DOW JONES, A NEWS CORP COMPANY DJIA 21711.54 0.17% … · Expedia CEO Dara Khosrowshahi added:...
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8/21/2017 For Hotels, There’s No Room Left for Online Travel Agencies - WSJ https://www.wsj.com/articles/for-hotels-theres-no-room-left-for-online-travel-agencies-1495974698 1/3 Major hotel chains are engaging in an online turf war with the very travel sites that have helped drive their businesses. Marriott International Inc., Hilton Worldwide Holdings Inc. and InterContinental Hotels Group are using extensive marketing campaigns to claw back business from Expedia Inc., Priceline Group Inc. and other travel-booking sites, which steer customers to hotel properties but also take commissions of up to 30% for each reservation. The chains are starting to treat these sites less as valuable business partners and more as gatekeepers standing between them and their customers. Many large hotel brands are offering lower nightly rates and other perks to loyalty members who book directly through their sites instead of online travel agencies. The industry effort faces an uphill climb, however, as travel portals have become ubiquitous tools for planning a trip. Online travel agencies were responsible for $99 billion worth of world-wide hotel bookings last year, according to travel industry- research group Phocuswright. A survey conducted by travel-data firm Adara Inc. showed that 52% of U.S. travelers between the ages of 18 and 34 prefer booking hotels through online search engines as opposed to brand websites, compared with 37% age 35 and older. Younger travelers are also less likely to participate in hotel-rewards programs, the survey found, raising questions about how much brand loyalty matters to price-sensitive customers. Many prefer third-party sites because they show an array of options and allow customers to package airfare or car rentals. “I always want to find the good deal, and see what all my options are first,” said Nicole Leffew, 28 years old, a bartender and fashion blogger from Ohio. She said she rarely consults the hotels’ websites because she feels “they don’t have that much.” DOW JONES, A NEWS CORP COMPANY DJIA ▲ 21711.54 0.17% S&P 500 ▲ 2429.73 0.17% Nasdaq ▼ 6215.78 -0.01% U.S. 10 Yr ▲ 3/32 Yield 2.185% Crude Oil ▼ 47.46 -2.16% This copy is for your personal, noncommercial use only. To order presentationready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com. https://www.wsj.com/articles/forhotelstheresnoroomleftforonlinetravelagencies1495974698 BUSINESS Major chains launch marketing campaigns to woo customers away from Expedia, Priceline Many large hotel brands are offering lower nightly rates and other perks to loyalty members who book directly through their sites instead of online travel agencies. Above, a Marriott hotel in downtown Los Angeles.PHOTO: PATRICK T. FALLON/BLOOMBERG NEWS May 28, 2017 8:31 a.m. ET By Chris Kirkham MAR 1.15% HLT 1.34% IHG 0.24% EXPE 1.06% PCLN -0.43%
Transcript of DOW JONES, A NEWS CORP COMPANY DJIA 21711.54 0.17% … · Expedia CEO Dara Khosrowshahi added:...
8/21/2017 For Hotels, There’s No Room Left for Online Travel Agencies - WSJ
https://www.wsj.com/articles/for-hotels-theres-no-room-left-for-online-travel-agencies-1495974698 1/3
Major hotel chains are engaging in an online turf war with the very travel sites that havehelped drive their businesses.
Marriott International Inc., Hilton Worldwide Holdings Inc. andInterContinental Hotels Group are using extensive marketing campaigns toclaw back business from Expedia Inc., Priceline Group Inc. and other travel-booking sites, which steer customers to hotel properties but also takecommissions of up to 30% for each reservation. The chains are starting to treat thesesites less as valuable business partners and more as gatekeepers standing between themand their customers.
Many large hotel brands are offering lower nightly rates and other perks to loyaltymembers who book directly through their sites instead of online travel agencies.
The industry effort faces an uphill climb, however, as travel portals have becomeubiquitous tools for planning a trip. Online travel agencies were responsible for $99billion worth of world-wide hotel bookings last year, according to travel industry-research group Phocuswright.
A survey conducted by travel-data firm Adara Inc. showed that 52% of U.S. travelersbetween the ages of 18 and 34 prefer booking hotels through online search engines asopposed to brand websites, compared with 37% age 35 and older. Younger travelers arealso less likely to participate in hotel-rewards programs, the survey found, raisingquestions about how much brand loyalty matters to price-sensitive customers. Manyprefer third-party sites because they show an array of options and allow customers topackage airfare or car rentals.
“I always want to find the good deal, and see what all my options are first,” said NicoleLeffew, 28 years old, a bartender and fashion blogger from Ohio. She said she rarelyconsults the hotels’ websites because she feels “they don’t have that much.”
