THE STATE OF HOSPITALITY DISTRIBUTION: DIRECT BOOKINGS · THE STATE OF HOSPITALITY DISTRIBUTION:...

THE STATE OF HOSPITALITY DISTRIBUTION: DIRECT BOOKINGS

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THE STATE OF HOSPITALITY

DISTRIBUTION: DIRECT BOOKINGS

A report series between EyeforTravel and Fornova

The information and opinions in this report were prepared by EyeforTravel Ltd and its partners. EyeforTravel Ltd has no obligation to tell you when opinions or information in this report change. EyeforTravel Ltd makes every effort to use reliable, comprehensive information, but we make no representation that it is accurate or complete. In no event shall EyeforTravel Ltd and its partners be liable for any damages, losses, expenses, loss of data, loss of opportunity or profit caused by the use of the material or contents of this report. No part of this document may be distributed, resold, copied or adapted without EyeforTravel’s prior written permission. © EyeforTravel Ltd ® 2019

Authors: Kerry Medina

Alex Hadwick Head of Research, EyeforTravel

http://www.eyefortravel.com



ABOUT

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We bring together everyone in the travel industry, from small tech start-ups to international hotel brands, to form a community working towards a smarter and more connected travel industry.

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EyeforTravel by the Numbers

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CONTENTSAbout EyeforTravel ...............................................................................................................2 Our Values .........................................................................................................................2 Our Services .......................................................................................................................2 EyeforTravel in Numbers ...................................................................................................2

List of Figures ........................................................................................................................4

Acknowledgements ..............................................................................................................5

Introduction: Direct Bookings – The Hotel Industry’s Holy Grail .......................................6

1. The Booking Battle ...........................................................................................................8 1.1 Assessing the Balance of Bookings ...........................................................................8 1.2 The Impact of Third-Party Channels on Direct and the Symbiotic Relationship ..10 1.3 The Challenge of Driving Direct Bookings .............................................................12 1.4 The Benefit of Direct ................................................................................................13

2. Driving Consumers to Direct Channels ..........................................................................14 2.1 Search Engine Optimization and Marketing ..........................................................14 2.2 Metasearch ...............................................................................................................17 2.3 Social Media & User Generated Content (UGC) .....................................................18

3. The Evolution of Hotel Websites ...................................................................................20 3.1 Today’s Hotel Website Design .................................................................................20 3.2 New Tools, More Features .......................................................................................21

4. Hotel Loyalty Programs ..................................................................................................22 4.1 The Outlook on Loyalty ...........................................................................................22 4.2 Where Loyalty Falls Short ........................................................................................25 4.3 Next Generation Loyalty Programs .........................................................................26 4.3.1 Case Study: Hilton Honors ...............................................................................27 4.4 The Independent Take on Loyalty ...........................................................................28

About Fornova ....................................................................................................................29

Methodology .......................................................................................................................30

References ...........................................................................................................................31

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Figure 1: Travel Suppliers Biggest External Challenges.......................................................8

Figure 2: Do you repeatedly make bookings with any of the following travel brands due to trust in that brand? ...................................................................................................9

Figure 3: Travel Suppliers Views of OTAs in 2018-2019.....................................................10

Figure 4: What Stands in the Way of Travel Suppliers Getting Their Products to Customers? ..........................................................................................................................13

Figure 5: Areas of Investment for Customer Acquisition for Travel Suppliers .................14

Figure 6: How Often Do Consumers Use Price Comparison Websites When Booking Accommodation? ................................................................................................................17

Figure 7: Travel Suppliers Views of Facebook and Google in 2018-2019.........................18

Figure 8: How much do loyalty program members spend compared to non-loyalty program customers? ...........................................................................................................22

Figure 9: Consumer Membership of Non-Travel Company Reward Programs by Income ............................................................................................................................23

Figure 10: How Much of an Effect Do You Think Your Loyalty Program Has Had on Customers’ Views of Your Brand? ......................................................................................23

Figure 11: Consumer Perception of the Performance of Hotel Loyalty Programs by Age ..................................................................................................................................24

Figure 12: How Often Do You Use Your Loyalty Rewards When Travelling by Age? .....24

Figure 13: Membership of Hotel and OTA Loyalty Programs Among Travel Consumers ...........................................................................................................................25

Figure 14: Do You Know The Overall Cost Of The Program Or The Cost Per Member Of This Program? ......................................................................................................................26

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LIST OF FIGURES




ACKNOWLEDGEMENTS

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EyeforTravel would like to acknowledge, with great thanks, the contributions of our advisory panel of thought leaders and industry experts. Each individual named below provided insights and analysis to ensure the focus and quality of this report reflects the highest industry standards.

Chatchai Pongprapat | Assistant Vice President of Revenue Manager | Dusit International

Dori Stein | CEO | Fornova

Nir Dupler | Chief Revenue Officer | Fornova

Jonathan Nouri | Vice President , Hilton Honors Strategy and Program Management | Hilton

Sanchit Rege | Manager, Distribution Strategy | Hyatt Hotels Corporation

Kyle Mais | General Manager | Jamaica Inn in Ocho Rios, Jamaica

Kate Martin | General Manager | Luma Hotel Times Square in New York City

Sean Hennessey | CEO of Consultancy Lodging Advisors and Assistant Professor | New York University Tisch Center for Hospitality and Tourism

Scott Weiler | Vice President, Marketing and Communications | Sonesta

Joe Pettigrew | Director of Revenue Maximization, Europe Hotels | Starwood Capital

Jason Lee | Senior Director of Product And Technology | Travel Media Group

Martin Kipping | General Manager | Viceroy Los Cabos




INTRODUCTIONDIRECT BOOKINGS – THE HOTEL INDUSTRY’S

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The hotel industry’s push for direct bookings is not a trend, but a fait accompli. As long as bookings are ceded to Online Travel Agencies (OTAs) en masse, hotel companies will battle to offset the balance. OTA commissions that can reach as high as 30% are ultimately the burden of hotel owners who are frequently also paying fees and royalties to a brand. The combined costs quickly add up and hotel revenues take the hit. The value of the brand flag flying above the property is effectively diminished once owners realize that OTAs do so much of the heavy lifting.

So, hoteliers, principally the major brands, have put certain countermeasures in place intended to drive consumers to their brand websites. The most notable tactic has been to communicate the benefits of bookings directly to the traveling public. Hilton launched its “Stop Clicking Around” campaign in 2016, a year after Marriott kicked off its own digital campaign, “It Pays to Book Direct.”

At times the OTAs haven’t helped themselves either. Adding fuel to those marketing messages was the European Union’s 2016 Internal Market Sub-Committee report Online Platforms and the Digital Single Market, substantiating claims that OTAs were coercing hotels into providing better rates while also publishing misleading information about vacancies and building shell websites designed to resemble hotel websites capable of accepting bookings. The following year, the European Commission released a review of 352 travel booking and comparison websites that found a third failed to deliver a final price that matched the initial rate displayed, while a fifth featured promotions that weren’t actually available and another 25% touted a limited number of rooms remaining at the displayed price, when in fact, that was only true of the inventory listed on that particular third party’s site.

More recently, the American Hotel & Lodging Association renewed its “Search Smarter” campaign in May 2018, encouraging consumers to avoid scams by third party resellers and book direct and pointing to a new survey conducted with Morning Consult that revealed consumers spent US$5.2 billion in fraudulent and misleading hotel booking transactions in 2017 (AHLA, 2018).

In February 2019 the UK Competition and Markets Authority concluded an investigation, with CMA Chairman Andrew Tyrie saying that “misleading sales tactics, hidden charges and other practices in the online hotel booking market … have been wholly unacceptable.” They agreed with Expedia, Booking.com, Agoda, Hotels.com, ebookers and trivago to end a variety of processes by September 2019, including to:

• Improve the clarity of hotel ranking, grading and paid positioning

• End misleading urgency prompts and stop placing sold-out hotels within search results

• Only offer deals that are actually available at that time and to improve comparison of product types

• To show additional charges and taxes in the initial price (BBC, 2019).

