Hotel companies can’t wait to find out what’s in store for the online travel agencies now that Airbnb is breaking into the distribution game.
I don’t mean they’re excited to see the shakeup; I mean they can’t afford to wait to see what happens.
A wait-and-see approach doesn’t minimize the hotel industry’s risk when it comes to technological change. Just ask the OTAs. Hoteliers experimented with these new intermediaries during the post-Sept. 11 downturn, and years later they woke up to find OTAs had come to dominate the way people shopped for and booked hotel rooms online—taking 20 percent off the hotels’ bottom lines in the form of commissions to boot.
Hotels have learned the hard way what happens when they get complacent or indecisive in the face of technology giants innovating all around them. And the pace of that change is only accelerating today.
Airbnb got everybody’s attention in February when it called out the big two online travel agencies as its competition. Expedia and Booking Holdings were forced to respond in public comments to their investors. Google continues to have a major effect whenever it tinkers with its search advertising business. There was even fresh buzz last month that Amazon could re-enter the fray, perhaps even buying an OTA, despite online travel previously being one of its rare failures.
The stories are new, but we’ve seen this before. Digital conglomerates like OTAs—and now Airbnb, or Google and maybe Amazon—create new ways to sell hotel rooms and deploy equally giant marketing budgets to incentivize trial. Lodging companies can experiment with new distribution channels, fight back with campaigns to aggressively promote their own booking platforms, or sit back and see how the new landscape shakes out.
During the last distribution shakeup, things didn’t turn out well for hotels. Lodging brands gave up too much. They went far beyond experimenting with OTAs during need periods; too often, they ended up surrendering their pricing power and value proposition to the intermediaries.
They can’t make that same mistake again—even if Airbnb or Amazon get a foothold and introduce some real competition to the OTAs. These budding rivalries have no bearing on how hotels must improve their online-booking experiences and maintain their inherent advantages over OTAs and quasi-OTAs.
Those advantages, of course, are the physical assets, genuine hospitality and customer data that can only be learned from a guest’s on-property stay and spending behaviors.
But hotels’ urgent, immediate need is to improve the experience on their direct-booking channels. A greater share of their business continues to migrate online. Booking conversions remain around 1 percent of site visits on average. Beyond that, hotels need to compete tomorrow and the day after in digital distribution with a booking experience that’s far more personalized and unified across different channels.
Also, this fight among Airbnb, the OTAs and whichever company decides to jump in next is really a race to end up with the most beds, across traditional hotel rooms and private accommodations, available to sell. That race will take years.
Hotel companies don’t have years to improve their online-booking and ecommerce strategies. Instead of cheering on Airbnb for its strike against the OTAs, hoteliers need to see this news as the sign of things to come and make smart decisions now to prepare for success over the long term.
Don’t sit back and wonder which company wins this digital free-for-all. If you’re waiting for the “winner” to emerge, you’re only ensuring that it won’t be you.
Patrick Bosworth is CEO and a co-founder of Duetto, a hospitality revenue strategy platform, based in San Francisco. Before starting Duetto, he was director of yielding and business strategy for Wynn Las Vegas.