DOW JONES, A NEWS CORP COMPANY
DJIA 21711.54 0.17% S&P 500 2429.73 0.17% Nasdaq 6215.78 -0.01% U.S. 10 Yr 3/32 Yield 2.185% Crude Oil 47.46 -2.16%
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https://www.wsj.com/articles/forhotelstheresnoroomleftforonlinetravelagencies1495974698
BUSINESS
Major chains launch marketing campaigns to woo customers away from Expedia, Priceline
Many large hotel brands are offering lower nightly rates and other perks to loyalty members who book directly through theirsites instead of online travel agencies. Above, a Marriott hotel in downtown Los Angeles. PHOTO: PATRICK T.FALLON/BLOOMBERG NEWS
May 28, 2017 8:31 a.m. ETBy Chris Kirkham
MAR 1.15% HLT 1.34%
IHG 0.24%
EXPE 1.06% PCLN -0.43%
8/21/2017 For Hotels, There’s No Room Left for Online Travel Agencies - WSJ
https://www.wsj.com/articles/for-hotels-theres-no-room-left-for-online-travel-agencies-1495974698 2/3
The new battle is the latestepisode in a two-decade“frenemy”-style relationshipbetween online travelagencies and the hotelindustry. Sites such as Expediaand Priceline were crucial forhotels during down periodssuch as after 9/11, but theyhave gradually eaten into theshare of overall bookings eversince.
For major airlines, the battlewith booking portals isn’t aspronounced since there arefar fewer airlines than hotel
chains. But hotels are facing a conundrum that frustrates many industries in theinternet age, from Hollywood to the music industry: Online middlemen deliver a vitalstream of customers, but end up taking a cut of profit. The 10% to 30% commissions thatonline travel agencies charge for each night represent an expensive customer pipelinefor hotel owners who already pay fees to major brands such as Hilton and Marriott.
Commissions associated with online travel agencies cost the U.S. hotel industry anestimated $4.5 billion for the 12 months ending last June, according to research fromhotel industry consultant Kalibri Labs.
“It’s always been a thorn in our side,” said Mark Ricketts, president and chief operatingofficer of McNeill Hotel Co., which owns and operates more than a dozen Hilton- andMarriott-affiliated hotels in seven states.
Chris Silcock, Hilton’s executive vice president and chief commercial officer, said a goalhas been “educating customers” and changing their behavior. “There had been thisperception that to get the best price, you book through a different channel than goingdirect,” he said. “That’s never actually been the case.”
Hotel bookings arethe biggest source ofgrowth for onlinetravel agencies. Lastyear, the value ofhotel bookingsthrough third-partytravel agencies in the
U.S. grew to $31.4 billion, surpassing direct hotel online bookings for the first time sincethe data was tracked beginning in 1998, according to Phocuswright. The sites spendheavily on marketing: The more than $8.5 billion spent globally on sales and marketingby Expedia and Priceline Group alone last year is likely on par with the entire world-wide hotel industry, the group estimated.
Hotels have responded with advertising campaigns such as “Stop Clicking Around,”Hilton’s largest-ever marketing effort, and Choice Hotels International Inc.’s “BaddaBook. Badda Boom” effort.
Brands have been tweaking their loyalty programs to extend immediate benefits tocasual travelers, not just frequent business travelers.
Hilton earlier this year began allowing its points to be used toward Amazon.com Inc.purchases, and Choice Hotels, which operates the Comfort Inn and Quality Inn chains,allows customers to redeem points for Starbucks gift cards and gas discounts. Brandsare also offering certain services, such as free Wi-Fi or the ability to choose a room, onlyto customers who book direct.
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The Middle Seat: How Booking Sites Influence Which Hotels You Pick (Jan. 27, 2016)
8/21/2017 For Hotels, There’s No Room Left for Online Travel Agencies - WSJ
https://www.wsj.com/articles/for-hotels-theres-no-room-left-for-online-travel-agencies-1495974698 3/3
Brian King, global sales officer at Marriott International, said the goal is to convertcasual customers into loyal guests who “stay the most, and they pay the most.”
Online travel agency executives said their platforms draw customers who might nototherwise think to book with a particular chain.
“Free is best. Everyone would like people to come direct to their business,” said GlennFogel, chief executive of Priceline Group. “That’s not the way the world works, though.”
Expedia CEO Dara Khosrowshahi added: “We just want to get you to the right hotel,whereas the chain wants to get you to their hotel.”
Kerry Ranson, chief development officer of HP Hotels, which manages more than 40hotels for Hilton and others, said the biggest unknown is whether new loyalty membersactually return. “Do those become truly active members, or are they one and done? Theydid it just to get the cheap rate,” he said. “That’s what’s still left to be played out.”
Write to Chris Kirkham at [email protected]
Appeared in the May 30, 2017, print edition as 'Hotels, Travel Sites Clash.'
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