The hotel industry is constantly seeking new creative ways to circumvent OTAs. But as their mutual dependency increasingly becomes clear, the tech industry giants tap into the game.

By Deanna Ting

Nearly three decades ago, one of the biggest disruptors to ever impact the hotel industry was born: the online travel agency (OTA). OTAs upended the distribution model for hotels and the travel industry as a whole, and made many hotels utterly dependent on them.

But today’s hotel industry is devising new ways to circumvent these online middlemen and to establish more direct relationships with guests. From small boutique properties to massive hotel chains and everything in between, today’s hotels are employing innovative strategies to reclaim those lost commissions and build stronger guest loyalty in the process. Here’s a look at a few of the ways that hotels, particularly those based in the US, are doing just that.

STRENGTH IN NUMBERS

In any industry disrupted by middlemen, achieving scale is an obvious and reliable strategy. This is why Marriott acquired Starwood for US $13.6 billion to become the world’s largest hotel company. It’s why Accor bought Fairmont, Raffles and Swissotel for US $2.7 billion; and it’s why Hyatt bought Two Roads Hospitality for US $480 million.

There is obvious strength in numbers. For bigger hotel players like Marriott, Accor and Hyatt, scale means better negotiating power with the OTAs for lower commission rates and more favourable terms. In 2019, almost three years after Marriott bought Starwood, Marriott International CEO Arne Sorenson told investors, “Starwood has made us a more formidable competitor, providing a more valuable loyalty programme, brands with strong appeal to loyalty members and owners, talented associates, terrific locations, particularly in the fast-growing Asia Pacific region, significant cost synergies and meaningful scale.”

But even for relatively smaller players, including independent hotels and lifestyle hotels, scaling up together has its benefits. Some independent hotels have historically chosen to join hotel marketing alliances like Preferred Hotels or Leading Hotels of the World, while some have piggybacked on the scale of larger chains by signing up for soft brand collections.

Some lifestyle hotels have found other ways to team together without losing their independence.

In 2016, Standard International, the parent company behind lifestyle-focused Standard Hotels, launched its own last-minute hotel booking platform, called One Night. Today on One Night, consumers book more than 200 hotels in 17 markets worldwide. Last February, One Night secured Series A funding and was spun off from Standard International, with Standard chief commercial officer Jimmy Suh leading its operations.

Suh said at the time, “With the funding, we also will be launching a new distribution channel later this year that is poised to disrupt traditional online travel agencies and set the stage for the next generation of travel agents.”

That new channel, called Benny, has yet to formally debut, but reports about it first surfaced in August, describing it as a “social travel agency.”

Illustrations: Thomas Fröling

GETTING INTO ADJACENT SPACES

Hotel companies are also becoming OTA-like in terms of what they can offer to guests, thanks to scale and entering into what Hyatt Hotels CEO Mark Hoplamazian has called “adjacent spaces” that complement their core hospitality business and also give consumers more opportunities and reasons to engage with a hotel company.

For Hyatt, those spaces have included alternative accommodations (with short-lived pilots with Onefinestay and Oasis), fitness/wellness (Hyatt bought boutique fitness chain Exhale in 2017), and offering experiences, or bookable tours and activities.

“Wellbeing is at the core of our purpose of care,” said Julia Vander Ploeg, Senior Vice President and Global Head of Digital for Hyatt. Vander Ploeg said Hyatt loyalty members can earn and redeem loyalty points at participating Exhale locations as well as through the FIND experience platform, “a curated and growing selection of over 200 unique, member-only experiences in more than 35 destinations around the world designed to positively impact World of Hyatt members’ wellbeing.”

For others, it might be offering short-term rentals, as Marriott is now with Homes & Villas by Marriott, or even getting into the co-working space, as Hoxton Hotels and Accor have.

The more experiences you can offer to your existing or potential customers, the better, the more stickiness you have and, hopefully, the more loyalty.

LEVELLING WITH LOYALTY

Loyalty programmes have been a mainstay in hotel playbooks for fighting back against the OTAs and enticing guests to book direct. Four years ago, the major hotel companies — Hilton, IHG and Marriott among them — waged what some described as a “direct booking war” against the OTAs by offering discounted room rates to members of their respective loyalty programmes.

Today, however, the conversation has shifted a bit, and instead of telling guests they’ll save when they book direct as a loyalty member, hotels are now telling them that they’ll also have an even better travel experience when they book direct.

Last year, Hilton launched a global marketing campaign, “Expect Better, Expect Hilton” that “was grounded in insights that revealed that many consumers view travel planning sceptically, and as a series of compromises,” said Patricia Page-Champion, Senior Vice President and Global Commercial Director for Hilton. “We really wanted to reassure travellers that booking direct with Hilton gets them the best deal through our price-match guarantee, as well as giving them extra perks.”

Those perks include free WiFi, Digital Key (opening your room with your own smartphone); the ability to choose your own room; and at some hotels, benefiting from Connected Rooms that let you control everything, from the temperature to the shades, with your own phone.

Since the campaign launched, Page-Champion said Hilton has seen “double-digit growth in brand consideration among leisure travellers who saw the TV advertisements.” She added, “Booking intent has increased nearly 10 percent among people who would normally book through third-party travel companies.” And membership numbers for the Hilton Honors loyalty programme have increased by 20 percent over the previous year to more than 100 million members.

