Online Travel Agencies (OTAs) are now responsible for a large proportion of online hotel room reservations and demand up to 20 per cent in commission fees. On average, around half of hotel rooms are reserved online, but only a quarter of these bookings are made via a hotel’s website with three quarters coming through OTAs.
It is therefore unsurprising that the hotel industry recently announced a lobbying and PR campaign in a bid to convince consumers and governments that OTAs are monopolistic, with booking sites such as Booking.com, Hotwire.com, Kayak.com and Travelocity all falling within the ownership of Expedia or Priceline. The aim is to lessen the stranglehold that OTAs have on the sector and build a stronger, direct relationship with the guest.
The fact that OTAs deliver valuable; albeit costly, customer acquisition is not up for debate. What is however, is how to convert these first time guests delivered via OTAs into brand advocates. Loyalty programmes have been cited as the primary force to achieve this. For example, Hilton launched “Stop Clicking Around” last year, a multi-million dollar campaign, which promotes heavily discounted rates for loyalty members. The hope is that the much reduced rates will elicit increased membership and direct bookings. The jury is still out.
The issue with loyalty is that too many schemes centre on rewards, rather than on the customer. The common denominator for successful reward programmes like My Starbucks or MyWaitrose is that they put brand experience right at the heart of the programme, focusing on the emotion behind the rewards. Likeability and trust are proven to be the main drivers of long-term loyalty and not coincidentally these two emotions are functions of brand experience. Amazon Prime is another great example – demonstrating convenience, ease and consistency, all in line with the Amazon brand.
This is a crucial point for hotels in their battle against OTAs. Hotels cannot compete against what OTAs offer their customers –the lowest price. Booking.com has a stranglehold on the market and pretty much always comes out cheaper than anyone else, so what can hotel brands do?
The key is in creating the most desirable experiences for your core customer, in line with your brand. 1 Hotels is a great example. The brand concept is environmentally conscious with a hedonistic edge. This foundation is present in every aspect of the experience – from the hotel cars (Teslas, naturally), to the Transparency Dashboard https://transparency.1hotels.com, to the filtered water taps in every room. The lowest rate available is still higher than most of their competitors’, but they achieve high occupancy rates and bookings driven directly through their own website. The financial gain doesn’t stop there. Experience can be a huge revenue driver, with additional touchpoints that customers can buy into once at the hotel – food and beverage is significant. If you create a fully engaging, consistent and on brand experience across high priority touch-points, guests are likely to spend more time in your hotel and with it, more money.
Hotels can compete with OTAs through their unique brand experience – creating a deep, relevant and emotional connection with guests. Price will always be a factor, but the right experience is priceless.