Daily Management Review

Hotels Offer Innovative Online Products to Fight Off Dominance by Online Travel Agencies


Hotels Offer Innovative Online Products to Fight Off Dominance by Online Travel Agencies
Expedia, Travelocity, Orbitz and Priceline, the travel websites, have been able to draw travelers to find and reserve hotel rooms, flights and rental cars.

Even though they had to pay hefty commission to these websites, the hotels accepted the deal as it brought in business.

However some of the major hotel groups are now fighting back the trend.

To break free of the clutches of the on-line giants and to lure back travelers to book with them directly, hotel are now offering a host of electronic services such as digital check-in, free meals, Wi-Fi and even the ability to choose a specific room over the internet.

And the hotels have a lot gain by breaking the shackles.

Not only are the hotels able to avoid the hefty commission to be paid thus affecting their bottom line, the effort enables the hotels to deal and communicate directly with the customers and guests. The on-line efforts also help the hotels to analyse customer profiles, preferences and spending habits which in turn help formulate strategies for effective marketing.  

Hotels might however find that price competition with the on-line travel agencies would not be easy.

While a guest may be inclined to believe that direct bookings would result in lower prices, the hotels, on the other hand, are bound by their contracts with the on-line booking sites. Adhering to price transparency for published rates norms by the government regulators also affects the ability of the hotels to reduce announced prices.

“Many times there is a rate-parity clause, which is designed so they can’t undercut the on-line travel agencies, and vice versa. So this fight is not really about pricing. It’s about sweetening the pot with other benefits,” said Naved Khan, senior vice president for Internet equity research at Cantor Fitzgerald.

One of the success stories of hotel trying to break free from the on-line travel agencies is the Hilton group of hotels that introduced a number of services for guests who book directly, including a digital check-in option that eliminates waiting in line. The application that the hotel released is now used by over one million people each month according to Geraldine Calpin, who oversees Hilton’s worldwide digital efforts.

“The guest can see the plan of each floor and click on the room they want,” Ms. Calpin said referring to a facility by Hilton hotels to allows guests to choose their exact room, a feature similar to an airplane’s seat-map function, for  clients who engage in direct-booking.

Loyalty programs such as rewards points and “elite” level benefits like concierge lounges, free meals and upgrades is another strategy that seems to be working for the hotel trying to gain direct on-line customers.

 “We see people who will book directly just to get their rewards points. They don’t want to give that up, and so it can be a powerful lure,” said William A. Crow, an analyst and managing director at Raymond James & Associates.

And the results of the efforts are showing. In a survey of nearly 3,000 leisure travelers, travel marketing firm MMGY’s Global 2015 survey found that there was a noticeable drop compared to 2014 in how often respondents actually booked rooms through the sites, even as third-party sites remained popular for comparing vacation hotels and prices.

“It’s a highly dynamic space. Hotel operators are not sitting idle; they’re also innovating,” said Mr. Khan at Cantor Fitzgerald.