Changes in consumer booking patterns reshape distribution strategies for hoteliers

As hoteliers grapple with implementing diverse distribution strategies that optimize their spend, reach and results, emerging trends around channel development and how consumers interact with direct and indirect channels are adding new dimensions to the challenge.

And, inevitably, there are a number of reasons why, which we'll discuss in this analysis.

Pricing competition is heating up

While there are indications that the trend may be slowing, online travel agencies steadily bit into hotel-direct bookings between 2010 and 2016.

During that period, hotel-direct bookings decreased from 55 percent of online market share to 49%, according to Phocuswright research . Hotel bookings through OTAs increased over the same period to reach 51% of the online market.

Consumer use of metasearch channels, which have primarily directed bookings to OTA sites but can also facilitate property-direct bookings, has also been growing since 2017.

According to Phocuswright’s U.S. Consumer Travel 2018: Shopping and Booking , 17% of travelers who purchased lodging typically booked via metasearch that year, a gain of 8% over the previous year.

These trends, and the reality that 47% of all lodging was booked online in the U.S. in 2018, have introduced new dimensions to pricing competition in the market that have major distribution implications for hoteliers.

“Online adoption introduced a unique challenge to the industry,” says Max Starkov, founder and director of HEBS Digital hotel marketing firm.

“With the Internet,pricing became so transparent that you can see all rates for all hotels everywhere, which means competing on price and promoting price in your direct channel marketing is a losing proposition for any hotel.”

According to Richard Wiegmann, managing director and chief commercial officer for EMEA at Sabre Hospitality Solutions: "The question for hoteliers is, how can I add value that others can’t add? There are so many possibilities. This is how you can move yourself out of the cheapest deal environment."

In Starkov’s view: “You can’t outsmart the OTAs on discounts. All they care about is price. Hoteliers need to relearn how to sell on value rather than how to sell on price alone.

"Price is important for any retail category, but value is always more important to any consumer. Promoting the hotel’s unique value proposition is the smart way to go when you devise your direct strategy.”

Key Takeaway

• Hoteliers can move out of the ‘cheapest deal’ environment created by increased consumer use of OTAs and metasearch by emphasizing their unique value propositions.

What a great brand.com website can do for you

A great brand.com website is fundamental to a hotelier’s direct channel strategy as it performs a number of critical functions, according to Ben Alves, Vice President and General Manager, Americas,with Sabre Hospitality Solutions.

“It creates an experience so customers understand your brand, it drives personalization in ancillary offers to your customer base, and it provides more flexibility in updating and changing content,” Alves says.

“It also drives loyalty programs, which are really huge for most brands out there today, and they’re pretty important on the independent level as well.”

A brand.com website also gives hoteliers control over the experience. “Driving understanding of your brand and your loyalty program becomes much more difficult if you don’t have control over the experience,” Alves says.

“That control drives a much more personalized, impactful experience for the customer that you just aren’t going to get on other sites or other search engine functions.”

Key Takeaway

• A great brand.com website gives hoteliers control over messaging and flexibility to add/modify content while driving brand positioning and personalization.

How to build a great brand.com website

Identifying your ideal customer segments and knowing your objectives are the starting point for building a great brand.com website.

“It’s imperative that you know your customer,” Alves says. “Who is the ideal customer, or who are the ideal customer profiles, you are going after? If the answer is everyone, it’s going to be more difficult to build the kind of web presence you need.

"You have to understand what the target customer looks like before you start building any code, before you start driving any sort of search function, before you drive any marketing spend.”

In determining the goals or objectives of a brand.com website, Alves advises hoteliers to take a flexible stance and a long view.

“The objectives of your brand.com web experience areevolutionary, they will evolve over time,” he says. “The first thing you want to do is build a presence. The next thing is to build an experience, and then personalize that experience.”

Flexibility to add and modify content including blogs, images, videos, experiential information, personalized options, new pages and new templates is critical, “so you can update the look and feel of your website and keep it fresh,” he says.

“Rather than treating a web.com development as an event it’s really more of a lifecycle,” Alves added. “You want to build it in a way that allows for evolution and change over time at a lower cost and higher sense of urgency to get to the market quickly.”

Personalization enabled by technology is a fast-growing trend throughout the travel industry and should come into play in hoteliers’ brand.com development.

“Consumer will continually have access to more personalization and experiential optionsthan they have ever had in the past. It’s going to become easier and easier to decide what they want to do, the kind of experience they want to have and what they want to pay for it,” Alves says.

“Technology can help hoteliers change what they have been doing—and very successfully for many, many years—by allowing them to do it more efficiently and effectively, including driving the brand messaging they want, driving loyalty differently, and driving a very personalized, very experiential position for their customers.”

While all of Alves’ insights might sound obvious, not all hoteliers approach brand.com development and updating from the perspectives he offers.

“Many customers we talk to are thinking about what the ultimate, ideal website might look like before they identify who they are trying to reach, what they are trying to achieve, and most importantly, how to build it in a way that allows flexibility today, tomorrow, and potentially a few years out,” Alves says.

