The global operators used the recent results season to deny that the shift to leisure demand had made them more reliant on the online travel agents for business.
Glenn Fogel, president & CEO, Booking Holdings, commented that it was going to be “a little bit harder” for some of its partners to get “that very high ADR business person” and “they will be looking for someone like us”.
Fogel said that, for most of the hotels around the world: “They don't operate in the number of languages we do. They don't do the customer service in those languages. They don't have the sophisticated machine learning.” He added: “There's no hotel in the world discussing, well, I just don't want to do that. They've got to do that. And if there is a marginal benefit to go into another channel, use that too”.
Chris Nassetta, president & CEO, Hilton, acknowledged that the sector’s focus had turned to lower priced leisure demand - “the biggest bucket of demand” - which, he said, “would typically favour” OTAs, commenting that the company would have previously turned to the platforms to fulfil its needs.
IHG CEO Keith Barr also identified a “bit of a mix effect going on”, attributing it in the main to the leisure-heavy summer months coinciding with travel restrictions easing around the world, which, he said, "leans up into OTAs”.
Barr was unwilling to identify a trend, telling analysts: “It's hard to say that we've seen a material shift in channels to OTAs because [occupancy] volumes are so down now.
“There may be slight movements here or there, but is there a different trend? Customers are really liking booking direct. Many of them had some very bad experiences in the downturn where they hadn't booked direct and had used third parties and had very difficult times getting refunds and cancellations through those third parties.”
Prior to the pandemic the large global operators had been pushing the direct booking message with the aid of their loyalty programmes and Arne Sorenson, president & CEO, Marriott International, drew attention to the company’s 143 million members, which he said “underpins all our marketing strategies”. With a lack of hotel rooms to sell, Sorenson said: “We remain focused on engaging our members with targeted email campaigns, and various promotions; such as points accelerators on our co-brand credit cards for gas, dining and groceries; gift card discounts and our current Bonvoy boutiques is sweepstakes for items like bedding and robes”.
Back to the bucket of lower-priced leisure demand, with Nassetta describing “a different sort of population than we are used to, which is not to be judgmental, but a much lower price point”. This explanation was given when asked whether he was concerned about a rate race to the bottom, which he said was more likely to be down to this shift in mix than cutting ADR.
Looking to the demand for this bucket, Nassetta said that the OTA business had held “relatively constant” as the company had looked to drive direct bookings. He said: “We want to continue to build direct relationships with customers of all sorts, including these customers who we hope may not have been our typical customer before. Our direct channels are growing at a faster pace…because of our actions …how we are spending our marketing dollars and how we are orienting our Honors programmes to access that type of customer.”
The operators have looked to the loyalty programmes and direct-booking capabilities to attract owners, more so in recent months, where there was the hope that conversions would compensate for a fall-off in pipelines.
Geoff Ballotti, Wyndham Hotels CEO, said that the company was looking to drive increased occupancy through its Wyndham Rewards programme, in turn “lowering the amount of rooms they are getting through an OTA at a much lower contribution”.
Insight: As Keith Barr said, these are early days and with few people staying in hotels, how they got there is almost by the by - except it isn’t. With the move to asset light, the operators now live and die by what they can bring through the door.
As markets start to reopen and travel increases, the numbers of travellers - and the recovery in what they will pay - will not return to 2019 levels until, well, take your pick. Anything up to 2024 is the latest hope. What can be forecast is that owners will look to pay as little as possible to fill rooms and operators and OTAs will fight to prove that the offer the cheapest option.
After years of being terrified by talk of 25% commission at the OTAs, this would seem an easy pick. But, with the typical traveller in a cheaper bucket, can the operators switch to a new target quickly? Many of them admitted that the loyalty programmes were costly - but that they also promised a customer for a lifestyle, cheaper in the long run. Can owners see out this long run?
We featured a letter this week from an advisory group for franchisees looking for greater help from the OTAs and you won’t need your crystal ball to predict that those who voted in the poll at the close would rather like more help, please. We are all, after all, in this together. Or that is the hope.