This month the CEOs from Priceline and Expedia attempted to dissuade hoteliers from efforts to drive direct bookings. In specific circumstances they may have a point. Newly-opened hotels, for example, can get to break-even more quickly by focussing on OTA-led distribution in year one.
But in general, hoteliers guffaw at the OTA protestations. 2016 is the year of the Direct Bookings. Hotels across the globe have set 'driving direct bookings' as their key strategic goal. Why? Here are eight reasons why hotels are fighting for more direct bookings:
1. Direct relationships
Hospitality is a people business. Inserting third-parties between two humans is rarely the best way to improve communications or understanding. 18 months ago Booking.com announced that it would no longer pass guest details and email addresses to hotels. That kind of relationship-blocker reduces a hotel's ability to know, understand and serve their customers.
For guests on vacation, the research is clear - they get more additional 'happiness' in the run up to your trip than in the trip itself. Building anticipation pre-travel adds value to any hotel stay. This is one reason why hotels have improved pre-stay messaging. Direct relationships make this possible.
3. Brand value
In return for services and bookings, real estate owners pay annual fees to hotel brands. These contracts are under pressure if the brands are disintermediated and fail to deliver significant direct bookings. The power of OTAs and importance of Tripadvisor reviews could drive owners towards an unbranded future.
It is far cheaper to encourage a repeat visit than it is to find a new customer. Loyalty is vital for hotels. The basic requirement for a post-stay relationship are guest contact details. These are far easier to gather during a direct booking than on-property. Furthermore, it is possible to supercharge a loyalty programme by adding additional guest information. This can be on-site behaviour gathered thanks to a direct booking.
5. Active choice
Chip Conley, founder of Joie de Vivre hotels and Airbnb Board Member, found a clear correlation between guest satisfaction and direct bookings. In Peak, he explains how OTA-bookers are less likely to make an informed active choice to stay at your property. They are often not from your target-market and have less regard for the ethos of your hotel. This can lead to lower review scores complaints to staff and lower team morale.
6. Future-proofing digital innovation
The next wave of customer-experience innovation will be mobile-led. Whether that's app-based checkin, social sharing or mobile door-opening. Direct relationships reduce friction in testing and adoption of these services by consumers. Better for hotels and better for guests.
Improvements in machine-learning and artificial intelligence hold great promise as tools for increasing loyalty, conversion rates and customer service. The impact may be a year or two away, but these techniques will become increasingly important and they are most impactful with 1st party-data. The most data a hotel has on a guest, the better equipped they will be to deliver personalised experiences. If guests are not researching and booking on the hotel's own website, opportunities to learn from guest behaviour and imputed desires may be lost forever.
With hotels paying 15-25% of top-line revenue in commissions, high fees are sucking cash out of the industry. The costs hurt and reduce the amount hotels can invest on service improvements. This is usually the most-cited reason for hotel's obsession with direct bookings. Personally I think some of the longer-term strategic issues above are even more important.
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