The Choice Hotels-Expedia brouhaha of recent weeks has shined a scorching spotlight on the fickle relationship between hotel companies and online travel agencies. Call it the industry’s version of a celebrity breakup scandal. But while the focus of debate has centered on last-room availability and other contractual terms surrounding room bookings, there’s a fundamental component of this precarious affiliation that’s gone largely ignored: visibility.
The OTAs’ primary purpose might be to generate room bookings, but sites like Priceline, Orbitz and the aforementioned Expedia also create consumer awareness of your product as would an advertisement in a magazine. That awareness then can translate into direct bookings on your hotel Web site, phone reservation lines and other channels outside of the third-party reservation fraternity.
Chris Anderson, who serves as assistant professor at the Cornell School of Hotel Administration, calls this the “billboard effect.” And as luck would have it, he’s just published a report discussing the impact it has on reservation volume.
In the report (which you can download for free here), Anderson describes a pseudo-experiment he conducted from October 2008 through December 2008. During the three-month period, he cycled four JLM Hotel properties on and off Expedia for periods of seven to 11 days. At the end of the trial, each hotel had been displayed on the site for 40 days and not displayed for 40 days. He then measured the average daily reservations booked through sites excluding Expedia during the 80-day period:
"Since the goal was to measure the impact of the OTA display on non-OTA reservation volume (rather than the total impact of the OTA listing), I eliminated the actual Expedia.com bookings. This means that the reservations shown in Exhibit 1 are those that were made through channels other than Expedia during the time of the test. In short, listing on Expedia created a lift of between 7.5 percent and 26 percent for these non-Expedia reservations."
||Average daily reservations when displayed on Expedia
||Average daily reservations when not displayed on Expedia
|Branded hotel 1
|Branded hotel 2
|Branded hotel 3
The large variance in incremental reservations from listing on Expedia involves interference from the hotels’ chain connections, which is explained in greater detail in the report. For our purposes here, it’s important to focus on the fact that these results seem to confirm the billboard effect, or, as Anderson states in the report, the “lift in reservations made through channels other than online travel agents that is created by listing on the OTA.”
Could this apparent benefit in listing room inventory on OTAs earn them the favor of embittered companies like Choice? Unlikely. But as the debate wears on, it’s something for the industry to consider nonetheless.