Pandemic Twist Emerges on Bookings for Hotels in Tussle With Online Resellers
By Sean O'Neill for Skift
Hotel companies have broadly resisted using aggregators such as Expedia and Booking.com for online sales so far during the recovery because of somewhat surprising factors. Yet the temptation remains. -
Several hotel groups have tried to lower costs for roughly a decade by driving more consumers to book directly. During the pandemic recovery, hoteliers have by and large continued to avoid overusing aggregators such as Expedia and Booking.com for much of their online sales.
“It’s personally been great to see the hotel industry overall not fall into the traps that we fell into after 9/11 and after the last financial downturn,” said Jay Hubbs, vice president of advertising, marketing, innovation, and analytics at Best Western Hotel Group.
The script that the hotel industry followed after the recessions of 2001 and 2008 involved becoming dependent on online travel resellers for more than 70 percent of online bookings on average. Yet many hotel companies haven’t repeated that playbook of giving up share to third parties — broadly speaking, so far. That’s according to industry experts speaking Monday in Dallas at HITEC, the Hospitality Industry Technology Exposition and Conference run by HFTP, the association of Hospitality Financial and Technology Professionals.
A few new factors have scrambled calculations related to the age-old hotel distribution balance between direct and indirect. A labor crisis has made some hotel companies shy about seeking more demand. A faltering recovery in business travel has complicated planning for hoteliers, too, while hotel hardware investment priorities have eaten into tight budgets that hoteliers might otherwise spend on online marketing.
Perhaps the biggest surprise has been how the difficulty hotels are having in hiring has made some properties cautious about seeking demand.
“In my nearly 30-year career, I don’t think I’ve ever heard a hotel say to me, ‘I don’t want to participate in a promotion run by the national brand.'” Hubbs said. “Yet I recently had a couple of hotels put their hand up and say, ‘I don’t want it because I can’t handle the demand I have now given the labor shortage.’ And I’m talking about hotels after peak season and in ordinary markets rather than hot destinations.”
“You can say, ‘When stimulus checks run out, things will bounce back,'” Hubbs said. “But we have a lot of people who have left our industry for other industries, whether it’s Amazon or doing something else. That’s been very challenging for us as an industry.”
Unlike in past periods of financial distress for the hotel industry, average daily rates for hoteliers serving mostly leisure travelers in the U.S. and Europe have broadly held firm, as Skift has reported. Revenue per available room, another key metric, has been weaker but still trending in the right direction and often outpacing 2019 levels.
“We had recorded a whole national brand campaign for the summer, and then we never ran it because we couldn’t handle the demand we were already getting,” said Stephen Fitzgerald, vice president of e-commerce and distribution at G6 Hospitality, which runs the Motel 6 and Studio 6 brands.
Waiting for Business Travelers
Technically speaking, pie charts showing the share of customers coming direct and coming via online travel agencies would typically indicate a creeping share gain by online resellers since late last year at most companies in the U.S. and Europe, experts said.
Yet such pie charts would be partly misleading. Hoteliers have generally seen their corporate travel segment dry up. Much of that corporate travel had been through traditional travel management companies instead. So the share-shift picture is less dire than such charts might otherwise suggest.
Yet the failure of many corporations to bring their workforces back to offices has been denting overall hotel performance at properties that rely on a healthy share of business travel to be profitable.
“I call it ‘deep pockets, short arms syndrome,'” said Robert Cole, a hospitality consultant. “Financial officers see how much they’ve saved on business travel during the crisis, and they are reluctant to return to past levels.”
Some travel executives have glibly said that as soon as the first rival salesperson steals away business, thanks to in-person meetings, the whole corporate travel sector will rebound.
Yet, in a current hybrid work environment, it’s hard to build a trip where you plan to visit several people during a single day or two because those potential contacts may not be working in the office or surrounding financial district on your travel dates.
Limited Hotel Budgets
Another reason many hotels haven’t spent heavily on third-party distribution has been the rise of digital alternatives for marketing.
“Hotel companies have broadly gotten smarter at digital marketing for direct bookings via social media, linear TV, and over the top advertising channels, which has also exploded in the last 18 months or so with people stuck at home,” Hubbs said. “With so many people logged into streaming services, I can target ads to you a lot better than what I could do two years ago. Loyalty programs have become more effective at guest retention, too.”
Yet hotel budgets are tight. Every dollar spent investing in new hardware to give guests a contactless experience can compete with dollars for marketing. Investing in new technologies such as self-check-in and guest room door locks can eat away at budgets that revenue managers might otherwise use for third-party promotions.
Seeking the Elusive Total Cost of Distribution
A final factor that’s kept hoteliers cautious about seeking more business from online travel agencies is that they’re trying to be savvier about the total distribution cost. Figuring out that calculation for each demand channel isn’t straightforward.
Bookings that come in through direct channels aren’t totally “free.” There’s a cost that hoteliers face for marketing online directly and for loyalty programs they participate in.
“Regardless of your technological footprint, [digital marketing] is getting close to the same commission via some third parties,” Fitzgerald said. “For some properties in some markets and segments, we’re at the point where the direct channel booked by a brand’s loyalty member may cost about the same as a guest who arrives via an intermediary.”
That line of thinking could lead hoteliers to lean into the third-party channel in the coming year. Hotel companies with reduced revenue management staffs may opt for what’s often an easier route for obtaining demand in the short run — even if it may create headwinds for the hotel sector as a whole in the long run.