“We have now created an entire industry whose primary purpose is to drive our pricing down. People say, ‘I didn’t stay at a Marriott or Holiday Inn, I stayed at an Expedia hotel.’”
The mood was still rather dour when STR founder Randy Smith made the above declaration during his keynote address at the 2010 Cornell Hospitality Research Summit. The month was October, and the most recent performance data showed an industry still struggling to stop the hemorrhaging of average daily rate. (At the time, year-to-August declines measured 1%—a figure made worse when taking into account the deplorable comps from the year before.)
Yes, the proverbial green shoots of recovery had sprouted, but we were still a long way from greener pastures—not that we even had our hands on the wheel to drive there. The OTAs were in control, many argued. They emphasized price at the expense of experience, all while whitewashing our exceptionally varied product into one indistinguishable commodity.
So when Smith decreed that hotel product in the United States essentially was as generic as the cereal selection at a discount food mart (my words, not his), there was nothing particularly surprising about it.
Why, then, do I bring up a five-month old quote that bore little impact on the overall state of the industry? A little thing I like to call salience.
Smith’s observation was the first thing I thought of when I read earlier this week that Expedia had officially launched its loyalty program, Expedia Rewards. The program allows members to earn points on the hotels, flights, packages and activities they book on Expedia.com—points that will allow them to book free travel on more than 140 airlines and at more than 70,000 hotels worldwide.
Does this spell the end of the hotel industry as we know it? Hardly. For one thing, the industry is showing signs of recovery, and hoteliers are slowly returning to a position of pricing power. They have more pricing power than they did last year, more demand, more reservations on the books and less competition from new supply.
For another, no one loyalty program has the power to shape the hotel landscape—for good or bad. Yes, they play a functional role in communicating with, marketing to and retaining guests, but these programs cannot fundamentally shape pre-existing consumer booking patterns.
And as loyalty programs go, Expedia Rewards just isn’t that great of a deal for travelers. A guest who books hotel rooms only (as opposed to packages with flights, car rentals, etc., which yield greater rewards) earns only one point per dollar spent through the OTA. That guest would have to book $3,500 worth of hotel stays to redeem points for a … wait for it … US$25 hotel coupon. Hooray! (Sarcasm implied.)
My fellow editors at HotelNewsNow.com didn’t think Expedia’s announcement—nor any other loyalty program announcements—is worthy of general news coverage. Loyalty programs are loyalty programs are loyalty programs. I do, however, think it’s important to bring the issue to your attention for one simple reason: Expedia Rewards is just another in a litany of intermediaries that are wedging themselves between you and your customers. While you can’t stop Expedia and other OTAs in this pursuit, you can redouble your efforts to establish direct connections with your traveler base to retain most (if not all) of your room revenues.
By focusing on a memorable guest experience, you’ll be able to remind customers that they’re staying at your hotel—not Expedia’s.