LONDON—Google might provide an even playing field, but it costs money to get off the sidelines. That means hoteliers are at a distinct disadvantage compared to the online travel agencies fighting for the same bookings, sources said.
“Google is not Red Cross. They’ll continue to monetize the search,” Chinmai Sharma, VP of revenue management and distribution at Louvre Hotel Group, said during a panel at the Hospitality Technology Europe conference in London late last month.
He said the group invests heavily in directing as much traffic as possible to brand.com, but there are certain budget constraints. Louvre’s team employs a disciplined approach, evaluating various channels or search engine tactics in which the cost of sale is low but the return on investment is high.
“We continue to divert funds where there’s the best bang for the buck,” Sharma said.
Content marketing is one such example, added R.J. Friedlander, co-founder and CEO of reputation management company ReviewPro.
“For many hotels, a key part of their success in this and getting traffic from other platforms is tied to the content strategy,” he said, advising attendees to adopt a uniform strategy across Instagram, Google+ and YouTube, among others.
While those efforts won’t supplant dollar spend in search-engine marketing, they drive higher organic search results and put properties in front of wider audiences, he said.
Reach is key, said hotel consultant Graham Dungey.
“The hotel needs to make sure that it’s up there on the search, and they need to do everything that they possibly can and need to be available on as many channels as they possibly can so that their property is marketed for whichever way the client wants to come to them,” he said.
A lost cause?
“I don’t think the hotels are ever going to win a head-to-head battle with online travel agencies in (search engine marketing),” said Patrick Bosworth, co-founder and CEO of revenue strategy company Duetto.
OTAs such as Expedia Inc. and The Priceline Group spend more in paid search than most hotel companies could ever dream of, he added. Hoteliers must respond with alternative strategies to compete.
“Fundamentally, hotels need to find some new way to create value other than rate parity,” he said.
Rethinking loyalty program benefits is one possible solution, Bosworth said. As presently constituted, most points-based programs reward only the most frequent of travelers—those who earn enough points to actually redeem for a free stay or upgrade.
An average leisure traveler is less likely to be points-loyal and therefore searches on price alone. This is where OTAs are “kicking our (butts),” Bosworth said. “Of course they’re going to be totally non-loyal to you because you’re not giving them anything experiential or anything of value.
“If someone has ever stayed in your hotel before, even if it’s just a single booking, they should be enrolled in a program that allows them to get recognized so every time they book direct they should always see a lower price,” he added.
Bosworth said hoteliers should market this: “‘Any time you book direct on my site you’ll see a lower price.’”
The benefit need not be based solely on price, Dungey said. When he worked at Concorde Hotels & Resorts, the company offered free breakfast to guests booking on brand.com. Website conversion went up 30% as a result, he said.
Fair trading indeed
The ability to offer discounts to such “fenced” user groups—in the above example, guests “enrolled in a program”—was deemed perfectly legal in a recent ruling
by the U.K.’s Office of Fair Trading.
In the investigation into Booking.com, Expedia Inc. and InterContinental Hotels Group, the OFT accepted commitments from the companies that hotel managers who deal with these three businesses will only offer discounts to travelers who have signed up for a membership or have made a previous undiscounted booking with the OTA or supplier in question.
The ruling could spell trouble for hoteliers, Dungey said.
“This is the beginning of a new chapter for the hotel industry, with online travel agencies using their commission to discount to our guests.
“Hotels will have a huge problem because their booking engine isn’t up to the level of pricing technology that they’re going to need to compete with the online travel agents. … Over the next few months and years, in the short term the online travel agencies will come out on top in terms of an advantage and hopefully the hoteliers will reinvent themselves to fight back,” he said.
Hoteliers do hold one key advantage, however. They set the net rate, Bosworth reminded conference attendees.
To make the most of that position of control, hoteliers must yield differently in each channel as opposed to yielding each channel based off the best available rate, he added.
“If all channels are managed together, hoteliers will always be at a disadvantage to OTAs. Prices need to fluctuate based on channel,” Bosworth said.
Many traditional legacy revenue management systems don’t allow hoteliers to do that, Dungey pointed out.
“The gloves are off, and hotels need to use every available tool to them to fill their hotels when demand is soft,” he said. “And when demand is hard, there’s going to be a little bit of blood here and there and a few broken noses.”