Our research has also found consistent evidence of a lack of clarity in pricing and regular undermining of direct prices in the accommodation industry as a tactic to lure in prospective customers. In the first report in the series, The State of Hospitality Distribution: Metasearch, which can be downloaded for free here, we found that hotels direct rates were being undermined regularly on price comparison sites. The biggest culprits were OTAs that had not been directly contracted by hotels to sell their inventory. They are, on average, posting rates 10% to 11% below the hotels’ direct rates. They are not alone as even hotels’ directly contracted OTA partners on average post rates 5% to 6% lower, representing an endemic issue in the industry of manipulated prices and an uphill battle for hotels to drive direct bookings (EyeforTravel, 2018).

The tactics have given rise to an entire subsector of the hotel industry. Travel technology professionals have taken note and built businesses aimed at giving hotels tools and tactics like website personalization, monitoring tools, and mobile-optimized websites in order to drive greater direct bookings.

However, according to J.D. Power and Associates’ 2018 North American Hotel Guest Satisfaction Survey,


https://www.prnewswire.com/news-releases/new-research-shows-consumers-spend-5-2-billion-annually-in-fraudulent-and-misleading-hotel-booking-transactions-300641116.html

https://eloqua.eyefortravel.com/LP=22681?extsource=press_release

https://www.jdpower.com/business/press-releases/2018-north-america-hotel-guest-satisfaction-index-nagsi-study



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these various efforts have not had much of an effect so far in moving the needle in favor of the hotel industry. The direct booking market share for hotels remains static. Of the 55,000 hotel guests surveyed in 2017, 67% booked their hotels on a branded hotel channel, a negligible dip from 68% in 2015 and 2016 (J.D. Power, 2018).

Nevertheless, the fact that such a high percentage of survey respondents reported booking directly on hotel company websites shows promise for hotel companies. Similarly, our research finds that hotel loyalty programs are not only popular but largely well-received and used (see Chapter 4).

Furthermore, it is not simply a black and white set of choices when it comes to direct versus OTAs. Our research has found that the majority of travel suppliers are comfortable with OTAs having a presence in their world. OTAs also continue to offer a billboard effect and, in some cases, may even be the most cost-effective route to market for a hotel, despite the commissions.

Hotels will therefore need to weigh their options and perfect established techniques, such as loyalty programs, as well as developing new strategies to convince customers to transact directly on their brand’s website. After all, the future strength of their own brands is at stake.

This free report from EyeforTravel and Fornova will investigate the methods that the hotel industry is employing to drive direct bookings, the challenges they face and the future of direct business. This report is part of a series into the state of hospitality distribution and will be followed by a report on OTA channels.



1. THE BOOKING BATTLE

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1.1. Assessing the Balance of Bookings Hotels – especially global chains – have not slowed in their efforts to drive the lion’s share of bookings to their brand.com sites. How successful they’ve been in the endeavor is difficult to gauge but it largely seems that inroads have been small and the issue continues to be of paramount concern to the industry.

An EyeforTravel industry survey, which captured nearly 800 responses from travel suppliers, found that the OTA issue was huge among suppliers. Just under 44% said that OTA ownership of the customer was a key concern, making it the leading issue they believed they were facing, followed closely by penetrating new markets (41.4%), with other factors trailing far behind (EyeforTravel’s State of the Industry Survey, 2018).

Figure 1: Travel Suppliers Biggest External Challenges

Source: EyeforTravel’s State of the Industry Survey, 2018

This points to the success of the OTAs in not only capturing customers but also to their hoovering up of the critical data that allows product refinement and personalization, with this latter point potentially most critical in the eyes of suppliers.

The accumulation of data expertise, along with the resources to interrogate and fully utilize the findings in marketing campaigns has given OTAs an advantage that hotels continue to struggle to match, from proper data analytics to being overmatched in PPC campaign spending. The net result of this is that the major OTAs have created a sense of brand loyalty among travel consumers and created a powerful market position. In a 2018 EyeforTravel consumer survey of more than 5,000 travelers from Australia, Canada, the UK and the US, we asked what brands consumers make repeat bookings with due to trust in those brands. We discovered that OTAs came out strongly ahead of hotel and traditional travel agencies. Expedia, Booking.com and Hotels.com were the brands attracting the most repeat bookings, far ahead of the big hotel brands, with Best Western, Hilton and Marriott the best performing of these but still far behind the OTAs (EyeforTravel Traveler Loyalty Survey 2018).


The OTAs owning the customer

Penetrating new markets

Vertical integration of travel products/partnerships

Choosing the right partners/working with start-ups

Global differences in customer behaviour

The rise of alternative accommodation providers

Impact of industry consolidation/ M&A activity

Brand erosion in the face of commoditization

The rise of the platform economy

10% 20% 30% 40%




Figure 2: Do You Repeatedly Make Bookings with Any of the Following Travel Brands Due to Trust in That Brand?

Source: EyeforTravel Traveler Loyalty Survey 2018

Financial results from 2018 give further evidence the successes of the OTAs in gathering bookings and challenging direct booking channels. Expedia Group Inc. crushed its earnings estimates for 2018. Revenue jumped 12% year-over-year to $11.2 billion and room-nights grew 13% (Expedia, 2019). Booking Holdings saw similar results, despite its enormous size. It was able to push up room-nights across the first three quarters of the year by just under 13% to 588.6 million nights (Booking Holdings, 2019). Meanwhile, the other mega OTA, Ctrip, has also recorded strong results. Across the first three quarters of 2018, Ctrip was able to increase revenues derived from accommodation by 21% (Ctrip, 2019).

The OTAs centrality to hospitality booking routes is uneven, however, with some geographic markets more predisposed to booking through OTAs and the largest chains creating stiffer resistance to OTA incursions than smaller and independent brands.

In our market research into China, for example, we found that the OTAs have a stranglehold over both accommodation and flight booking, as they have powerful apps of their own and strong presences on China’s foremost social media platforms.

One of the bulwarks against this is a strong brand that can throw marketing muscle around. Marriott reported that OTAs accounted for 12% of their 2017 bookings in their 2018 end-of-year earnings call. This compares to a direct booking share of 70% for the brand and represented a very slight jump of 1% in terms of OTA share, which Marriott ascribed to their Starwood merger (Travel Weekly, 2018). A similar picture was presented for Wyndham, with President and Chief Executive Officer Geoff Ballotti saying in its Q3 2018 results call that “our central systems domestically deliver 67% of the feed to our economy and midscale

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ExpediaBooking.com

Hotels.comOther travel agencies or hotel brands

AirbnbBest Western

TravelocityHilton

Marriott/Starwood & associated brandsLastminute.com

Thomas CookWyndham & associated brands

PricelineHotwire.com

TUI/First ChoiceOrbitz

Motel 6Choice Hotels

HyattCheapOair

HomeAwayIntercontinental & associated brands

AgodaeDreams/OpodoCarlson Rezidor

10% 20% 30%




hotels.” He also noted that independent hotels being signed on would be able to “shift that mix from 50% of their business coming through the OTA down to where it should be in the mid-20s,” indicating how they believe the distribution mix should look (Seeking Alpha, 2018).

From this, we can build a picture of major brands taking around 60% to 75% of bookings from direct channels and a broadly stable relationship according to most of the available research on booking share. Both MMGY’s study of American travelers and J.D. Power and Associates studies of hotel booking patterns report broad stability across 2016 to 2018, with thus far statistically insignificant declines in direct booking rates through those years.

1.2. The Impact of Third-Party Channels on Direct and the Symbiotic RelationshipWhilst clearly the two sides are competing, the relationship and effect of OTA channels on hotels is more subtle than merely a straight-up conflict between the two, with more of a ‘co-opetition’ dynamic between hotels and OTAs emerging over the last few years. This sees them as needing each other within the ecosystem but also having to compete for eyeballs and clicks in a frantic e-commerce environment.

There are measurable benefits from working with the OTAs for the large majority of hospitality companies, with the former’s scale and marketing capability improving visibility and often leading to direct bookings following OTA searches. They can also supplement marketing budgets and even potentially be the most cost-effective route to market in some cases.

However, it is by no means all positivity. As we saw in Figure 1, travel suppliers’ greatest external challenge was OTA ownership of the customer and the formidable resources of the OTAs can result in market power imbalances, predatory pricing practices, opaque rankings and spiraling marketing and commission costs.

This complex and frequently symbiotic relationship can be seen in our State of the Industry Survey 2018. While OTA’s position between brands and the customer was reported as a challenge, travel supplier respondents to the survey largely said that they were comfortable with their relationships with the OTAs – 78.3% said that they did not find them a threat, compared to 17.2% who did. Within this nearly 40% reported that the OTAs in fact helped their businesses (EyeforTravel’s State of the Industry Survey, 2018).

