Six of the top 10 hotel brands saw direct bookings in the US increase from May 2016 to May 2017, according to Hitwise.
The growth came after a concerted direct push from the global operators, leveraging loyalty programmes to offer discounts for booking direct, a strategy which Morgan Stanley described as “a price worth paying”.
The company said that Wyndham had more than tripled its share of direct bookings to 9.61%, while Marriott International had the biggest share of direct bookings, at 26.21% in May 2017. The report counted Starwood Hotels & Resorts separately, with the group achieving 5.19% of sales directly.
In contrast, of the top eight online travel agents, only Booking, Expedia and Priceline saw growth in share of bookings. Expedia had the highest volume of OTA site bookings, with 28.09%, while Booking, which had 19.13% of bookings, saw the largest growth, building its share by 3.35 percentage points.
Hilton, which, with its Stop Clicking Around campaign, launched the drive to book direct, recorded 17.25% of its bookings direct, up 0.82 percentage points on the year. The company started its direct campaign in February 2016, ahead of Hitwise’s study and a year before Marriott International.
On Hilton’s second-quarter earnings call, CEO Chris Nassetta said: “With the most guest-centric loyalty programme and the efficiency of our web direct channels, guests benefit from greater personalisation and more choice and control and best value. At the same time, owners benefit from lower distribution costs and continued increases in system revpar premiums.”
The company said that, year-to-date, 5.5 million people had joined Hilton Honors, a 20% increase year-on-year. Hilton Honors occupancy increased 170 basis points versus the prior year.
Hitwise counted direct booking as bookings made on mobile and desktop, not ‘phone bookings or walk ups. The company told us that it measured bookings by tracking visits to each hotel’s specific confirmation pages.
A report from Morgan Stanley called on operators to look to the quality, not quantity of those signing up for discounts. It said: “We believe that branded hotels are paying on average 20bps more
for distribution than they were around 18 months ago. However, through increased loyalty members and contribution, and a slowing shift to OTAs, one can argue this could be a cost worth paying, depending on the quality of the new members.”
Morgan Stanley said that it believe that Marriott International and Whitbread had either lowered their distribution cost or kept it flat, while Hyatt and InterContinental Hotels Group had seen their distribution cost rise by around 30bps.
The study said: “Long-term success will be realised by brand companies’ ability to monetise loyalty members. Loyalty members across our coverage rose 17% in 2016, up from 14% growth in 2015. As a result, loyalty members made up an average of 40% of hotel brands’ occupancy in 2016, from 38% in 2015.
“If hotel brands can continue to grow their loyalty programmes more than 10% per year and can monetise at historical levels, there should be mid-single-digit system net revenue upside, despite distribution cost headwinds. However, if new members are less ‘loyal’ and just looking for discounts, there’s downside risk.”
In terms of the relationship with the OTAs, Morgan Stanley said that renegotiations between the largest hotel brand companies and OTAs had resulted in lower OTA commission rates with sources suggest that Hilton and Marriott were able to negotiate their contracts down by around 200bps since 2015.
HA Perspective [by Katherine Doggrell]: The evolution of the loyalty programme is something which is going to tax the hotel sector in the coming years, as the OTAs focus on rewards schemes and operators focus not just on bookings but on data and guest ownership and creating loyalty which brings value.
The OTAs are not going to roll over. Despite the loyalty push, OTAs are still front of mind for the consumer, aided by their enthusiastic advertising spend, ease of booking and choice.
Commenting on the value of investing in direct booking, Jerome Wise, VP, enterprise clients, Travelclick, told Hotel Analyst: “It is worth it in order to grow their loyalty base – it comes at a cost to the owner of between 2% and 5% ADR and in terms of increased loyalty costs, but I think it’s the right move because loyalty and guest recognition is where hotels can win.
“Hotels should absolutely be in the business of selling rooms, but they should look at the cost of selling rooms across the channels – the costs should be should be consistent. I feel that the supplier vs OTA battle is a little outdated. Hotels should be looking to provide a great guest experience and creating a loyal customer base – this is how hotels can win”.
Hotels have always had the power to decide the channels they sell through. The drive to regain power through leveraging loyalty programmes should help remind them of this and concentrate on how to work effectively with the OTAs.