The saying goes, “Misery loves company.” This cultural expression is based on the concept that people who are unhappy may get some consolation from knowing that others are unhappy as well. Does this adage apply to our hotel industry? It appears so!
Now, some ten years after the advent of the OTA, hoteliers seem to be finally awakening to the fact that operating hotels with this arduous booking commission structure is a burden they can no longer withstand.
Most hoteliers love the bookings the OTAs deliver, though. It’s great ‘billboard’ advertising, and these channels are great for offloading unsold inventory. Hoteliers just can’t stomach the fact that these bookings come with such a huge cost, both directly off the gross via commissions as well as indirectly through the concurrent changes to consumer purchase pathways.
Increasingly, we are starting to embrace different ways of looking at our business model in an attempt to cast a brighter light on the cost structure of various channel segments. As I have long advocated, by-segment ADR data that does not reflect the full cost of delivering those rooms will lead to bad judgement. Senior executives need to have a better grip on the actual costs of converting that guest to book their properties, as no two channels have the same reservation cost structure.
Having now identified that indeed business derived from the OTAs has a lower ‘Net ADR’ (that is, room price less commission paid to the selling agent) than booking via the brand.com, corporate hotel management is now starting to seriously examine methods of stimulating demand for the lower cost direct sales channels. And not surprisingly, they’re tapping their marketing expertise to educate consumers on best rate guarantee and to communicate the benefits of booking direct.
One such campaign that has emerged recently has been a campaign by Hilton. Entitled, Stop Clicking Around, you can view the impressive video advertisement here. Backed by a Rolling Stones Satisfaction soundtrack, this is a big budget production. Kudos to their team and agency!
But as anyone in the marketing department knows, creative development is only half the battle. Messages require both reach and frequency to gain broad awareness amongst the desired target audience. To build a great advert and leave it to YouTube for the heavy lifting is a slow and, at best, limp-wristed approach.
Take as a counterexample the ‘Trivago Guy’. You can picture what I can talking about just by mentioning these two words! That immediate recognition did not materialize from a one-off digital video posting. To build strong levels of memorable communication requires a very deep pocketbook.
I’ve read that the OTAs are now collectively spending about $34 million per day in advertising. Remember, this is media spending that is coming from your commission payments! Additionally, a recent report cited that Dara Khosrowshahi, the CEO of Expedia, took home a total page package of $93.6 million, up by nearly ten times from his compensation two years ago. Clearly, they’re doing something right…and by ‘something’ I mean everything.
So, if the hotel empire is going to strike back against the OTA onslaught, it is going to take more than just one or two forays into the advertising galaxy. While Hilton’s campaign is commendable, this cold war will require a unilateral effort if we are to stand any chance of winning.
About the author
One of the world’s most published writers in hospitality, Larry Mogelonsky is the owner of Hotel Mogel Consulting Limited and founder of LMA Communications Inc., an award-winning marketing agency based in Toronto. His experience encompasses hotel properties around the world, both branded and independent, and ranging from luxury and boutique to select-service. Larry is also a principal of Cayuga Hospitality Consultants and is on several boards for companies focused on hotel technology. His work includes three books “Are You an Ostrich or a Llama?” (2012), “Llamas Rule” (2013) and “Hotel Llama” (2015). You can reach Larry at larry@lma.ca to discuss hotel business challenges or to book speaking engagements.
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