Figure 3: Travel Suppliers Views of OTAs in 2018-2019


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Helps my business

I don’t find them a threat

Reasonable competition

A threat to my business

Not applicable

39.7%

12.3%

26.3%

17.2%

4.5%




There are other data points that support this more favorable view point than is sometimes portrayed in travel industry media. Firstly, the visibility factor is probably the most important advantage conferred by having a presence on OTAs. Studies on the so-called ‘billboard effect’, which is the boost hotels get to direct-channel demand when listed on OTAs, continue to show that there is an uplift. A 2017 study from the Cornell Centre for Hospitality Research noted that “65% of consumers booking directly with the hotel visited an OTA prior to booking direct” (Anderson, C. and Han, S., 2017). Estimating the exact effect of this on direct channel bookings is difficult but the study, alongside prior investigations, suggest that the boost to demand is at least 5%, and likely more.

Further studies appear to back up the potential for positive effects from listing on an OTA in terms of both demand subsequently generated on direct channels and also overall revenue. A study looking at a four-year period from 2008 to 2012 when all hotels in the city of Columbus, Georgia, were delisted due to a lawsuit, found that the positives were outweighed by the negatives. Although occupancies rose, deep discounting was required by hotels in Columbus, and is often the case with cutting prices in hospitality, the Average Daily Rate (ADR) was very slow to recover, resulting in lower Revenue Per Available Room (RevPAR). The study estimated a loss of 2.8% in revenue during the delisting period and lingering effects for years afterwards (Anderson, C. and Han, S., 2018). A 2016 study from Italy concluded that listing hotels on multiple OTAs resulted in revenue growth, better operating profitability, and that that profitability was improved by a greater degree than just being on TripAdvisor alone (although this latter point could be as a result of few hotels posting direct ads onto TripAdvisor; Raguseo, E., Neirotti, P., and Paolucci, E., 2017).

A further report by European Technology and Travel Services Association (ETTSA) claimed that there was a statistically negligible difference between the profitability generated by OTA channels and going through direct for online sales primarily as a result of losing the billboard effect and increased search engine marketing costs (ETTSA & Infrata, 2018).

As with most things in travel distribution, the conclusion hoteliers should draw is not simply to close the book and declare direct as dead. Firstly, it is worth noting that the ETTSA is funded by a consortium of OTAs and its findings should be very much considered in that light. Rather than taking the findings of the aforementioned report to its ultimate conclusion and conceding booking activities to OTAs, there instead continues to be a strong case for maintaining a consistent and high-performing direct presence.

Hotels need to continue to fight for the direct booking to gather ownership of the customer and their data and to prevent ceding too much share, and thus bargaining power, to the OTAs. Whilst the ETTSA report may believe that the savings are negligible, the long-term benefits are what the main power-play is about for the hospitality industry, and general opinion across the industry is that commission rates continue to be too high, particularly for smaller players. A 2017 report by of more than 350 self-catering and bread and breakfast owners in the UK found that while 13% found that fees from OTAs were acceptable, 43% thought that they charge too much (Sawdays, 2017).

Clearly, the OTAs are here to stay and the hotel industry doesn’t yet appear ready to walk away from the distribution channels, despite their best efforts at pushing travelers to book direct.

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https://s3-eu-west-1.amazonaws.com/sawdays-production-assets/wp-content/uploads/2018/02/07094714/Sawdays-OTA-Market-Report.pdf



1.3. The Challenge of Driving Direct BookingsOne of the challenges that hotel companies face in driving direct bookings is that they are essentially competing with their own OTA-listed inventory. If rates appear higher on the brand.com site, here’s a good chance the consumer will book the room on the OTA. As stated in the first report in this series on metasearch, rate parity can be subject to how local taxes in a given market are presented to the consumer as a component of pricing as well as the leniency with which OTAs use currency conversions in international markets. Contracted wholesalers selling-on room inventory as part of a package to OTAs with which the hotel doesn’t contract can also impact rate integrity. It’s also possible that the lack of parity isn’t intentional on the part of the OTA, but a technical issue.

Nevertheless, hotels that suffer from a parity issue and that have a presence on metasearch engines are effectively advertising that their brand.com rates are the most expensive in the market. The cost of labor and technical resources means monitoring the situation is a near Herculean task for a hotel to do internally. Varying IP addresses are also an obstacle as far as viewing the rates seen by potential guests from other countries. “There’s no way for a hotel revenue or e-commerce manager to know what the metasearch engines are showing their guests based on IP addresses in different countries,” said Dori Stein, CEO of Fornova, which tracks hotels’ rates across a spectrum of third channels. “Assuming the hotel wants more sales and wants more of them to be direct, it’s crucial to have a decent parity situation and with our clients, we strive to get their parity to the best possible situation, identifying the issues and giving them the tools to resolve the issue as quickly as possible.”

Put succinctly, consumers shopping on meta and OTAs are spoiled for choice and that is where hotels’ brand.com sites fail. But it isn’t for lack of trying to compete. “As brands scale up either through mergers and acquisitions or through the introduction of new brands within a family of brands like Marriott or Hilton, the hotel companies are trying to offer a broad distribution of hotels by geographic region, property type, price level and design style,” explained Sean Hennessey, CEO of consultancy Lodging Advisors and assistant professor at New York University Tisch Center for Hospitality and Tourism. “The hope on the part of the brands is that a larger system, with more options within the system, can ultimately be the functional equivalent of the variety of hotel options available on OTA sites.”

But this strategy isn’t without its downsides. For one, the strategy can only be a driving force if consumers end up landing on the hotel company’s umbrella brand.com site. Hennessey went on to note that “a company like Marriott would want to drive traffic to the brand site for the purpose of comparison shopping, but there may be a sensitivity issue on the part of franchisees who don’t want the parent brand to discourage travelers from going to their specific brand site.”

That is, the particular brand.com site of any given flag within the Marriott or Hilton stable will deliver fewer results to travelers searching for a hotel room within a given market and thus, increasing the chances of a direct booking for those hotels that appear in the search results. Conversely, the search results that will appear for a given market on the hotel company’s umbrella brand.com site will give consumers more of the selection that they seek on OTAs. That also means more competition for that direct booking among hotels delivered in the search results.

The issue is only compounded when new brands are created. Market saturation or oversaturation can affect existing hotel owners in the form of occupancy, Average Daily Rate (ADR) and even direct bookings, despite the fact that new brand launches typically cause Wall Street to applaud the parent hotel brand.

Regional hotel brands and independent hotels simply don’t have the marketing budgets necessary to generate direct bookings en-masse. “We have Times Square in our name, so from a search perspective, we do well,” said Kate Martin, general manager of the Luma Hotel Times Square in New York City. “But because there’s so much supply, it’s tougher to make sure your direct platform is visible.”

They are clearly outspent by the OTAs and so stand to gain from the far-reaching exposure and, in turn, bookings that these travel tech platforms can give them. As Stein noted, if the hotel company or property doesn’t have brand awareness outside of their main feeder markets, they probably don’t have the marketing funds to achieve any meaningful influence beyond those markets. “Direct is best where you have the option to do enough direct [channel marketing] to make an impact, which is usually in your local market,” he said.

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Another issue with direct bookings is the investment it requires. Stein commented that the number of staff hired by hotel companies to manage direct brands is never adequate in comparison to the teams employed by OTAs. The cost of marketing activities such as Cost-Per-Click (CPC) or cost-per-thousands-impressions (CPM) typically requires upfront payment, leaving hoteliers hoping that they see a return. Hotel owners are also liable for the discounted room rates and free perks like complimentary breakfasts offered to hotel loyalty members, which may amount to less than the cost of OTA commission, but cumulatively can still adversely affect gross revenue.

1.4. The Benefit of Direct Hotel companies –and especially the major global brands—are willing to make the investment in marketing direct bookings not just in the hopes of quelling the fees that their owners pay on OTA bookings, but also in an effort to generate lifetime customer value or the profit expected from the entire future relationship with guests who have the complete brand experience, beginning with the booking phase.

