesaler, retailer).” (BusinessDictionary.com). “Owning the customer” and engaging the customer on a one-to-one basis is the ultimate objective of the direct online channel.
Let’s examine this claim from 2 perspectives: the travel consumer and the property:
- They search hotels on “Book on Google” or “Book on TripAdvisor”
- They identify a hotel that they like most
- They check dates/availability and pricing
- If they like what they see, they book right on Google or TripAdvisor
- They are asked to enter their names, address, credit card info, billing address, etc.
- The reservation is confirmed
- Google and TripAdvisor pass the guest information and credit card to the property
- Any post-reservation customer service is referred to the hotel directly (floor and room preferences, etc.)
How is the above different from a booking on Expedia, Booking.com or on any OTA site? It is exactly the same flow for any travel consumer on any OTA site.
- The hotel CRS has to interface with “Book on Google” or “Book on TripAdvisor”
- The hotel has to be in rate parity and provide last room availability, the same as with any other OTA
- If a consumer books on “Book on Google” or “Book on TripAdvisor”, the hotel receives the guest information and credit card, the same as with any booking on an OTA site
- The hotel pays a commission to Google or TripAdvisor, the same as with any other OTA
- The hotel proivides the post-reservation customer service
How does the above make a booking via “Book on Google” or “Book on TripAdvisor” a direct booking for the hotel? Indeed, it does not. It’s no wonder that TripAdvisor recently abandoned any pretense that this is a direct booking with the hotel and has renamed its Instant Book feature to “Book on TripAdvisor”, which in most cases is powered by JetSetter, an OTA owned by … TripAdvisor.
In my view, both “Book on Google” and “Book on TripAdvisor” OTA-type services “deface” the hotel, remove the brand equity from the customer engagement and convert it into an engagement and brand interaction between Google or TripAdvisor and the customer.
2. Increasing your property’s OTA dependency by converting two important direct online channels into OTA-type channels and adding them to the OTA mix
How is this for a wake-up call? For the top 40 hotel chains and brands in North America, back in 2007 85% of all online bookings were via brand.com (i.e. direct) vs. 15% via the OTA channel.
Fast-forward to 2012, when as a result of the great recession this ratio brand.com vs. OTA has already shifted in favor of the OTAs to become 72:28. Another fast-forward to 2015 when the recession is long gone and our industry has been enjoying 4 years of steady growth in occupancy, ADRs and RevPARs, can you guess what the brand.com vs. OTA ratio is? Well, it is now 64:36 in the first half of 2015, a serious shift in favor of the OTAs. And all of this with only two main OTAs in existence?
Throwing another two heavy hitters (TripAdvisor and Google) into the OTA mix will undoubtedly further erode the direct online channel (brand.com) and shift the scales in favor of the OTA channel. In our view, this would lead to brand.com vs. OTA ratios shifting to 50:50 in less than 3 years from now.
3. Losing control over the ability to generate demand for the property when you need it most
Signing up with Google’s “Book on Google” and TripAdvisor’s “Instant Book” is opening another permanent distribution channel, which similar to the major OTAs is ruled by rate parity and last room availability (LRA) provisions, which are mandatory for both programs. What does it mean for your property? It means you will be receiving OTA-type of bookings with a hefty distribution price tag when you least need them: in high season and high occupancy levels when travel demand is naturally high; and conversely receive very few or no bookings during low season or whenever travel demand is low. Hoteliers do not have to look far to find glaring examples of this user case: where are Expedia’s or Booking.com’s bookings for New York City hotels in January? Or February?
This is why hoteliers need robust advertising and digital marketing budgets, including sufficient ad dollars for meta search, which would allow them to spend more and bid higher on TripAdvisor Meta and Google HPA when they need more business (i.e. during low season or when having group cancelations, or having low occupancy days, etc.), and spend less or not spend at all when they least need help (i.e. in high leisure travel season or during high convention/corporate meeting season, or during holidays, etc.).
Read full article at: Hotel News Now