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Earlier this week, Choice Hotels announced exclusive discounted rates for Choice Privileges members that book directly through the site or Choice mobile app. This isn’t the first time a hotel chain has offered this kind of deal (and it certainly won’t be the last), but the motive behind these discounts can be traced back to a booming trend, a disruption in the industry, and a hotel marketer’s biggest headache all rolled into just three letters: OTA.
Online travel agencies like Expedia and Travelocity have become a thorn in the side of the hospitality industry. Make no mistake, however: These third-party booking sites offer a marketing reach that a majority of hotel chains would be unable to achieve on their own. A site that brings in more business and thus, more revenue, can’t possibly be bad for the hotel, right? Not quite, because the cut of the booking price taken by the OTA leaves the hotel missing out on a good chunk of the profit it would have received from a direct booking from the guest.
“Choice has done an exceptional job of shortening the ‘earn’ window coupled with a great marketing program,” said Doug Sutherland, Consumer Engagement and Loyalty Consultant with Dynamics Inc. “But, convincing customers to book directly with the brand proves harder and harder to do with OTAs and aggregators like Kayak and Trivago, who simply make it easier to find a great rate online. The brands that will win the race will have to offer an exceptional online/mobile experience, or with the consolidation of brands, perhaps one must choose to take their product off the OTAs altogether.”
The problem that hotels respond to is convincing customers to book directly with the brand (through the website, mobile app, or calling ahead).
“I admire the effort of hotel brands as they implement differentiated campaigns to overcome the challenges today’s marketplace brings to bear,” added Carolyn Corda, Vice President Industry Strategy, Travel & Hospitality at Epsilon. “There’s a big push to get consumers to simplify their digital journey, 'stop clicking around' and book directly with the hotel brand, amidst increased competition from Online Travel Agents (OTAs).”
So how are hotels dealing with these pseudo-competitors?
One way is through this exact type of deal: customers simply earn a discount by directly booking with the brand. This combats the primary advantage of the OTAs—price—and is often accompanied by a “price match” guarantee. This is a quick and easy solution, especially for increasingly price-conscious consumers, and is a popular method of bringing direct booking back.
Another method for bypassing the OTAs leverages the loyalty program as a direct connection between the guest and the brand. From transactional factors like only earning points, through direct booking, to surprise and delight gifts for these guests upon check-in, there is a multitude of ways for hotels to try and turn brand loyalty into a tool for encouraging direct booking. The drawback here, though, is the constant risk of falling short of creating this loyalty. This strategy is resource-intensive and faces the challenge of incoming generations that are far less brand loyal than those before them.
Holly Henry, Director at Brierley + Partners, agrees that price doesn't need to be the sole factor in winning these travelers back.
"The hospitality industry has the opportunity to reclaim their market share by creating a differentiated experience for their loyalty guests," said Henry. "By offering experiential rewards and benefits that customers perceive as high value, this enhances the customer’s visit and incentivizes them to book directly with the brand. That makes it more than just a game of price matching."
It’s proven time and time again that customer loyalty leads to an improved bottom line. In the hospitality industry, however, this loyalty means even more, and can mean the difference between a loyal customer, and one that’s willing to book your rooms through someone else to save some money.
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