From owner to brand to online travel agency, finding customers in the most cost-effective way possible remains one of the most pressing challenges for the hotel industry.
Speaking during the "Reaching Customers: The Power of Partnerships" session at the 2024 International Hospitality Investment Forum, various panelists echoed the idea that both brands and online travel agencies need to be working to please both potential guests and hotel owners.
"This business has two customers: the guest and the owner," said Elie Younes, global chief development officer for Radisson Hotel Group.
Fiona McDonnell, vice president of global partner services for Booking.com, echoed that sentiment.
"Booking.com operates a two-sided marketplace, so yes we have travelers or guests on the one hand, and we exist to take the friction out of the way they book, but on the other hand ... we have partners who will be everything from Sheila's B&B to the large hotel chains," she said.
Christopher Hartley, CEO of the Global Hotel Alliance, said the key for pleasing hotel owners is helping to provide a clear cost of bookings.
"The challenge is the multiple layers of costs the hotel owner has to deal with and try to understand," he said. "I think it's clear that you need multiple distribution channels. The question for owners is do they really understand the cost of acquisition of each of those channels and all the related costs that need to be added."
The Global Hotel Alliance is a membership group of independent hospitality brands, representing more than 800 properties across 100 countries. It also offers its own loyalty platform.
Hartley said for the time being, hotel owners don't have a clear picture of customer acquisition costs by channel, including brand direct, OTAs and other third parties.
"I think it's so important for owners today to try to understand a very complex distribution environment and what is the best value business I can get," he said.
What makes the biggest difference from a brand perspective is how much brands can align interests with owners and whether the distribution strategy can be crafted to meet their individual goals, Younes said.
"As much as you have different types of guests, you have different types of owners," he said. "You have institutional owners. You have private equity owners. You have family offices. You have white-label operators. Each owner needs a different business model that has a different profile and you must address that difference."
He added institutional ownership groups are less likely to focus on acquisition costs while third-party operators and family-operated franchisees "put much higher value" on that part of the business.
Any considerations of cost of acquisition have to include a calculation on the lifetime value of a guest, McDonnell said. He added that while many OTA commissions are higher on a one-off basis, hotels that are able to turn those guests into repeat customers and higher-spending customers are poised for success.
"Some of the best lifetime value comes from [bookings] with slightly higher cost," she said.
McDonnell added guests in loyalty programs book earlier, stay longer and spend more at the hotel once on property.
"And we make it easier to bring them in," she said.
Hartley agreed that the cost of loyalty programs are justified in the long term, adding those programs are a good way to build a closer relationship with customers.
"The more they use your technology, for example, the more you're able to personalize communication, and so if you have a direct relationship with a customer, they're more likely to engage on your channels, which ultimately, if you do that analysis of cost of acquisition, would generally be the lowest cost of acquisition," he said.
From a brand perspective, Younes said loyalty programs are "cheaper than the other distribution channels." But in the hundreds of deals Radisson signs with owners each year, he doesn't remember a single owner who has been swayed to sign based on the strength of their loyalty program. Instead, Younes said, the focus for owners is on the total strength of their booking platform, including but not limited to loyalty.
"It's the total system deliver beyond the loyalty program that you put on the table and how much revenues you can produce directly through your channels," he said.