“The question is, do you look at it from the perspective of operational results, which means profitability for the transaction, or from the point of view of lifetime customer value or customer retention,” posited Sanchit Rege, manager, distribution strategy at Hyatt Hotels Corporation. “Even if I have to spend five extra dollars [on metasearch costs] for someone to book direct, I have an advantage over the other transaction because now I know who this person is before he arrives and I have the ability to drive profitability on my food and beverage or some other form of ancillary revenue and I have the ability to actually make him loyal over a period of time.”

Figure 4: What Stands in the Way of Travel Suppliers Getting Their Products to Customers?


Taking this kind of approach is one way of tackling possibly the biggest issue in the industry, the cost of customer acquisition. When EyeforTravel asked travel suppliers what issues were standing in the way of getting their products in front of customers, cost of acquisition came top at 43.4% of respondents, followed by another highly relevant issue to the direct question: Intermediaries (36.4%; EyeforTravel’s State of the Industry Survey, 2018).

Kyle Mais, general manager of the Jamaica Inn in Ocho Rios, Jamaica, called guests who book directly “more sticky”. “Once the booking is made, we follow up with them directly to get them ready for the trip and create a relationship from an early stage,” he attested. The hotel will advise guests of packing needs, ground transportation and seasonal activities taking place on property during the guest’s travel dates. At check-in, these guests will ask to meet the reservationists with whom they’ve been communicating because of the relationship and want to thank them before their vacation has even begun. For guests who book through an OTA, their initial interaction with the hotel is upon arrival and the hotel is starting from square one without data on the customer to help them.

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Cost of acquisition

Intermediaries

A skills shortage

Siloed data

Rate parity

Closed user groups

I don’t know - this isn’t my field

Cloud migration

Nothing

10%0% 20% 30% 40% 50%

43.4%

36.4%

36.0%

25.9%

24.7%

15.9%

12.3%

10.8%

9.4%



2. DRIVING CONSUMERS TO DIRECT CHANNELS

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2.1. Search Engine Optimization and Marketing Search engines, most notably Google, are hugely important gatekeepers for the travel and are the most hotly contested digital real estate in the industry. The intensity of this competition stems from their centrality to most research processes online and also the limited amount of space brands have to reach consumers through the medium.

In our research with Jumpshot, which covered five countries, we found that in the 15 sites before a conversion occurred on a travel site, nine out of ten consumers had visited a search engine (EyeforTravel, 2017a).

Naturally this importance extends to sending consumers down the funnel to direct bookings. According to hotel industry digital marketing specialist HEBS Digital’s The Smart Hotelier’s Guide to 2018 Digital Marketing Budget Planning, SEO continues to play a critical role in driving direct bookings, with at least 30% to 35% of hotel website revenue generated as a direct result of organic search engine referrals (HEBS, 2018).

However, for efforts to be maximized, hotels really need to be on that first Search Engine Results Page (SERP). Advanced Web Ranking provides a monthly tracking of ClickThrough Rates (CTRs) and shows that after the first 10 results, most are fighting for scraps, with the tenth position getting around a 1% CTR on average in available 2018 results. In comparison, the top result gets around a 29% CTR on desktop (Advanced Web Ranking, 2018). A smaller study by Ignite Visibility found similar results, although not quite as harsh, with CTR for the first ranking result hitting 20.5% and then falling to just under 8% for the tenth result (Ignite Visibility, 2017).

Despite the criticality of achieving a page one result, getting those top rankings, especially for generic searches like “hotels in London,” is difficult for most properties given the ability for OTAs to spend their resources to rank top both organically and non-organically. However, hotels are by no means giving up on search engine marketing despite the fierce competition in the space and rising cost of acquisition. Travel suppliers in our 2018 survey reported that their top area of investment for customer acquisition is SEO, at 54% of respondents. Furthermore, 49.4% are investing in content marketing, which is important to generating inbound links and the kind of quality content that search engine algorithms and their human testers are looking for when ranking sites (EyeforTravel’s State of the Industry Survey, 2018).

Figure 5: Areas of Investment for Customer Acquisition for Travel Suppliers



Search Engine Optimization (SEO)

Content marketing

Social media marketing/Blogs

Email marketing

Search Engine Marketing (SEM)

Pay-per-click advertising (PPC)

Affiliate marketing

Don’t know/this isn’t my field

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https://38sxsi12keb34fkkey3q8km2-wpengine.netdna-ssl.com/wp-content/uploads/sites/12/2017/11/hebs-digital-smart-hoteliers-guide-to-digital-marketing.pdf

https://38sxsi12keb34fkkey3q8km2-wpengine.netdna-ssl.com/wp-content/uploads/sites/12/2017/11/hebs-digital-smart-hoteliers-guide-to-digital-marketing.pdf


In order to make the most of this vital medium, hoteliers will need to operate in the medium wisely through well-optimized websites and focusing on long-tail keywords comprised of four or more words that will increase the website’s chances of a first-page ranking for a more exacting and less competitive search query, such as “luxury London hotels near Piccadilly Circus”. Here are some key areas to focus on to improve the organic ranking of your site:

• Move to a responsive website: If you are still operating two sites or even a desktop-only site, then you need to move over now. Google has tweaked its algorithm with the release of Hummingbird to be more focused on the mobile experience, which means a responsive site that adjusts to mobile screens is a must. Responsive sites also help with ranking as it is easier for search engines to crawl and uses a single URL. It should also help with page load time as there is no need to redirect after detecting the device type, which is important because …

• Look at code and content carefully to reduce page load times: Rich content and imagery are critical to travel conversion but remember that you need to balance with page load times as these are considered as a core part of ranking a site. There are numerous ways to try and reduce load times that we can’t cover in full detail here but here are some key suggestions. Firstly, look at page weight and figure out where the biggest strains are as well as where there might be smaller savings, such as unnecessary whitespace, JavaScript that can be minified or small features that have been added on over time but can now be cut. Most likely the biggest load is imagery, where there are numerous fixes. Images can be compressed before loading to a site, and packs are now available to automatically compress imagery but if you are running a relatively simple site, adjust size imagery before you upload to a server and combine background images into a single image to reduce requests. Ideally, have an image server that can optimize and resize imagery depending on device through CSS and possibly defer loading of images until the user scrolls to them. Similarly, load and host video content onto a hosting site, so you are diminishing your own server load and then embed. A further option to aid speed and lessen server strain is to use a Content Delivery Network (CDN), which reduces latency by way of localized servers. You can also play around with what loads first on your site to diminish bounce rate, keeping weightier items to load later, or better still, use async/await or defer functions to allow concurrent execution of script. You can check your site’s speed with Googles PageSpeed Insights tool And also whether Google considers your site mobile friendly with their testing service.

• Think about user purpose at all stages: Google does consistent user testing alongside collecting metrics automatically as their key goal is to satisfy the users intent in the shortest possible number of steps. Consider the user intent at all stages and make it easy for them to navigate to the next step. Make sure the search and purchase funnels are clear and progress in as few steps as possible and have high security standards. Reduce distractions and keep unnecessary features to a minimum not only for page speed but also for quality rating reasons. Google has very high quality rating standards for sites where transactions occur and its testers are asked to look at independent opinions and reviews of websites, making user experience key. You can find Google evaluator guidelines here.

• Create quality, original content: Google has worked hard to fight those who were gaming their metrics and tried to focus on finding and ranking quality content. Don’t invest in content mills or generic and short content. Instead focus on being trustworthy and authoritative. Poorly conceived and created content will mean low dwell times, a lack of backlinks, high bounce rates, and poor ClickThrough Rates (CTRs). All of this will hurt your domain authority and make it harder for you to rise those ranks in the future. Create content hubs related to your destinations or offerings that interlink with each other and answer specific things that visitors would want to know about the area or service.

• Remember search engines are mostly text-based and you need to make their lives easy: Search engines crawl through sites and their background data to try and build up a picture of the site and its capabilities. It therefore remains important to look at underlying structural data that can help engines and therefore your position. These include: meta titles, meta descriptions and header tags, particularly the H1 tag, that use keywords appropriately and help describe the page; alt tags, related file names and descriptions for key images; and provision of a sitemap to Google.

• Set up a Google Search Console account: Google’s Search Console is an incredibly helpful tool to track site performance and organic SEO.

If you need more advice, you can visit the Google Webmaster Guidelines here.

