Hotels continue to face massive challenges in getting their distribution right. The OTAs continue to innovate with new tools, in a highly dynamic landscape.
Regulators across Europe are ruling against rate parity agreements, leaving third parties to undercut hotel websites, on a regular basis. And delegates at the Hotel Distribution Event heard that the next wave of outbound Chinese visitors will require a fresh marketing approach.
And the scale of the challenge was laid bare by James Parsons of OTA Insight. He said other research has suggested that OTA market share of bookings in Europe will rise to 66% by 2021. Yet a growing number of competition authorities are banning rate parity, encouraging competition.
Many hotels are being caught out, spending for online marketing that is not paying off. “This is one of the realities of metasearch, that we see all the time,” said Parsons, providing an example of how a branded hotel paid for an online ad, yet was undercut by third party listings immediately beneath the ad, on the same webpage.
His company’s research across Europe, from earlier in 2018, suggests around 44% of major brand chain rooms are sold at rates cheaper than the brand’s own website. For independents, the figure rises to 52%. “The figures give an idea of the scale of the issue – it’s a mammoth task.”
New OTA channels are popping up regularly, warned Parsons, and they end up undercutting the brands as they sell off rooms that wholesalers are keen to shift. These wholesale shifters simply want to make a turn, and don’t care about brand image or margin differences. He said one tactic that helps to reduce the problem is a move to dynamic rates.
Expedia’s Sue Spinney said the OTA is “shifting to bring more value to our partners” and has invested USD1.4bn in tech over the last year. Among the innovations is a revenue management solution, which in client trials has shown a 10% growth in revenues. The group is also working hard to persuade site visitors to book complete trips, and experiences, rather than just a hotel room. She stressed that hotel customers need to be savvy about using OTAs, saying acquisition is about being clear on those market segments they desire to build market presence in: “We’re here to help”.
Expedia is also testing a new loyalty programme, with the aim of hooking more brand agnostic bookers: “We’re still in the early stages”. It will also support those smaller hotel brands that don’t have their own loyalty offer – something that might appeal to companies such as 10-strong Apex Hotels. Its digital manager Steven Howe explained his company had closed its loyalty programme in May: “Basically it didn’t cover enough of our guests,” he said, noting his emphasis had been upended: “I’m probably more interested in disloyalty.”
Howe revealed the group’s GDS channel, useful for picking up corporate business, is ultimately more costly than the OTA commissions it pays. “For us, it’s a mix,” he said, with the aim of incrementally increasing direct bookings year on year. “We compete with the OTAs, and we do very well.”
Apex is testing out Airbnb for distribution, though that avenue has to date produced few bookings. Howe also expressed frustration at the lack of a decent off-the-shelf booking engine, saying he had opted to go bespoke instead.
Metasearch continues to play its part in the distribution mix for some, with Suzie Thompson of Red Carnation Hotels declaring herself a fan, albeit one with a disciplined approach. “Metasearch is very much part of our online strategy.” Google and Tripadvisor deliver good business for Red Carnation, while “25% of the business we get through meta is remarketing.”
Nikhil Gupta, co-founder of startup ScoTrav and a former executive at Skyscanner, warned: “Hoteliers need to be cautious. It is driving traffic to your site, but at a cost. Hotels should control their pricing and their inventory – and if you have a website that is crap, it won’t work.”
Google’s Satayan Joshi noted that not all customers are clear on the differences between metasearch, OTAs or direct booking sites, and his group’s entire focus is on understanding and delivering precisely what the customer wants. “The reason I would use a meta is to ensure I get the best rate.”
Roy Graff of agency Dragon Trail, said the massive and growing outbound Chinese market is another challenge that hotel marketers need to be aware of. Forget groups who travel together and only eat Chinese, he said, as the more enlightened, younger independent traveller now represents half of the outbound market. But, with Google blocked from China, other platforms have prominence. “If you don’t exist on social media in China, you don’t exist,” he warned.
In addition, WeChat is a massive presence, combining many of the attributes of Facebook, Twitter and online marketing all in one. “There’s no need for a native app for your brand,” he explained. Instead, hotels need their own WeChat presence, in Chinese, to drive traffic and reviews. Social influencers are also more powerful than in the West, “and working with them is extremely efficient”. Other fundamental differences he noted are that the Chinese are keen users of price comparison sites, and around three quarters of bookings come from mobile.
HA Perspective [by Chris Bown]: So this online selling stuff is complicated. But that’s no excuse to give away your rooms on the cheap, or pass them to the online equivalent of Del Boy, who’ll undercut you to turn a few pennies. OTA Insight’s Parsons intimated to Hotel Analyst that the actual financial numbers are even more scary in volume, than the percentage figure of undersold rooms, by several noughts. There is mishandling of inventory management, on a massive scale, by both the big brands as well as the independents. High time hoteliers got their heads round the right strategy to get sales volume, ahead of time, and cover all the different market segments they think will want to stay in their hotel.
Thankfully, hotelier representatives from Red Carnation and Apex revealed that it is possible to comprehend online sales and marketing, and to pick out the right tools that deliver profitable business, while protecting brand standards. Rocket science it does not appear to be.
For those using OTAs, Expedia’s Spinney was at pains to point out their attitude towards supporting hoteliers. They are constantly testing new ideas and tools – and only launching those that appear to meet a client need.
The quick primer on Chinese outbound travellers was an eye-opener, demonstrating the need to comprehend a completely different marketing infrastructure to capture oriental visitors. Their numbers are growing, and the reach of their social platforms is astounding. Graff told Hotel Analyst of a fish and chip shop in Brighton, which has become the go-to place for Chinese visitors to the area. A bemused chippie owner discovered – by asking one of the growing throng – that a Chinese visitor had reviewed his shop on WeChat……