TripAdvisor is slowly becoming for hotels a booking site alternative to Expedia and Booking.com. The economics are more attractive for hotel chains although they are helping to create a new powerhouse.
TripAdvisor landed a big fish in Marriott International and its 19 brands as an Instant Booking partner, and that leaves major online booking sites such as Expedia and Booking.com as increasingly isolated holdouts.
Under Instant Booking, TripAdvisor visitors can book hotels without leaving TripAdvisor sites or apps. The hotel partner pays a commission, usually 12% to 15%, and handles customer service and fulfillment in the background.
Marriott and TripAdvisor are calling their new alliance a strategic partnership, and Shafiq Khan, Marriott International’s senior vice president of channel strategy and distribution, said: “The result is mutually beneficial to both partners from a strategic and economic standpoint.”
With the deal, TripAdvisor gets increased conversions of lookers to bookers, especially on mobile, when it can have the hotel bookings taking place in its apps or on its sites instead of transferring leads in classic metasearch style to hotel websites. Marriott gets a new distribution channel that is considerably cheaper than working with an online travel agency and the higher commissions they demand.
Hotel chains, such as Marriott International, still would prefer to drive traffic directly to their websites and Evercore’s Ken Sena points out that travelers who book a Marriott property on TripAdvisor won’t earn Marriott loyalty points.
With the signing of Marriott, which is considered the third largest global hotel chain with more than 4,200 rooms, TripAdvisor now counts some of the largest global chains, including Best Western, Accor and Choice Hotels, among Instant Booking partners. Hilton Worldwide and Wyndham don’t participate.
In the first quarter of 2015, TripAdvisor CEO Stephen Kaufer said the company had about 20 Instant Booking partners live but the major online travel agencies have been notable nonparticipants because they don’t see it in their strategic interests to build up TripAdvisor as a competitor, and don’t necessarily like the economics and relative lack of branding when consumers select the book on TripAdvisor option.
Piper Jaffray analyst Michael Olson published a note stating that “substantially all Marriott properties are being included” in the Instant Booking partnership, meaning consumers will be able to book them on TripAdvisor starting this summer.
“We believe that, to the extent Tripadvisor can partner with major hotel chains, as the Instant Booking platform gains steam, this will put pressure on larger OTAs to join the platform,” Olson wrote.
UBS, in a research note, states that Marriott only gets bookings from online travel agencies in the mid- to high-teens as a percentage because the chain focuses on business travel.
“Over the longer term, further hotelier adoption (particularly by independents outside the U.S.) could help TripAdvisor evolve as a legitimate third option in the minds of hoteliers, potentially taking share away from Expedia and Priceline,” UBS wrote.
TripAdvisor shares skyrocketed nearly 14 percent to around $86.85 on the news in late afternoon June 17.
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Photo credit: Guests hanging out at a Courtyard by Marriott property (shown above). Courtyard is among the Marriott International brands that will be available for booking on TripAdvisor starting this summer. Courtyard by Marriott