THE STATE OF HOSPITALITY DISTRIBUTION: DIRECT BOOKINGS 2

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https://search.google.com/test/mobile-friendly

http://static.googleusercontent.com/media/www.google.de/de/de/insidesearch/howsearchworks/assets/searchqualityevaluatorguidelines.pdf

https://support.google.com/webmasters/answer/35769?hl=en


Yet, while the importance of organic search shouldn’t be discounted, Jason Lee, senior director of product and technology with the hospitality digital marketing firm Travel Media Group, suggested that TripAdvisor rankings are equally important. “When a consumer is on TripAdvisor and decides they’re looking for the number one hotel in the market, they’re probably looking in terms of a certain price point,” he said. “So, if a competitor is above you in that price segment, that’s where you want to be because consumers are looking at the best hotel in their price range.”

Similarly, although paid-search has something of a bad reputation when it comes to driving value for travel brands due to the competition from OTAs, it also shouldn’t be ignored by hotel brands, as there is still room to compete. Indeed, the spend by the hotel industry towards Google appears to be on the increase since it updated its Google Hotel Ads (GHA) service. Roiback, a digital services provider to the travel industry, reported that their customers had increased the number of room sales through GHA by 77% in summer 2018 compared to the year before and that Google is now the dominant metasearch engine (Roiback, 2018). This is supported by our results, where we found that hotels were highly connected to Google for meta sales and were using it far more than competitors TripAdvisor, trivago and HotelsCombined.

Google claims that it was able to grow leads to hotel partners by 65% year-over-year in the first half of 2018, as part of its campaign to promote Hotel Campaigns (Google, 2018). This is where hoteliers have access to bidding controls that allow marketers to optimize for bidding dimensions unique to hotels, including length of stay and check-in day and to use smart bidding powered by machine learning in order to maximize bookings at a certain return on investment (ROI) goal.

Joe Pettigrew, Starwood Capital’s director of revenue maximization, Europe Hotels, weighed in on the value of a digital marketing spend. He said that while bidding on search terms delivered better value than metasearch, “the keywords we were optimizing for were mid- to upper-funnel and I think hotels are starting to shift some of the budget to meta, because in the end, it will probably deliver a lot more return for the money.”

Looking at all of these tools, SEM should therefore include blended results from the Google Ecosystem, including the Search and Display Networks, Remarketing Lists for Search Ads, Google Hotel Ads and Gmail Ads. Outside Google, also consider search engines that are dominant or important in their local market, such as Baidu in China and Yandex in Russia.

Remember when using Google Ads, your account needs to be well-run and focused, not just for your bottom-line through avoiding wasted spend but also because you are assigned a quality score. Getting and keeping a high-quality score means your bids are cheaper. It is measured via:

• Landing page quality.• Relevancy of the ad served to the search.• CTR.• Keyword relevancy. • Account performance over time.

Therefore, get the framework in place and think carefully about using long-tail keywords, avoiding terms where you are already performing well organically, and looking at exact match terms. Here are some basics:

• Make sure you understand and have set up your tracking properly, whether through Google Analytics or a comparable service. You need to understand your consumer segments well even before you have set off to use paid ads, so you can do appropriate targeting. Then you need to be able to track ads to measure performance. Some ad campaigns may not work despite the best of intentions and is important to know to shut these off and focus on what is working.

• Focus on conversion. There’s no point getting consumers to your pages if conversion rates are poor and the booking engine is not user friendly. Similarly, you need to know how well your paid ads are converting. Perhaps organic SEO is enough and paying for very low conversion rates is not worth it. Make sure your own house is in order first.

• Similarly, think about how the customer will convert. Get a system ready to deliver quality ads and focused landing pages. If either is poorly designed, then it will lose you customers and lead to diminished quality scores.

• In order to get those ads and landing pages to target customers in an appropriate manner, do your research into what niches your properties can exploit and compete on. Landing pages and ads need to be relevant to the segments targeted. Although beyond the resources of most, Skyscanner and Airbnb have created tens of thousands of landing pages to help them rank highly on search, for example.


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The HeBS report recommends 3% to 6% of total room revenue –depending on property location, business complexity and ADR—go to the hotel’s sales and marketing budget, with 90% of the spend directed toward digital technology and marketing initiatives. For the company’s independent hotel clients, that translates to about $650 per room, per year and for branded hotel clients, $250 per room, per year, which should cover a range of digital initiatives including SEO, SEM, email marketing, social media and website operations (HEBS, 2018).

On a granular level, Martin of the Luma Hotel Times Square explained that considerable budget is directed toward promoting the hotel’s website and digital marketing is essential to the strategy. “We do campaigns –sometimes seasonal, like Cyber Monday—that are direct only and for a limited time and we go out there with a multi-channel platform to support it,” she said.

2.2. MetasearchAs stated in the first report in this EyeforTravel series, price difference drives consumers to metasearch engines, with 94.4% of consumers reporting that they use these sites when researching their journeys (EyeforTravel, 2018). Many hoteliers see meta much like Pettigrew: “Your primary objective of meta is to drive more direct bookings and use it as both a customer acquisition and conversion optimization space. … If you have a finite budget, you’ll be able to get a higher return and ultimately generate more direct bookings from meta,” he said.

Figure 6: How Often Do Consumers Use Price Comparison Websites When Booking Accommodation?


The use of metasearch among travel consumers is on the rise, according to Stein, and, as noted in the previous Chapter, it’s skewed toward Google. “Google has an unfair advantage because they have the most sought-after internet real estate: The Google Search Engine Result page,” he said, acknowledging that TripAdvisor and trivago also have value as search engines, but still struggle to compete on a level playing field. Noting that share prices haven’t been doing well for either search engine and yet their advertising expenses continue to rise, Stein said that they are both “reaching more people, but it’s coming to the them at tremendous costs while Google increases exposure to its metasearch engine with no real additional costs.”

He also raised the point that smaller search engines don’t typically have the funds that would allow them to play in the same league as these larger counterparts, with two exceptions: Skyscanner and KAYAK, which Stein said are constantly investing to grow their respective platforms and grow greater awareness among travelers seeking a hotel. “Their challenge is that although they have a tremendous number of visitors coming to their websites with the intention of booking trips, they are perceived by the public as a tool for sourcing the best price and changing brand perception is an incredible challenge,” Stein added. “But if they crack it, they will leap in traffic numbers to play with the big boys.”


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Every time I am making a booking

Most times I am making a booking

Occasionally

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Never

43.6%

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15%

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Regardless of which metasearch engines are selected to list hotel inventory, managing costs as a function of revenue generated is essential. Managing both Cost per Action (CPA) and PPC are essential. “CPA can bring customers back to a hotel’s brand.com site for more direct bookings and to build brand awareness, which also has its benefits, but CPA needs to be managed in the same way as PPC,” said Nir Dupler, Fornova’s chief revenue officer.

Properly managing PPC is a matter of establishing rate parity, knowing who is bidding against the property and if any unauthorized channels are selling hotel inventory without the hotel or hotel brand’s consent. A 360-degree overview of the marketplace allows hoteliers to create the right mix of CPA and CPC, especially as TripAdvisor, trivago, Google and even Qunar offer CPA options. “At the end of the day, 70% to 80% of a hotel’s occupancy comes from online bookings whether that’s through OTAs, metasearch or Google,” Dupler pointed out.

By monitoring the available rate that distribution partners offer on third party channels, hotels can avoid cheaper prices appearing next to rates listed by the direct channel and thus, the perception that direct is more expensive. “It’s easy to waste a PPC spend, hurt the brand, pay OTA commissions and propagate the perception that OTAs are cheaper,” said Dupler. Ultimately, it’s a question of finding the right mix of distribution channels and working with those that provide the best margin. Dusit International partners with Fornova to police rates and when disparities appear, Pongprapat explained that they are tackled on an individual contract basis and now looks at contracts with a medium-term approach. “For static contracts, we are looking at the terms and conditions and trying to rectify them so that we are no longer at a disadvantage and can make sure our hotel rate is not being undercut,” he said.

Dusit International also considers individual markets before getting involved in bidding; the company pays for premium positioning in those markets that have low bidding action, but have the potential for high returns.

Click here for the full first report in this series, The State of Hospitality Distribution: Metasearch.

