REPORT FROM THE U.S.—There was a period not that long ago when entire earnings seasons were dominated by various companies, headlined by heavyweights like Hilton and Marriott International, going to new lengths to secure more direct bookings.
In those companies’ quests to win share back from online travel agencies and other third parties, many engaged in discounted loyalty bookings and other new programs to lure more direct business.
Chatter around those programs has cooled considerably, so Hotel News Now decided to look to some expert sources to take a pulse on where they stand.
The campaigns are no longer the talk of investors
Michael Bellisario, senior hotel research analyst and VP at Robert W. Baird & Co., said the programs are considerably less likely to dominate conversation during publicly traded hotel companies’ earnings calls.
“It hasn’t been as big of a topic of conversation the last few quarters,” he said.
Bellisario said there’s a chance companies are less talkative about the programs because it’s difficult to quantify how many people lured in by things like discounted loyalty rates were going to book on third-parties.
“That’s the toughest thing to get your arms around,” he said. “Ultimately, it’s just about stats and getting x-percentage of people to book direct or into the Marriott Rewards and Hilton Honors programs.”
Optimism remains, but patience is required
C. Patrick Scholes, managing director of lodging and leisure equity research for SunTrust Robinson Humphrey, said that the hotel C-corps seems to have decided direct-booking campaigns are “going well, although we believe this is going to require a multi-year process to be considered a successful shift in how customers are booking travel.”
Any significant shift in consumer behavior, he said, doesn’t often happen overnight.
“Customers will have to be retrained in how they book travel, and the hotel companies are simply at a disadvantage when one compares rates for one hotel company on brand.com versus all hotels available in a market on an OTA,” Scholes said.
Outside analysis deemed campaigns a success
It’s not surprising to hear hotel companies claim their strategies are bearing fruit, but an analysis by Kalibri Labs seems to back that up.
Kalibri’s CEO and co-founder Cindy Estis Green, and VP of revenue strategy Mark Mazzocco, claim in a recently released study titled “Book Direct Campaigns: The Costs & Benefits of Loyalty” that “there was clear evidence of faster growth in brand.com when compared to the OTA channel.”
The study notes this is true “of both revenue and roomnights” compared to the year before the direct-booking campaigns were launched.
Net rates trend higher even with discounts
Both Bellisario and Scholes expressed concerns about the practice of loyalty discounting to drive direct bookings.
Scholes noted it is unclear “if the brands and hotel owners can sustain deals for customers who book directly as we believe some of the discounts for booking with brand.com are fairly generous.”
But the Kalibri report indicates net rate was a strength, not a weakness, of the programs.
“When comparing average rates net of direct transaction costs such as channel fees, commissions and loyalty costs, the brand.com rates that loyalty members booked were 8.6% higher than the net average rates of OTA transactions,” the report reads.
Campaigns realized a spike in loyalty membership
The report also pointed out that campaigns seem to coincide with significant jumps in “loyalty contribution rate,” noting an increase across brands of “30% to 40% growth in membership” from 2015 to 2016.
Bellisario said significant growth in loyalty membership has a series of positive effects for hotel companies, from driving higher levels of direct bookings to more interest from franchisees.
“If you’re a developer, it makes you more likely to say their system is stronger,” he said.