In the age of the Internet, the rise in third-party online booking services such as Expedia, Priceline, Trivago, and others have been instrumental in not only allowing people to travel at more affordable rates, but in giving them complete information on what hotels offer the best prices and service, and which places to avoid. Chris Kirkham of The Wall Street Journal writes that “Sites such as Expedia and Priceline were crucial for hotels during down periods such as after 9/11, but they have gradually eaten into the share of overall bookings ever since.” This has caused a sort of “turf war” as Kirkham describes it, in which major hotel chains such as Choice, Hilton, Mariott, and others are now encouraging potential consumers to book directly through their sites rather than via third-party booking sites like Travelocity and Expedia.
This war is due to a competitively symbiotic relationship between hotels and booking sites. Hotel chains need the volume of reservations that third-party booking sites provide, but booking sites take a commission of up to 30 percent for every reservation made. This is money that the hotel operators themselves do not receive. With more and more travelers making reservations through these sites, big brands in the hospitality industry are looking at new ways to attract customers. Recently, hotel chains have seen what they call “customer acquisitions costs” increase dramatically, meaning that, due to more competition with online booking sites, hotels are having to work harder to keep customers coming back to their hotels. These costs, according to hotel data analysis firm Kalibri Labs, have, “risen from five to 10 percent of guest-paid revenue in the 1990s to 15 to 25 percent in the U.S., and higher in other regions, in 2016.”
Hotel chains, whose marketing budgets pale in comparison to their third-party counterparts, are using different tactics in an attempt to claw back business. These include advertising campaigns such as Hilton’s “Stop Clicking Around” initiative, or Choice Hotels International’s, “Badda Book. Badda Boom.” campaign. Drew FitzGerald of The Wall Street Journal writes that:
“The chains have started offering exclusive discounts as high as 25% this year to members of their loyalty programs who book through the hotels’ websites, a bid to avoid double-digit commissions charged to the hotels by online travel agents, such as Expedia Inc. and Priceline Group Inc.”
However, these hotels only offer these often substantially lower rates to members of their rewards programs, meaning that they do not have to extend the same rates to online booking agencies. Many hotels now do not even offer rewards points to guests that do not book directly through their sites. In this way, many hotels are pushing brand loyalty and increasing the perks that their respective loyalty programs offer. Priceline and other booking sites, according to FitzGerald, have, in response, started pushing those loyalty-discount-based hotels’ results lower on their websites.
Aaron Kessler and Julie Weed of the New York Times mention that, with Expedia now in control of roughly 75 percent of the domestic third-party online booking market due to a merger, consumer advocates and regulators are concerned. The Federal Trade Commission (FTC) has even warned consumers in the past of deceptive, third-party booking sites that appear to represent a hotel. These sites may charge customers undisclosed fees or a higher rate or not even reserving rooms and, according to the American Hotel and Lodging Association, these 3rd party booking scams affect more than 15 million bookings a year. While there are certainly reputable sites that are excellent at catering to price-sensitive travelers, third-party booking scams are a serious issue, and false bookings cost well over $1 billion annually.
What this means for consumers is that it may be time to consider examining a particular hotel chain and seeing if their loyalty rewards programs are worth investing your time in. Promotional discounted rates could be anywhere from two to 25 percent or more, depending on what hotel chain is offering what discount at the time. In addition to the myriad of other perks that these programs offer, Cindy Green of Kalibri Labs points out that there are considerable benefits for hotels to consider, such as improved guest relations, the ability to make last-minute changes to a stay, and increased reservation personalization. These advantages, in addition to the lower rates offered by loyalty rewards programs, make these programs even more attractive. Regardless of what lodging solution consumers use, whether that is a hotel, booking site, or even hotel alternative like Airbnb, consumers should carefully weigh their options to ensure that they are getting the most out of their money.
“Hotels Turn to ‘Member’ Discounts to Battle Travel Websites” (Drew FitzGerald, The Wall Street Journal)
“Hotels Fight Back Against Sites Like Expedia and Priceline” (Aaron Kessler and Julie Weed, The New York Times)
“Book Direct: The Numbers Tell the Story” (Cindy Green, Kalibri Labs)