2.3. Social Media & User Generated Content (UGC)Social media platforms continue to pile on users even in the midst of many an ongoing scandal and are consequently gaining increasing traction among the hotel industry as a marketing vehicle. Travel Market Report’s Outlook on Social Media research, which surveyed travel agents found that 89% find social media very or somewhat important to overall marketing plans, with 44% saying it is very important (Travel Market Report, 2018). Leading the pack of platforms was Facebook, with 97% saying that they use the platform for advertising, followed by Instagram. This is supported by our research, where our The State of Data and Analytics in Travel Report 2017 found that 61.6% of travel marketers think Facebook is the best performing social media network, trailed far behind by Instagram at 15.8% of respondents (EyeforTravel, 2017b). Furthermore, in our State of the Industry Survey 63.7% of travel suppliers said that Facebook and Google were positive influences that help their businesses (EyeforTravel’s State of the Industry Survey, 2018).

Figure 7: Travel Suppliers Views of Facebook and Google in 2018-2019



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15.8%

10.3%

7.8%

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Helps my business

I don’t find them a threat

Reasonable competition

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http://1.eyefortravel.com/LP=16751

http://1.eyefortravel.com/LP=16751


Most hotels see value in these marketing platforms. “Social media plays a big part in who we are and how we reach new audiences,” said Martin. “Because we’re new and hip, we find and connect with customer who appreciate us for being different and social media is a big part of that.”

Social media also allows hotels to better connect with younger consumers who spend more time on mobile devices. According to a 2018 Expedia multi-country study, 77% of Millennials report being influenced by social media, rising to 84% of Generation Z (Expedia Media Solutions, 2018).

However, can social media genuinely drive traffic to a hotel’s brand.com site? Brands need to temper expectations and not expect social to transform their marketing overnight but rather to be part of an integrated strategy. Social media helped 22% of consumers decide where to go on vacation according to a global survey from Q3 2018, but this was the lowest of factors, with 59% saying affordability was key (the top factor) and 27.6% saying food and drink choice influenced them (GlobalData, 2018). Similarly, a WeSwap survey of UK consumers found that 23% will search potential destinations on social media (WeSwap, 2018). These demonstrate that it is influential, particularly in initial phases, but is not a magic bullet that can drive marketing efforts alone.

Lee, at Travel Media Group, finds that social media and in particular Facebook affect all phases of the buying process, with “Facebook delivering the most bang for the buck because there’s nothing like it in the social media sphere.”

Lee’s strategy for hotel clients is to both invest in promoted content and ads and to create content that builds engagement. Consumers will likely use social media as a research tool, going elsewhere to book and largely ignoring Calls to Action (CTAs) on hotel social media pages with one exception: CTAs are effective in promoted social media posts, especially when deployed at choice moments of heightened interest. For one hotel client, Lee spent $10 on a Facebook post promoting room availability during dates when a high-profile artist was giving a concert at a venue near the property. Within minutes of the post going live, it was viewed several hundred times, shared 87 times and generated seven room nights. The promoted post included both concert-related tags and photos of the artist. “I think someone randomly finding a hotel Facebook page and looking at the images and posts isn’t going to do much as far as the call to action,” Lee added.

Social media shouldn’t be confused with User Generated Content (UGC), however, which Lee described as absolutely affecting a hotel’s ability to demonstrate value in the pre-booking process. Lee advised that there is value in TripAdvisor’s Business Advantage for Accommodations, which is the only way hotel contact information will be included with a listing. “If you’re looking for direct bookings and you understand that reputation management is part of the process, then it’s worth the spend and you get more advanced analytics,” Lee said.


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https://www.tripadvisor.com/TripAdvisorInsights/w779


3. THE EVOLUTION OF HOTEL WEBSITES

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S3.1. Today’s Hotel Website DesignWhen Google issued a recommendation in 2015 for businesses to create move to their sites to a Responsive Web Design (RWD) format, the hotel industry took note. Web designers, developers and domain owners were advised to create a single URL that can be viewed and navigated with a minimum of resizing, panning and scrolling across a range of mobile devices, regardless of screen size (see Section 2.1 for more). This was followed by Google Chrome’s January 2018 move to label HTTP websites “Not Secure,” which encouraged still more hotels to invest in SSL (security) certificates for the sites.

Hoteliers also recognize that the information that appears about their properties on OTA sites is often so formatted that it has a generic feel to it and so consumers will look to the hotel’s website for more information. The level of detail on the Luma Hotel Times Square’s website not only highlights the in-room wall art, but also the hotel’s partnership with nearby Bryant Park. The hotel hosts marketing campaigns with and through Bryant Park and, Martin added, “has even done packages with them like our First Anniversary Package, when we donated 5% of the proceeds on reservations made with a certain booking code to Bryant Park.” Showcasing the partnership with the park, which is the longer-standing and more well-known entity of the two, also serves the hotel well as far as SEO is goes.

Scale, too, is another reason that hotel companies are redefining their online brand presence. Newton, Massachusetts-based Sonesta International Hotel Corporation has nearly 80 hotels spread across eight countries. Within the US alone, the brand’s property portfolio grew from three to 55 in just over five years, with its newest brand, Sonesta ES Suites, comprising the bulk of that growth. The new extended stay brand was introduced during that same time period, quickly achieving a current total of 42 hotels under the Sonesta ES Suites flag. Simultaneously, nearly every existing property in the portfolio was going through renovations. The development strategy also prompted the hotel brand to completely rebuild both the front and back ends of its website, which is also now mobile responsive.

“The site is much more visual that what we had previously,” said Scott Weiler, vice president, marketing and communications at Sonesta. “We commissioned a lot of new photos so that the site would be in lock step with the look and feel of the hotels.”

Much of the website balances a single hero image across the top of a page with tiles that Weiler described as visually providing users with a way of navigating a number of ideas very quickly. Sonesta’s Travel Pass, the company’s loyalty program, is also featured on the website, but its prominence is secondary to the brand. Weiler explained that, driving the decision, is the fact that guests are looking first and foremost for a hotel and loyalty programs are realistically, an enhancement of the guest experience. “But they’re not the reason that guests choose a hotel,” he said.

The overall look and feel remains similar on the landing pages of individual properties, but as users navigate deeper into a hotel’s subsite, information is organized into a more traditional hierarchy where accommodation details and meeting and event information have their own dedicated sections.

In overhauling the website, Weiler and his team were careful to ensure that the design would still engage current guests while also appealing to the growing audience that the new Sonesta ES Suites brand attracts. He said that as the company created and launched the ES Suites product, “we’ve seen a tremendous shift from a male dominated customer base to a slightly female dominated base and from the website perspective, we’ve kept that in mind, particularly with its new visual nature.”




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In terms of advertising, Sonesta uses many of the same tools as other hotel chains, including CPC, paid search through Google and other search engines as well as metasearch, banner advertising and TripAdvisor. But with a marketing budget reflective of the portfolio size, advertising and marketing dollars are geotargeted to travelers going to the locations where Sonesta has hotels and focus mostly on the bottom of the booking funnel. Since the redesign, the site has brought in about four times the booking revenue that it did previously, but Weiler is also careful to note that the portfolio has also grown significantly. The other success metric is in the form of improved SEO, which is where Weiler has said the company has seen the biggest results.

3.2. New Tools, More FeaturesAnother area of website improvement that hotels are investing in is the booking engine. A more streamlined process with fewer steps to get to the bottom of the funnel helps make a hotel’s brand.com site more competitive with OTAs, as does attempts to re-engage visitors. Tactics can range from book direct incentives and e-commerce upgrades such as a pop-up window upon exit intent, abandonment emails triggered after a user has entered their email address but failed to complete the check-out process, and a multi-channel marketing campaign that re-engages with past guests and users who have previously visited the website or hotel’s social media accounts.

Hotels are also trying to drive more direct bookings by taking a cue from Amazon and Netflix and incorporating personalization into their website design, a technology product that the Viceroy Los Cabos in Mexico has already embraced. “We’re exploring new tools to enable us to gather more customer information and really target our communication,” said General Manager Martin Kipping. The tool recognizes users’ IP addresses to identify their location. So, if they’re based in a Spanish- or English-speaking country, the website will automatically load in their respective language. But the benefit of recognizing IP addresses is even more comprehensive, promoting resort packages to an area that is suffering from particularly bad weather or based on the length of stay that travelers from that area tend to average at the property. “Translating the online world from the offline world is something that still needs to be worked on so we can truly provide a compelling reason for a customer to come back to the website and spend more time on it, which in turn provides a better conversion rate,” he added.

