2019: The Year Hotels Get a Grip on Acquisition Costs

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By Jason Q. Freed, Managing Editor at Duetto

Examining the challenges and opportunities facing hoteliers in 2019, it might be easy to say, "New year, same old story." In attempts to drive revenue and increase profitability, hoteliers—like they have for seemingly the past decade—continue to focus on less costly ways to acquire guests.

On one hand, OTAs continue to grow share, release new features to better connect with your guest and, in general, innovate faster than the large hotel brands. This is a problem because part of the allure of a hotel brand is the giant distribution system that comes with it, supposedly bringing guests at a much lower cost. Therefore, upcoming negotiations between Marriott and Expedia are expected to be tense and the results could have a wide-ranging impact on industrywide commissions.

On the other hand, most independent hotels today better understand the relationship and the value that third-party distribution channels bring and are finding ways to only use them in need periods and to target specific markets. "Optimizing one's distribution mix is probably a lot more productive than fighting OTAs," says hospitality marketing consultant Martin Soler.

When it's all said and done, we expect hoteliers in 2019 to have better insights into the cost of each of their distribution channels and the relevant information to make educated decisions on how to acquire guests.

OTAs Facing New Competition

The days of fearing that Expedia and Booking.com will dominate distribution and bankrupt your business are over. After gobbling up most of the other third-party distribution sites and building what appeared to be a duopoly, Expedia and Booking suddenly find themselves facing new competition in Google, Airbnb and eventually Amazon. For hoteliers, this new competition is good and drives down costs.

For example, according to a Skift report, in 2008 Expedia and Booking Holdings were capturing $19 of travel sales for every $1 they spent in marketing. Today, each dollar spent on marketing earns them closer to $16 in bookings, a 15% decline in efficiency.

While Expedia enters 2019 calling itself, "The World's Travel Platform," Skift is quick to point out that in 2018 Expedia had only 12% of overall travel market share in the U.S. and Canada, its biggest market. Don't forget about global sites like Booking.com, Ctrip, TripAdvisor, and—perhaps most importantly—Google.

Book Direct Campaigns Working

Earlier this year, Soler opined that the "Direct vs OTA" debate had lost a lot of steam. Hotels weren't ignoring their efforts to drive business direct, he said, but better understood the complexity of competing with OTAs.

Then out came a report by Kalibri Labs saying "Book Direct" campaigns launched by many of the big brands last year have in fact been successful in "either stabilizing or strengthening the growth rate of bookings via proprietary hotel company websites."

Kalibri has been examining hotels' efforts to drive direct business through their loyalty programs, which often offer a 10% discount or similar to entice travelers to join their loyalty programs and book directly with the brand or the hotel. "Bookings growth for online travel agencies during this period either held steady or decelerated, signaling a shift for the hotel industry," Kalibri said.

Undoubtedly the results of this report, coupled with the internal findings from brands who initiated Book Direct campaigns, will provide a momentum boost to hotels looking to take back share through personalization and loyalty membership bookings.

Read the full article on Hospitality Net