May 2014, London
The year of the fight back, the decade of innovation?
Is the war over? Are the hotels back in control? Can there really be a win-win scenario with room for all to innovate in the hospitality sector? Pamela Whitby reports on the first session in London this morning
The EyeforTravel Travel Distribution Summit, Europe kicked off this morning in London with a presentation from one angry hotelier.
Yes, Richard Lewis, CEO at Interchange & Consort Hotels, Best Western Hotels, Beacon Purchasing, who I interviewed last week, could not have been more clear: that enough is enough, now is the time for the hotel industry to wake up and fight back.
Another hotelier on this first panel of the day was Carl Oldsberg, VP Revenue & Distribution, Nordic Choice Hotels. “I’m no longer an angry hotelier,” he told, a hall of around 450 delegates. “We’ve transitioned from being enemies to being friends.”
We’ve transitioned from being enemies to being friends. Carl Oldsberg, VP Revenue & Distribution, Nordic Choice Hotels
He was even magnanimous enough to suggest that the OTAs couldn’t be blamed for pushing hotels into a corner; they saw a gap in the market and they capitalised on that. “Who could blame them?”
Still it took a while to get to this point. Having been in the vice-like grip of the OTAs back in 2011, his company had to “turn off the snooze button” and get back in control. In 2012, that shift got underway and involved them embarking on a strategy that involved “rate disparity, no last room availability, lower commission and no unethical search”.
Some OTAs cut ties as a result, but Oldsberg says it was worth it. And some of those same OTAs are now back at the negotiating table and today Nordic is in a much better position than it was a few years ago.
Oldsberg’s presentation followed that of Expedia’s Isabelle Pinson, Senior Director Market Management, Northern Europe who insisted that there is space in the market for both OTAs and hoteliers. “Our data shows us that consumers who book on OTAs are different – from both a demographic and consumer behaviour point of view – to consumers that book direct,” she said. “It doesn’t have to be competition.”
Our data shows us that consumers who book on OTAs are different – from both a demographic and consumer behaviour point of view Isabelle Pinson, Senior Director Market Management, Northern Europe, Expedia
One thing that both hoteliers had to agree on was that they can’t compete with the OTAs on several fronts – technology, user testing, marketing spend, reach (Expedia has over 400,000 hotels and counting) and, of course, mobile.
To Pinson's point, last year Expedia conducted 800 A/B tests with the sole objective of improving conversions. They also threw £1.2bn into global marketing campaigns and adapted those specifically to the local needs of individual markets.
What is more, Expedia operates in 38 languages and 30 different currencies. So if a Brazilian wants to pay in installments for a hotel in the Lake District then Expedia can help them do that.
And of course they are investing heavily in mobile. One thing was evident from this session, if you don’t have a mobile strategy yet, then you really do have reason to be losing sleep.
EyeforTravel’s soon-to-be published Mobile in the Hospitality Industry Report backs this up:
- Sales via mobile have grown 138% since 2012
- Brands expect to increase of 40,7% of bookings via smartphone in the next 12 months.
- 64% of hotels brands say that mobile has resulted in direct bookings
But, and this is the one area where hotels do have the edge, is that the OTAs can’t deliver the guest an unforgettable experience, while they are on holiday, nor do they have the local knowledge.
“We can’t compete with the OTAs on user testing or marketing spend but we can compete from the second the guest arrives to when the guest leaves," said Oldsberg.
What irks Lewis, is that what many consumers – and many reservations teams too – probably don’t realise, is that when payment for a reservation goes through Expedia or booking.com, then the hotel is losing as much 18% or more, which they then reinvest in marketing, technology, mobile apps and so on to acquire more customers. What they won’t sort out is the plumbing, the peeling paint and the rodent invested kitchen.
“On this front our industry needs more training,” Lewis said.
So what can hotels do to fight back?
- Reward loyal customers through social media by giving them discount codes
- Offer dynamic packaging – why not car hire, flights and so on?
- Create a value-add to your most loyal guests – whether that’s a free drink in the bar, a discount on their next stay or a discounted birthday treat in the bar
- Create a closed user group to offer discounts that don’t appear elsewhere
- Don’t give loyalty points to anybody who books through an OTA
- Be transparent. Put reviews, the good, the bad and the ugly on your brand.com site
The next headache
No keynote address at an online travel industry conference could be complete without a mention of Google’s moves. At the moment, all three panelists seem to be agreement – and not yet through gritted teeth - that Google is if not a good, then, at least, an essential partner.
But Oldsberg did confess to being a bit worried. Lewis too said: "Google is a fantastic partner we’re keeping a watchful eye on their developments”.
Google is a fantastic partner but we’re keeping a watchful eye on their developments Richard Lewis, CEO at Interchange & Consort Hotels, Best Western Hotels, Beacon Purchasing
However, he does wonder why on Google Hotel Finder, brand.com websites appear so low down the list. Is that because Google is taking a cut from bookings made through the booking.com and the like?
Of course, everybody knows that Google now has a foothold in virtually every travel related experience - Hotel Finder, Google Wallet, Google Business Photos, Google Indoor Maps, Google mobile click-to-call. So who knows what comes next, and some are scared to be too publicly critical. But let’s also not forget the other media houses like Facebook and Apple, which, like Google, are powerful because of their access to ‘big data’.
While Lewis believes that the Office of Fair Trading investigations, and antitrust action have, effectively, “produced nothing”, what it has done is throw light on some pretty unfair practices by OTAs like their “damaging demands” on last room availability.
The result is now, perhaps, a more complimentary relationship. Pinson believes that and argues that today Expedia can help hotels to:
- Play to the booking curve
- Analyse, test, learn
- Target promotions based on need
- Present the hotel to the consumer in the best possible light
So the playing field may be more level but do the OTAs still wield too much power? Paul Richer, Senior Partner, Genesys, the chair of this session put this question to the floor. Interestingly, more delegates see the OTAs as friend rather than foe.
Its seems the battle may be over or, at least, changing. Let's hope that the lessons learnt over the last few years will mean a more level playing field for doing business, and this can truly become the decade of innovation. Watch this space.