Honolulu-based Aqua-Aston Hospitality also found inspiration for its new website, which launched in early 2018, from Amazon as well as retailers LL Bean and Zappos, both of which also use personalization to help grow online sales. The accommodations provider chose to position itself on its website as a Hawaii destination expert in addition to offering lodging facilities. Travel suggestions are tailored to users’ preferences and content themes change regularly and are tied together with customized itineraries created by local influencers and ambassadors. The company also amasses user data as they spend time exploring the site; that information is used to improve target marketing capabilities, serve up more relevant offers to users and further build its Customer Relationship Management (CRM) system and loyalty program.


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4. HOTEL LOYALTY PROGRAMS


4.1. The Outlook on LoyaltyThe loyalty program in travel is often decried and derided as in crisis or outright failing but is this narrative overly pessimistic? Loyalty programs can be expensive, complex to run and difficult to measure but they do remain highly popular among consumers and don’t appear to show signs of diminishing membership with younger demographic groups, contrary to much of what is said. They also remain a key part of the travel decision-making process and, perhaps most critically, they have the potential to provide huge volumes of valuable data about a wide range of behaviors.

Critically, it is worth targeting and pursuing loyalty program members as they are high-value targets. 78.5% of respondents to EyeforTravel’s State of Loyalty in Travel Industry Survey 2018 reported that their loyalty program members spent more than the average, with 30.8% reporting that they spend ‘considerably more’ (see Figure 8; EyeforTravel’s State of Loyalty in Travel Industry Survey 2018).

Part of this is driven by the correlation between rising income and greater membership, particularly for programs not directly administered by travel companies, such as credit card schemes. In our consumers survey, whilst membership for non-travel-led programs in the lowest incomes bracket was split around 50-50, this rises to 71.4% for those in the highest income bracket (see Figure 9; EyeforTravel Traveler Loyalty Survey 2018).

Although clearly some of that higher spend is associated with the reaping of awards and the gamification effect of a loyalty system, it is also worth noting that loyalty programs have value in identifying and targeting higher income consumers with more spending power.

Figure 8: How Much Do Loyalty Program Members Spend Compared to Non-Loyalty Program Customers?

Source: EyeforTravel’s State of Loyalty in Travel Industry Survey 2018

30.8%

3.1%

6.2%

12.3%

47.7%

Considerably more

Slightly more

The same

Slightly less

Considerably less



Figure 9: Consumer Membership of Non-Travel Company Reward Programs by Income


Furthermore, travel industry brands that operate travel loyalty programs appear to be generating value for those brands from loyalty programs. Both consumers and brands believe that loyalty efforts create positive results for brand imagery. Over 90% of travel organizations believe that their loyalty program has had a positive effect on their brand’s perception among consumers (see Figure 10; EyeforTravel’s State of Loyalty in Travel Industry Survey 2018).

Additionally, there was a positive view of hotel loyalty program performance across all age groups according to our EyeforTravel Traveler Loyalty Survey 2018, which surveyed more than 5,000 consumers in four countries. Even more encouragingly for those operating a loyalty program, satisfaction was highest among the youngest age group. More than 80% of those aged 18 to 35 and members of at least one program think that hotels provide good or excellent service when it comes to loyalty membership. This declines to 73.8% for those aged 36 to 55 and 65.4% for over 55s (see Figure 11; EyeforTravel Traveler Loyalty Survey 2018). This appears to suggest enthusiasm for loyalty programs among younger consumers and a strong future for programs if they can offer genuine value to consumers.

Figure 10: How Much of an Effect Do You Think Your Loyalty Program Has Had on Customers’ Views of Your Brand?

EyeforTravel’s State of Loyalty in Travel Industry Survey 2018


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Somewhat positive

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Figure 11: Consumer Perception of the Performance of Hotel Loyalty Programs by Age

18-35 36-55 Over 55

Excellent 41.1% 32.1% 21%

Quite Good 40.2% 41.7% 44.4.%

Average 16% 20.9% 27.6%

Poor 1.8% 4.7% 4.1%

Very Poor 0.9% 0.6% 2.9%


This position as a valuable tool for travellers means that loyalty programs remain important in the decision-making process. Consumer research by the CMO Council found that after deals and discounts, the top motivators in making travel decisions were loyalty programs and perks, which was selected by 34% of respondents (CMO Council, 2018). Facebook research from 2018 also found that loyalty programs were highly influential for US consumers, with 80% saying that loyalty programs influenced their choice of airline, behind the 94% of respondents who said that past experience was key (Social Media Today, 2018)

Further evidence that loyalty memberships are consistently used by consumers and not purely sitting in wallets is provided in our survey, where the majority of respondents who are members of at least one loyalty program reported to us that they use their rewards on most of their journeys. Even better, the most engaged members are those aged 18-35. In this demographic cohort 70.3% report that they use their rewards on all or most of their journeys, falling to 66.1% from our middle-aged group and then to 51.8% for those over 55 (EyeforTravel Traveler Loyalty Survey 2018). Travel brands should capitalize on the data they generate from loyalty membership and this demographic trend and create segmented offers that target users based on age first and foremost but also income, location and pertinent tracking data.


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Figure 12: How Often Do You Use Your Loyalty Rewards When Travelling by Age?

18-35 36-55 Over 55

On every journey 32.5% 29.9% 23.4%

On most journeys 37.8% 36.1% 28.4%

Occasionally 20.6% 22.5% 29.7%

Very rarely 6.4% 9.6% 13.5%

Never 2.7% 2% 5%


There is more good news for the hospitality industry, as their loyalty programs are more popular than those on offer from the OTAs. Although several of the OTAs do not operate a loyalty program or offer an unconventional one, there is a substantial difference in membership that is worth noting and likely points to loyalty programs being a useful means of leverage for direct efforts. Whereas 37% of consumers reported that they do not have any OTA memberships and 31.6% said that they had just one, 48.2% said that they are members to two or more hotel programs (see Figure 13; EyeforTravel Traveler Loyalty Survey 2018).

Figure 13: Membership of Hotel and OTA Loyalty Programs Among Travel Consumers




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10%

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20%

30%

40%

0 1 2 3 4 5 or more

Hotel loyalty programs OTA loyalty programs

17.5%

37.0%34.4%

31.6%

24.5%

16.9%

12.4%

6.8%5.7%

4.3% 5.5%3.5%

18-35 36-55 over 55



4.2. Where Loyalty Falls ShortHotel loyalty programs have been in existence for about as long as OTAs and just as these tech giants evolve their businesses models to respond to the changing needs of the travel market, so too are loyalty programs transforming. But their primary objectives remain unchanged. Loyalty programs are intended to capture a greater share of guests’ wallets and build “Lifetime Customer Value” while also representing the “closed user groups” that allow hotel companies to circumvent the rate parity clauses that they are contractually obligated to maintain with their chosen OTA partners. In turn, loyalty programs should theoretically drive more direct bookings that will deliver greater profitability than bookings that come through OTAs, both through saved commissions and higher-spend per guest.

Although we have seen the net-positive effects of loyalty in the previous section, this does not mean that loyalty programs are achieving all of their goals.

For example, the Cornell Hospitality Report Assessing the Benefits of Reward Programs found that “the current reimbursement structure for redeemed nights is unfavorable to hotel owners. Owners are reimbursed significantly less for redeemed nights, which shows that guest redeemed nights are not favorable to owners.”

However, even judging costs is problematic according to our survey, as hoteliers underperform when measuring visibility of costs and loyalty program effectiveness. In our industry survey, we found that less than half of respondents who said that they had a loyalty program knew the overall cost of the program or the cost per member of the program (see Figure 14; EyeforTravel’s State of Loyalty in Travel Industry Survey 2018). Travel brands need to get a stronger handle on key performance metrics for their loyalty programs so they can truly judge its value and return on investment. Just having a loyalty program for the sake of it is not enough – it needs to be generating measurable returns, the first step of which is fully understanding costs.

Figure 14: Do You Know the Overall Cost of the Program or the Cost per Member of This Program?

Source: EyeforTravel’s State of Loyalty in Travel Industry Survey 2018

The other issue presented by loyalty programs is usage among business travelers who will earn points for stays paid for by their workplace and then cash them in later on for leisure trips. In our consumer loyalty survey, we found that those who had engaged in a business trip were far more likely to be members of loyalty programs and to redeem their points regularly.

