Shots fired.  Can anyone win the ‘Booking Channel’ war?

27/10/2016 By James Bland

Make no mistake, we are in a state of war.  Hotels and online travel agencies (OTAs) are slugging it out via mainstream advertising channels to claim the disputed country of ‘Booking Journey’.  At stake: ownership of the customer and a not insignificant amount of money.

It’s sad to see friends fall out.  What started as a perfect partnership, with OTA platforms facilitating the sale of distressed hotel inventory at short notice, escalated quickly into an enormous bone of contention as first dependency and then commission levels increased to around the 20-30% range.

Our friends at CBRE started to draw the industry’s attention to this by shifting hoteliers’ focus from REVPAR and onto GOPPAR, and the sort of cold war that had been brewing for years.  Brands have long been crying foul about what they saw as espionage on the part of OTAs, having been outbid on their own name on the battlefields of Google.  On the other hand, went from zero to litigious at those of their partners using TripTease (a price comparison widget that displays OTA prices alongside own-site rates), threatening legal action if they didn’t cease and desist.  Immediately.

As soon as rate parity clauses became, in practice, unenforceable, it was only a matter of time before the conflict heated up.  IHG led the way with their Lowest Price Promise, before Hilton harnessed the power of the Rolling Stones to urge us to Stop Clicking Around.  The campaigns are also fundamentally different from the extensive OTA advertising on the airwaves.  While the brands focus on the transaction, the OTAs look, instead, at the experience – “dot yeah”.

Shots fired comparisons

The hotel brands – despite enormous spend – are being comprehensively outgunned in this particular conflict though they can claim some success in these battles.  IHG reported a two percentage point increase in growth of direct bookings at the expense of OTAs, and Hilton pointed to the share of the share of web direct channels in their distribution mix growing five times that of the OTAs.  However, it has taken a lot of dollars to get there and surely they cannot now afford to turn off the advertising tap if they don’t want it to reverse.  This has to be the new normal, just another establishment cost.

The hotel brands are engaging in a very civil sort of warfare (as you might expect from businesses built on hospitality).  They’re comfortable saying their channel offers the best price but crucially refrain from saying explicitly that the other side is bad, or explain why.  Their campaigns have stopped short of pointing out the level of commission paid to the intermediary – a tactic that the head of the British Hospitality Association advocated at this year’s Annual Hotel Conference, but one probably more likely just to portray them as whingers.

But while the hotels remain diplomatic, (even denying that a war exists, labelling such terminology ‘unhelpful’), the other side is not so restrained (although still a little bit), with veiled threats of unspecified consequences likely to arise as a result of the book direct push (See interviews with CEOs from Priceline Group and Expedia).

But where is it going to end?  Whoever owns the data owns the customer, and whoever owns the booking journey owns the data, so we might expect this to continue for a while.

On the other hand, I wouldn’t bet my bottom dollar against some sort of truce.  Amongst all the sound of gunfire, the sound of collaboration between Marriott and Expedia was a little bit drowned out.

Although Vacations by Marriott is small fry in the context of their 30+ brands now the takeover of Starwood is complete, the principle of an OTA powering a hotel brand’s booking engine is hugely significant; working together to sell rooms by each focusing on what they each do best.  In this country, at least, Marriott has been somewhat less active in the war.  Is this because they are trying to manoeuvre themselves into the best position from which they might win the peace?

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