BERLIN, Germany — Few topics garner more attention in the hospitality sector than distribution. Ever since travel agents took their first commissions, followed by the now ubiquitous online travel agencies adding another booking layer, to the likes of Google sitting somewhere in between, intermediaries have never had more of a platform as they do now.
It's up to hoteliers to figure out how to fully optimize their channel mix.
A panel during the International Hotel Investment Forum here at the InterContinental Berlin attempted to address the distribution challenge and hotel strategies for overcoming it all.
The Google Effect
Like most discussions regarding anything online, it begins with Google, and Terri Scriven, Google's industry head of hospitality, was the online giant's representative. Scriven said that 60 percent of travel decisions all begin on a search engine, but 37 percent use online to book—that further is broken down by OTAs (25 percent) and direct (10 percent).
If getting customers in front of hotels is the idea, than Google is that bridge. And while all hotel companies would prefer business to come in direct, many (most) travelers take a detour on a search and land on one of the booking sites powered by Expedia or Priceline.com. And that is where they make their reservation, believing they are getting the lowest rate, while, at the same time, making the OTAs a fortune at the expense of owners.
That's not an indictment of OTAs—to be sure they drive bookings to hotels that, in many cases, would not sniff the booking without them. But it comes at a cost, which is why, from the brand perspective, Osama Hirzalla, Marriott International's VP of brand marketing and eCommerce, said understanding channel mix and management is so vital. "You have to understand your cost per channel and profitability," he said. "Working with OTAs can drive more profit, but it's about how to work with them to drive profitable business."
Competing for Customers
Cyril Ranque, president of lodging partner service for Expedia, which spent $3.5 billion in marketing in 2015, had the most obvious, but pointed line of the panel, when he said, "We cant exist without hotel partners." Make no mistake: OTAs are nothing without inventory, of which they own zero. So, short of hotels pulling their inventory from OTAs, they will remain a viable, robust booking option for customers.
"How, then, do hotels compete?" Scriven asked.
For one, OTAs have done wonders for independent hotels, which, with limited to no marketing budgets, can use OTAs to feed customers, "up to 80 percent of bookings," Scriven said.
Meanwhile, Google exists to create good competition amongst hotels and OTAs. "Google’s role is to create competition for us," Ranque said. "We can help chain partners and independents."
"Our job is to make the user journey process to find a stay easier and frictionless," Scriven added. "Shorten the steps and provide answers and not just links."
Meanwhile, mobile conversions was also a topic. "Half of transactions on mobile are made 48 hours before the date of stay," said Peter Verhoeven, managing director of EMEA for Booking.com. "They are less prone to cancel."
Even in an OTA discussion, Airbnb became a topic. Last year, Expedia acquired rival site HomeAway for close to $4 billion. "It's time to give Airbnb a run for their money," Ranque said.