Leisure travelers, Lodging Advisors’ Hennessey pointed out, are prone to comparison shop for hotels in a specific location that are within their price range on certain dates. “OTAs have the advantage of making comparison shopping quick and painless,” he said. So, there’s little likelihood in his opinion that these programs are creating true loyalty among members or that they are or ever will be real revenue sources for owners who are required to participate if they fly a brand flag at their hotel. “Hotel companies are trying to minimize the impact of OTAs on their business and largely approaching this by offering perks, benefits and discounts through loyalty programs,” said Hennessey. “But this represents an alternative view of loyalty: Discounts for volume usage.”


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https://scholarship.sha.cornell.edu/cgi/viewcontent.cgi?article=1156&context=chrpubs


4.3. Next Generation Loyalty ProgramsCurrently, hotel loyalty programs have strengths and value but it would be difficult to say that they are being utilized in the most effective way possible. Membership numbers for the major international brands are in the millions, but according to Hennessey, it’s still possible for the hotel companies to come up short after making enormous investments into these programs or alternatively, to greatly improve their businesses, drive up revenues and ultimately drive up their share prices. The latter is causing hotel companies to rethink their programs and ratchet back the emphasis on elite members.

Weiler said Sonesta is now much more focused on guest recognition. “Although a lot of our focus is on elite members, we are also now more focused on guest recognition because anyone spending money on our hotels wants to be recognized accordingly,” he said. In fact, one of the most recent research studies of Sonesta Travel Pass members showed that personalized content is among the highest valued benefits of the program. “If they’re staying at a particular hotel for a few days, they may want to know where they can go power walking,” Weiler explained. “We already provide this service to our members, but they told us it’s even more important than we thought it was.”

Moving focus onto the wider loyalty membership rather than just top-tier elite members is something that our results support. Our loyalty survey revealed a wide base of consumers using loyalty programs (just over half the population of countries surveyed) and engaged with those programs, particularly younger travelers. However, non-members reported that by far the biggest reason that they were not enrolled was because of the difficulty in earning rewards and how long this takes and that rectifying this would incentivize the majority to sign up.

4.3.1. Case Study: Hilton HonorsThe Hilton Honors program is also casting greater attention on its non-elite members, especially as enrollment is on the rise around the globe. After growing membership 20% to 71 million members in 2017, the first half of 2018 saw the addition of another 6.6 million new members, putting total membership at nearly 78 million. “More people are seeing the value of the program and once enrolled, over 95% of members book direct,” said Jonathan Nouri, vice president, Honors strategy and program management.

Hilton Honors provides all members with the lowest available nightly rates when booked directly, free WiFi and access to the brand’s digital key, which is currently available at about 60% of Hilton’s 5,500 hotels and allows users to select their room location within the hotel, check-in online, bypassing the front desk upon arrival and uses their phone in lieu of a room key. The points-based program recognizes membership at all tiers, the scope of benefits for which points can be redeemed extends even to the sums accumulated by infrequent leisure travelers.

“For someone who travels once or twice a year, points don’t resonate because they feel that they will never have enough to do anything,” explained Nouri. To remedy the issue, Hilton Honors members can now unlock points earlier, paying for hotel stays with a combination of points and dollars. Members can apply as few as five thousand points to a direct booking and then pay the difference as opposed to accumulating at least 40,000 points before cashing in on a free room. Members can also pool points with up to 10 friends or family members of their choice, with no fee for point transfers and also apply their points to Amazon purchases by linking the two accounts. The Hilton Honors logo and the member’s point balance remains visible on their Amazon account, so even when they aren’t traveling, they’re reminded of their membership. Creating that brand awareness is good business for Hilton because, as Nouri explained, “the next time they book a hotel stay, the first place they’ll think of is Hilton.”

Elite status can also be achieved by signing up for a Hilton Honors branded American Express card, starting at USD95 for a card that comes with gold status, which gets them daily complimentary breakfast with every stay, late check-out and 80% in bonus points on each stay. “It starts to get cardholders on the loyalty sauce,” said Nouri. Elite member benefits were also designed to equally draw interest among business and transient travelers; the complimentary breakfast is as important to leisure travelers as it is to business travelers who may be on a per diem.


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Hilton Honors members can also use points to access exclusive experiences like the band Smashing Pumpkins recent rerecording of a video for their 1996 hit song 1979 in the house where the original video was filmed. Hilton Honors members were able to use points in order to take part in the video and photo shoot with the group. “Money,” said Nouri, “can’t buy this experience, but members who engage in events like this will be more likely to give every future hotel stay to us.”

This aspect of the program also reaches members at both ends of the points spectrum as points can be used to bid on experiences like this rock video as well as a private experience at Lake Cuomo in Italy. However, the program’s “Lawn Days” series also enables members to exchange five thousand points for a ticket to a concert like this past summer’s Kesha performance in Miami and entrance to the concert’s Hilton Honors VIP area. “It gives people something to aspire to and keep people engaged in the platform,” the program head noted.

4.4. The Independent Take on LoyaltyThe independent sector has a different perspective on loyalty programs. A single property or a small group of regional hotels is likely to view the investment required to create and maintain a hotel loyalty program as a significant expenditure from which comparatively little is to be gained. Some hotels elect to pay into loyalty programs created specifically for independent hotels like Stash Rewards or Voila Hotel Rewards or even a more ubiquitous rewards program like Dosh, which also extends to the retail and dining segments. Others choose to go without, betting that the unique experience offered by their properties is enough to lure guests back again and again.

Mais described the approach at the Jamaica Inn as “doing it the old fashioned way,” remembering to stock a guest’s minibar with their preferred wine and keeping their dietary preferences on record for the next visit, for example. “Personalized service is what delivers loyalty and it’s the hospitality industry’s original definition of loyalty,” he said.

The Luma Hotel Times Square’s Martin believes that guests don’t want to wait to be rewarded at a later date; they want immediate recognition. She called the more traditional loyalty program “a customer service recovery mechanism so if the guest had a bad stay or bad experience, they would be given so many points in order to make up for it.” Instead, the hotel invests in the services and amenities offered to call guests, who receive complimentary WiFi and have espresso makers in their rooms in addition to special amenity programs like “Millionaire for a Day,” where all guests receive a complimentary scratch-off lotto ticket with turndown service. But are these features driving more direct bookings for the 130-room hotel? “The reality,” she said, “is that you have to have a market mix to get through 365 days.”


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About Fornova

Fornova’s patented technology helps hoteliers maximize revenue and profit by continuously optimizing their distribution mix across ALL channels – to sell every room through the best channel, every time.

Hotel distribution is evolving fast. Fornova’s leading-edge technology delivers a comprehensive, constantly updated view across both direct and indirect distribution channels – giving hotels dynamic control of their entire distribution and e-commerce operations. And with intelligence and automation, hoteliers can get maximum profit on every room by optimizing their distribution mix across ALL channels.

Founded in 2010, Fornova has over 130 employees with offices in London, New York, Israel and Amsterdam, providing market-leading distribution solutions for more than 15,000 hotels globally.

Find out more at www.fornova.com


www.fornova.com



METHODOLOGY

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The data used in this research and credited to Fornova was collected using Fornova’s patented visual web-analysis technology, known as Distribution Intelligence. This technology scans the web visually, like a real user, using image analysis and providing a true picture of what a guest really sees when searching online.

Using Distribution Intelligence Fornova looked at a sample of 8,000 properties spread globally, over a four-month period from March to June, 2018 (Q2 2018). During this time, four leading metasearch Engines - Google, TripAdvisor, Trivago and HotelsCombined – were monitored daily from 15 different points of sale. During this effort, nearly 10 million shops were made - where a shop is a single search for an upcoming stay date for a property on a website for a standard request of two guests staying one night.

To compliment our partners’ data, EyeforTravel conducts consumer and industry research. EyeforTravel’s Traveler Loyalty Survey 2018 was a multi-country study conducted through partners TapResearch across Australia, Canada, the UK, and the US. The survey population sample was designed to be broadly representative of travel consumers in those countries by age and income. Respondents had to have conducted at least one paid overnight stay in the past 12 months for business or leisure purposes to qualify. 5,544 started the survey and 3,136 consumers completed the survey in its entirety. EyeforTravel’s State of Loyalty in Travel Industry Survey 2018 was an industry survey conducted in January 2018 that collected 168 initial responses.




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