Illustrations: Thomas Fröling

FLAUNTING THEIR ATTRIBUTES

For hotels, promising the best possible guest experience starts at the time of booking, before a guest even steps past their doors.

IHG and Marriott are employing attribute-based guest reservations systems that give users some control over the types of attributes they’d like in their rooms, such as the number of beds or bed types; balconies; distance from the elevator, etc.

Choosing certain attributes will generate searches that only show rooms that have that unique combination of features a guest wants so they can start customising their stay from the very beginning.

OTAs, too, will receive an initial set of very basic attributes that categorise the room inventories that they advertise on their platforms. But hotel brands like Marriott and IHG will retain control of the thousands of possible attributes and combinations that a guest can have, giving guests even more incentive to book direct with the hotel brand than with an OTA.

The OTAs can’t sell every attribute or every combination of attributes, but the hotel can. Once consumers get used to this type of customisation, they may be more likely to book direct than with OTAs.

This tactic, however, has limits for smaller hotel chains or independents who don’t have the resources to overhaul their guest reservations systems to offer this customisable booking experience.

USING OTAS TO THEIR ADVANTAGE

For independents – and even for the world’s largest hotel company – sometimes there’s a benefit in partnering with OTAs or at least leveraging their tech and marketing budgets to their advantage.

While the commission fees may be steeper, the net revenue made from bookings – without having to spend additional money on marketing and soft brand fees – could potentially be higher than if that independent joined a soft brand or flagged itself with a brand.

In recent years, OTAs like Booking Holdings and Expedia have increasingly offered more business tools and services for independent hotels, including but not limited to marketing. One example of this is Expedia Partner Central, which launched in 2016.

In some ways, both OTAs and major hotel conglomerates like Marriott and its peers are not just fighting for bookings from consumers, they’re fighting to win over independent hotel owners, too.

Last autumn, Marriott announced an exclusive partnership with Expedia, naming the OTA as its preferred global distributor of Marriott’s wholesale and promotional room rates, curtailing the power of another third-party distribution channel – bedbanks, such as HotelBeds, WebBeds and MG Bedbank. Since October, these bedbanks have had to work directly with Expedia Partner Solutions in order to have access to its more than 7,000 hotels worldwide.

TECH PLATFORMS FLEX THEIR MUSCLES 

Direct booking war or not, the truth is that hotels and OTAs fundamentally rely on one another in a number of ways.

A guest may book her room on an OTA, but once she checks into her hotel, it’s up to the hotel to give her the best hospitality – and hopefully convince her that for her next stay, she should book direct.

Modus Hotels CEO Aaron Katz told me, “If we pay 20 percent [in an OTA commission fee] to get a customer, that’s not an expensive way to get a loyal member into your organisation. You get that opportunity to turn that person into a loyal member of your organisation.”

And as vigilant as hotels are today about curbing disruption from OTAs, both hotels and OTAs have another disruptor they need to account for: tech platforms like Google and Amazon or even Facebook. We have already seen how Expedia has been compelled to use higher-cost Google Hotels rather than lower-cost organic channels such as Google Search – and caused their market share to fall.

Some independent hotels are advertising their rooms on Airbnb, because Airbnb’s commission structure can be more favourable than traditional OTAs in most instances. The increased competition is, in some ways, benefiting smaller, independent hoteliers. And it’s also impacting how the larger hotel companies strategize, too.

However, it should be noted, said Robert Cole, CEO of hospitality and travel technology consulting firm RockCheetah to GUEST magazine, “Google is not an OTA. It is simply the platform that connects travellers to the travel sellers.” Google, he said, benefits because it’s just the platform.

“Google is compensated for fulfilling the role of advertising platform, not as a travel seller or operator. This is a very high margin business, which appeals to Google shareholders – much more than owning/managing hotels or running a travel agency, online or otherwise.”

In other words, Google may not be as much of a direct threat to hotels as the online travel agencies such as Booking and Expedia are; it may, in fact, be hurting the OTAs much more than the hotels. But the work that these tech platforms like Google are doing are having an impact on how larger hotel companies strategize for the future.

At the NYU International Hospitality Industry Investment Conference in 2018, Marriott CEO Sorenson said, “I think we are in an absolute war for who owns the customer. It’s a long-term war, and ‘long term’ in digital space might be a few years. I think less about Airbnb than I do about Google and Facebook and all these other digital empires who own all of us.

What Amazon is doing with these digital assistants is reinventing voice search. They are all getting into having a profile for each and every one of our customers, so how do we use that to make sure we are monetising that relationship as much as we can? This is a battle we are going to be fighting for some time,” and he added, “Each of us is making our bets in this space.”

DEANNA TING, JOURNALIST

Deanna Ting is a New York-based business journalist who has covered the travel and hospitality industry for the past 14 years. Currently, she is the Senior Platforms Reporter at Digiday, reporting on the intersection of media, marketing and technology. Previously, she was the Senior Hospitality Editor at Skift, where she covered the global accommodations industry, from short-term rentals to hotels. In 2017, she authored the Complete Oral History of Boutique Hotels, covering the boutique hotel movement as it emerged in the USA in the 1980s through the early 2000s.

Deanna Ting, PR photo