A recent study conducted by Expedia Group claimed travelers are 57 percent more likely to book a hotel via an OTA than before the pandemic, as a result of emerging traveler booking motivations such as:
- To get the best nightly rate (69 percent)
- To get the best room (40 percent)
- To compare properties in one location (35 percent)
Other motivations include earning reward points (32 percent), one-stop shopping (28 percent) direct promotions (26 percent), and buying a bundled offer, such a flight and hotel, in one transaction (25 percent).
Needless to say, this is a very self-serving study with less than stellar methodology (audience polled of only n=500 US consumers).
Unfortunately, there is some truth to Expedia's claims and the hospitality industry is partly to blame for at least some of the emerging traveler booking motivations cited above. Here are some of the advantages the OTAs undoubtedly have in the post-crisis period and the tactics hoteliers can deploy to neutralize these advantages, hold on to their direct guests, and ultimately outsmart the OTAs:
1. Calamities make the OTAs stronger
Traditionally, the OTAs have emerged stronger after all of the previous crisis and calamities: 9/11, SARS, MERS, the recession, ZIKA, H1N1. The main reason is that travel suppliers - especially hoteliers - panic too easy, shut down their marketing efforts due to budget cuts, and run for help to the OTAs. In post-calamity periods, hoteliers are more willing to work with the OTAs, to discount and provide the OTA with sales promotions (24- or 48-hour sale, etc.) without promoting these same sales via the direct channel due to lack of marketing budget. All of this allows the OTAs to convince the traveling public that they can find the lowest rates on the OTA sites/apps - rates they cannot find elsewhere.
- What can hoteliers do? Hoteliers should continue to maintain rate parity and invest in omni-channel marketing campaigns. All discounts or promotions you provide to the OTAs should also be promoted in the direct channel: Hotel website, content marketing, SEM, online media, social media, CRM and loyalty marketing. Travel consumers are shopping around (45 digital interactions before making a hotel booking - Google Research 2019) and omni-channel marketing gives the hotel an equal to the OTAs chance to engage the travelers throughout the Digital Customer Journey and its five phases (Dreaming, Planning, Booking, Experiencing and Sharing Phases), eventually acquire and retain them.
2. COVID-19 accelerated the shift from offline to online
eMarketer reports that US e-Commerce sales will reach $794.50 billion this year, up 32.4% year-over-year. E-Commerce sales in Europe have exploded as well. The pandemic drastically accelerated the shift from offline to online commerce, a shift that will also impact how travel is being researched, planned and booked in the future. Because of the shelter-at-home mandates around the world, the vast majority of the population - even late adopters - were forced to use online services to communicate, work and study remotely, search for news or information, purchase goods and services, order food, chat with friends and family, watch streaming services and entertain themselves.
This "online planning and purchasing education" has created millions of converts and believers in online services, which will inevitably affect how they research, plan and book travel in the future. This new wave of online converts will benefit online travel players like the OTAs immensely at the expense of brick-and-mortar travel agencies and traditional tour operators and wholesalers.
- How about hoteliers? This "forced" conversion from offline to online can also greatly benefit smart hoteliers who continue to invest in digital marketing, cloud technology and applications and "reach out" to these newbie online travelers vs shutting down their marketing and technology budgets. Recently I wrote an article outlining a hotelier's action plan for maintaining online presence that does not require significant investments Can Hoteliers Afford to Ignore Google in the Post-Crisis Era?
3. The OTAs now have a formidable reward membership base
Unlike the previous calamities, this time the OTAs have a significant new advantage: very robust Reward Programs comparable in popularity to the loyalty programs of the major hotel chains. Booking's Genius Program has more than 100 million active members; Expedia Group and its three reward programs (Expedia, Hotels.com and Orbitz) have approximately the same membership count. The OTAs have been investing heavily in their reward programs over the past 3-4 years with the hope to increase repeat business, which is 10-15 times cheaper than acquiring new customers and decrease dependency on the expensive performance marketing (read Google and metasearch players like Trivago and TripAdvisor). Before the current pandemic, the OTAs have been spending in excess of $11 billion a year on performance marketing.
Many of the current OTA initiatives - for example Expedia Partner Recovery Program - require hoteliers to provide special discounted rates to the OTA's reward members if they want to benefit from the OTA's recovery program initiatives. All of this creates a vicious cycle where hoteliers are forced or enticed to provide lower rates and discounts to OTA reward members, which in turn increases the membership and further convinces the traveling public that the OTAs have the lowest rates and are the place to book their next trip.
- What can hoteliers do? Focusing on your past guests and repeat business should become a top priority vs chasing new customers. Past guests and loyalty members are already familiar with the property, its location and product, the only thing now is to convince them that the property is safe to stay at. Past guests and repeat business will rule the next 24 months!
Hotel chains with loyalty programs should not participate in OTA reward member discounts and should provide any discounts and promotions to their own loyalty members instead. Due to weak travel demand, loyalty member initiatives, such as loyalty marketing, CRM initiatives, upsells and cross sells, should be top of mind for any branded hotelier as opposed to chasing new customers.
Independent hoteliers should focus on bringing back their past guests and creating a guest recognition program to reward any repeat guest. A simple program based on giving free nights based on X number of roomnights stayed can go a long way today. Hotels.com has 50 million members in its simple, but very effective reward program, which gives one free night with every 10 nights stayed at any hotel. Independents should also strongly consider implementing a cloud CRM technology and create a CRM program to increase repeat business, engage last and current guests and turn them into future guests.
The big question is what else can hoteliers do in this environment of weak travel demand and severe budget cuts? I believe selling on value vs selling on price alone can compensate to a great extent the budget limitations and online dominance by the OTAs. Hoteliers must remember and relearn how to sell on value vs price alone! The OTAs are the masters of selling on price, hoteliers have no chance outwitting or outspending them in their marketing efforts. But selling on value? This is where hoteliers can truly outwit the OTAs and provide real value to their customers. Do you have cooking classes, weekend specials, coronavirus de-stressing packages, spa packages, family packages, activity packages, special occasion packages, wine tastings, F&B packages and promotions, work-from-hotel packages, etc. that you can use to target your local, short-haul and drive-in feeder markets?
Especially now, it is not difficult to be creative and figure out what your customers want and need - they, like all of us, have been locked at home for most of the past 7 months. We have all been there and you can easily come up with enticing packages and special offers based on what your guests would love to do and experience at your property and its surroundings in the current environment.
Remember, the OTAs have one huge disadvantage: in spite of all of their technology and marketing might, they do not know your hotel product and your destination like you do.