The financial stakes are high, so it's no wonder that hotels now want to wrestle back control of travellers' bookings from intermediaries, especially as OTAs are becoming consolidated and more powerful than ever.
With increasing consolidation in the online travel space as booking giants like Expedia and Priceline strengthen their positions through organic growth and acquisitions, major hotel chains like Hilton Worldwide and Marriott International are pushing back aggressively at third-party distribution channels to reclaim direct sales market share.
In February this year, Hilton launched the Stop Clicking Around global marketing campaign in an attempt to change consumer perception, assuring potential guests that the lowest room rates can only be enjoyed through direct bookings on its websites.
Geraldine Calpin, chief marketing officer at Hilton Worldwide, commented in a press statement: “Our customers do not need to worry about sorting through a dizzying array of websites, enduring hundreds of clicks and wasting hours of time.”
On top of the lower rates, Hilton is also offering direct booking benefits such as free Wi-Fi and digital check-in with room selection.
In a similar move to counter OTAs, Marriott has rolled out Marriott Rewards Member Rates in April, promising its loyalty members the best rates.
Karin Timpone, global marketing officer at Marriott, said in a statement: “We want to help dispel the myth that other travel websites offer better rates for our hotels.”
Marriott even promises that if a guest finds a better rate within 24 hours of booking direct, they will match the lower fare and provide an additional 25 per cent discount.
These bold moves come on the back of the love-hate relationship between hoteliers and OTAs. Even as these online intermediaries help hoteliers to fill their rooms, they are also eating massively into revenues as commission rates paid to the latter can range from 10 to 30 per cent.
In response to Hilton and Marriott’s direct booking campaigns, Mark Okerstrom, chief financial officer, Expedia, said: “We know these hotels are taking steps to compete with OTAs and are watching (the hotels) very closely.”
These hotels risk losing their market share and credibility as the OTA booking ecosystem is already entrenched in consumer behaviour, cautioned Okerstrom.
It will not be surprising to see adverse impacts on their bookings through the Expedia website. Based on Expedia’s sorting order, hotels will fall to less optimal positions and their conversions decline with less aggressive participation on Expedia sites.
Moreover, with other rival brands ready to take over with competitive prices, Hilton and Marriott will stand to lose even more in the online marketplace, he added.
Okerstrom said: “Consumers are coming to (Expedia) because they do not know which hotel to stay. If they make an online search and do not find the hotel offering their best prices, they simply will not choose the hotel. That is the power of the marketplace.
“It is going to be difficult for big chain hotels to have a broader selection of hotels than Expedia. People will continue to come to us to look for their perfect hotel at the best prices,” he posited.
Expedia’s CEO Dara Khosrowshahi even goes as far as to label Marriott and Hilton’s global push for direct bookings “a mistake”.
“I completely understand that the hotels want to grow their customer loyalty but they are not going the way consumers want,” said Khosrowshahi.
“Consumers want to have all the choices and content out there,” he added, highlighting OTAs’ fast growth over the past five years as a testament to what sells in the market.
And Expedia offers more than just hotels today.
Last December, Expedia acquired vacation rental site HomeAway for US$3.9 billion in its largest-ever acquisition. This means that the online travel giant will no longer be watching the thriving shared economy space from the sidelines as it muscles into the lucrative market for apartments and vacation homes.
Explaining the decision to venture into this “new business segment”, Khosrowshahi said: “Our consumers are telling us they love alternative accommodation and we can see that home owners are going to get significantly more travellers.”
He elaborated: “The more inventory we present to customers, the happier they will be.”
The Expedia-HomeAway combination has since displaced Booking.com (part of the Priceline Group) as the world’s largest lodging seller in terms of numbers of hotels, vacation rentals and apartments as Expedia now offers at least 1.5 million properties compared with Booking.com’s 893,000.
This acquisition concluded Expedia’s mega shopping spree last year, which saw the company also acquiring Travelocity, Orbitz Worldwide and Australia’s Wotif.
When asked if Expedia will still be snapping up any more companies this year, Okerstrom said: “Our focus this year is about integrating a lot of the acquisitions we made but we are still aggressively expanding into the huge opportunities which will give us a massive runway.”
Despite all the major acquisitions, Khosrowshahi emphasised that Expedia’s focus is on organic growth.
He said: “If I think about the long-term value creation of this company, it is organic growth and it will always be the top driver of our growth. Inorganic growth will always play a part but it will serve as a complement rather than as a core part of our strategy.
“That said, we will be very opportunistic as the company delivers well over one billion dollars of cash flow a year and I have to do something with that money,” he laughed.
This article was first published in TTG Asia, May 6, 2016 issue, on page 4. To read more, please view our digital edition or click here to subscribe