Will Direct Booking Strategies Impact OTAs?

A recent Morningstar study, “Hotel Direct Booking Campaigns Won’t Hurt Priceline and Expedia Says Study,” asserts that the impact of major chains’ direct booking campaigns on online travel agencies will be negligible.

HSMAI’s Digital Marketing Council recently discussed key issues the study might not have considered, and what hoteliers should be doing, when it comes to their channel and pricing strategies, to drive booking, revenue, and profit.

Did Morningstar Get It Right?

  • The study assumes an average brand.com member discount of 10%. From the brands’ perspective that is a significantly high estimate, and that makes me skeptical of the rest of the study. If their numbers are off, then their conclusions are skewed.
  • We’ve seen different analyses of the profitability to the hotel in light of the discount.
  • Today’s direct booking campaigns aren’t a short-term play, but a long-term one. If all you’re doing is discounting, the shine of that will wear off quickly. The value-add that augments this strategy, and is not factored into the study, is all the value hotels provide those guests after the booking (from mobile services to wifi to more).
  • The study took a myopic view of one aspect of the hotels’ strategy, layered on a short-term perspective, and then drew conclusions.
  • Management companies generally are not particularly happy with the discounts of today, but know that all are taking a longer view.
  • It’s not just about the first booking, but the multiple bookings that take place after that.
  • The study does acknowledge that there is a degree of incrementality in the discount strategy, but doesn’t factor in the on-going and long-term impacts of loyalty. For example, very frequent travelers are not the most price-sensitive, but are highly sensitive to superior degrees of recognition – and incrementality plays a big role here. More incremental business will be derived from this movement than the study gives credit for.

Read rest of the article at HSMAI