Key Takeaways

To build a great brand.com website:

• Identify your ideal customer segments
• Know your objectives
• Take the long view. Building a website is evolutionary
• Plan for flexibility to add and modify website content (blogs, graphics, rates, etc.)
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How to approach indirect channel choices

In addition to creating a great brand.com website, hoteliers need to navigate the indirect distribution landscape to determine which indirect channels reach their target customer base and best support their business.

“You can still cover a big chunk of your indirect distribution in the more traditional ways that hoteliers are familiar with,” says Jenny Mays, vice president of product management for Sabre Hospitality Solutions.

“For corporate travelers, you are still going to get the bulk of your business through the GDS where you have a presence with the TMCs and the consortia. For the mass market leisure traveler, especially in the U.S., you need to participate in the OTAs.”

Which OTAs are included in a hotelier’s indirect marketing strategy can have significant variations depending on the geographic market.

“The Americas lead with Expedia Group and Booking Holdings. Outside North America it flips and Booking Holdings is first and Expedia second,” says Mays.

“There’s a big fallout from there as other OTAs could be very relevant to specific hotels. If you are a property in a major U.S. city and you want to reach Chinese travelers, you need to be on Ctrip.com or another Chinese OTA.

If you are in an adventure travel location you’ll want to find an OTA that speaks to adventure travelers.

"This is where you can start to specify geographically or by interest, or by which customer segment that OTA speaks to. Those are the OTAs you are going to want to partner with.”

The number of OTAs included in hoteliers’ indirect distribution strategy trends differently by region. “In the Americas, I see hoteliers who say, I only need the big two OTAs and maybe one or two more and then I’m good,” says Mays.

“In Asia/Pacific I routinely see customers who need a list of 20 or more channels to be effective in their distribution strategy. It’s very regionally based.”

Key Takeaways

• Traditional indirect distribution channels are still effective, including GDSs for corporate and OTAs for leisure.
• Choose OTA channels based on your location and the geographic and interest markets of customers you want to attract.

Keep an eye on OTA growth and consolidation

Two other key trends are reshaping the OTA landscape.

New OTAs are popping up at a rapid pace, targeting special interests and specific geographic markets. “New OTAs are popping up at a rapid pace, targeting special interests and specific geographic markets.

“We consistently have new OTAs on our request list,” says Mays.

At the same time, consolidation is occurring in the OTA and meta search travel landscape through acquisition. The two major players operate accommodation-specific OTAs as well as metasearch and other travel-related sites.

Expedia Group now includes Expedia.com, CheapTickets, HomeAway, Hotels.com, Hotwire.com, Orbitz, Travelocity, trivago, and Venere.com and CarRentals.com. Booking Holdings includes Booking. com, Priceline.com, Agoda.com, Kayak.com, Cheapflights, Rentalcars.com, Momondo and the OpenTable restaurant booking app.

“As OTAs fragment on the long tail side, at the head of the snake, there is also continuous consolidation,” noted Mays. “Maybe by changing, it doesn’t change in the end, but we do need different ways of working as we go.”

Key Takeaway

• The OTA landscape is in flux, expanding rapidly with new entrants while simultaneously consolidating through acquisitions.

Keep up with shifting demographics moving travel search and booking online

In addition to keeping an eye on trends in OTA, hoteliers need to keep up with demographic shifts that increasingly moving research and booking online, and to mobile devices.

While just under half of all hotel bookings were made online in 2018, Mays noted that 80 percent of hotel bookings by travelers under 30 are now being made online.

“Millennials and younger are all about mobile, and they are doing much more on search engines and meta, so the opportunities to be seen and source bookings on meta search are increasing,” she says.

Millennials and the Gen X generation that follows are significantly more dependent or likely to buy based on recommendations from their peer group, which is accelerating the trend to include social media in an indirect distribution and marketing strategy.

“You can probably get away with not doing social media marketing today. But if you look at the trends and where demographics are going, it’s going to be more and more important to have a social media presence in the future,” Mays says.

“What’s real today are the reviews. Be aware of the reviews you have out there and respond to them. Even if there is a comment about a problem, or a review is not so great, if you respond on the social media site where it was posted that actually improves your overall conversion.”

Multi-purpose messaging platforms are also emerging as a next-step indirect distribution channel option after social media sites.

“On multipurpose messaging platforms like WeChat it’s about having a presence and engaging with the customer,” says Mays.

“You have to introduce content constantly, and you really have to have an engagement strategy. We’re seeing hotels as well as other retailers who aren’t practiced with this partnering with agencies that can provide that content and engagement for them to help them source traffic from those platforms.”

Mays offered a basic approach to keep pace with the ever-increasing opportunities offered by the evolution of indirect distribution channels.

“Think about the future, and about how you can participate now in the places where people are starting to spend more of their time digitally,” she advised. “Test out some strategies. Talk to other hoteliers about what they are doing that’s successful.”

Key Takeaways

• Hotel research and booking is increasingly moving online, and to mobile platforms
• Social media and multi-purpose messaging platforms are growing in importance as indirect marketing channels for hoteliers

Conclusion

Strategic consideration and careful planning, testing, seeking input from colleagues and experts, and flexibility will be key to success as changes in consumer booking patterns and emerging trends in direct and indirect distribution reshape the marketing landscape for hoteliers.