Who are the winners in the direct bookings war?

Last week’s announcement of a newly expanded partnership between Expedia and Red Lion Hotels Corp. to promote the hotel brand’s Hello Rewards program and its associated rates doesn’t appear to have signaled a massive industry shift back to OTA sales—yet. Driving more site traffic to hotels’ brand.com websites continues to the be on the radars of most major hospitality companies, including RLHC, IHG, Marriott and Four Seasons, all of whom will attend the upcoming Direct Bookings Summit, taking place in Washington D.C., next month.

Ahead of it, here's what some executives tied to this conversation are saying.

Everybody’s Talking

Charlie Osmond, chief tease at direct booking optimization platform Triptease and the event’s organizer, is well aware of the fierce competition among hotels, but added that if hotels aren’t located in the same geographic region, they’re generally open to share experiences and advice on direct-booking strategies, as they were at the inaugural Direct Bookings Summit, which took place in London in June, and required Triptease to source a larger venue after selling out a few days after opening registration. “There’s content for branded hotels and independents, because we know they use different strategies,” he said. So other than hearing directly from various hoteliers, Osmond said to expect a session by a leading attorney who will advise independent hotels on key terms that hotels are now avoiding in OTA contracts. Osmond told HOTEL MANAGEMENT: “Consumers have been trained to believe that OTAs are cheaper and that’s why price is at the heart of the book direct initiative.”

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Where Direct Bookings Miss the Mark

The traveling public certainly has been schooled in the art of OTA bookings, particularly with the help of successful marketing campaigns like Expedia’s “Find Yours” and Priceline’s ads featuring baby-boomer favorite William Shatner as “The Negotiator” along with millennial actress Kaley Cuoco of "The Big Bang Theory."

But Gary Isenberg, president at LW Hospitality Advisors (LWHA) Asset Management in New York believes it’s not just comparatively shopping across price that draws consumers to OTAs, but also the ability to compare service levels and the experiences of other consumers. “The push toward direct bookings is too little too late now because the consumer is already educated,” he said. “Travelers want to experience the local environment and shopping across multiple platforms allows them to see what’s available throughout a single destination rather than a single brand’s offerings in that destination. Brand consistency isn’t as attractive as it once was.”

Another concern that he voiced is the brands’ current strategy to drive direct bookings from its loyalty members, who Isenberg describes as less price-sensitive and typically among the highest-paying customers because they’re often business travelers who aren’t booking months in advance. “They’re point junkies and they’re already buying direct, so I’m not really sure what we gain by discounting rates for travelers who are already coming direct,” he said.

But as Kelly McGuire, a research fellow at the Cornell Center for Hospitality Research, pointed out, offering discounted rates to loyalty members is the loophole that keeps these brands from violating rate parity agreements with OTAs. “The brands need a private channel to offer these discounts through, so a members-only rate is where they went,” she said.

Overcoming the Obstacles

For owners, the loyalty member markdown poses a new challenge: the discounts are available year-round, without accounting for compression at any given individual property. “It’s often a rate plan that you can’t control or close out and it’s a brand-dictated discount, so in terms of revenue management—when you’re controlling demand driven-weekends—things like this can make it challenging,” said Johnathan Capps, VP of revenue at Charlestowne Hotels. “When we go into January and every weekend is wide open, that’s when we want discounts.”

Not that Capps is averse to discounting if it can bring hotels direct business. In fact, the management company dissuades its hotel clients from high OTA dependence, asserting a source of reservations ratio that averages 77 percent non-OTA bookings and 23 percent OTA bookings for its chain-affiliated hotels and 76 percent and 24 percent respectively for independent hotel clients.

Charlestowne Hotels’ independent hotels, Capps explained, have more flexibility as far as how they drive direct bookings. In turn, these properties benefit from Charlestowne’s complete roster of direct-booking tactics, which are effectively a throwback to pre-OTA days when hotel staff were the tried-and-true success behind direct bookings. So depending on the property, Charlestowne instructs reservation agents to utilize certain rate structures to fade off BAR, if needed to close a reservation. Revenue managers review reservations data daily to assess patterns to control, shift or even to turn off certain channels. Direct-to-consumer marketing also plays a role in the booking process. Advertising dollars are also judiciously spent to target travelers with certain household incomes in particular zip codes on certain websites.

The Technical Aspects

According to Isenberg, increasing direct bookings for LWHA clients has—in some cases—been as simple as finding open inventory. “Many of our clients have been so heavily dependent on OTAs that they haven’t been allowing themselves to offer inventory on their own sites and that just goes hand-in-hand with making sure your website is seen by customers and people can book direct,” he said.

A website that’s appealing to the traveling public and has an integrated booking engine is intrinsic to the direct-booking equation. And so they have also been to business at cloud platform SiteMinder, which has seen an uptick in sales for its various distribution, revenue management and booking products, including wholly-branded booking engine The Booking Button, since “direct bookings” became the industry’s newest catchphrase. “Cost-per-click is only going to be effective if it brings consumers to a website where they have a pleasing experience that’s going to convert the business,” said managing director Mike Ford. “If the site is old and the booking engine is confusing, you’re going to lose the guest who you’ve paid another site to drive to yours. So without great booking technology, direct bookings can become more expensive.”

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