Boutique may work when it comes to a relatively small business and finding a nice hotel room for the night, but the biggest travel companies, such as Expedia and Marriott, need to get bigger to keep up with the competitive pack.
Expedia and Marriott are only the latest examples of company strategies highlighting the advantages of being big — really big.
Politics aside, they both want to be “yuge.”
In Expedia’s investor day presentation last week, in which the company touted the 1.5 million hotel rooms and vacation rentals it offers on its Expedia/HomeAway platforms, CEO Dara Khosrowshahi explained how adding hotel supply to a given destination enhances conversion.
When Expedia transforms a destination on its sites from 25 percent hotel coverage to 50 percent, conversion usually doubles, he said.
Expedia has been doing everything it can, from investing in its platforms to adding account managers and lowering commissions over the past couple of years, to speed up the on-boarding of new properties.
In its investor slide below, “Scale advantages in supply,” Expedia shows how its efforts to add hotels have sped up from just 15,000 new additions in 2011 to 73,000 in 2015. Having more than 3,000 employees in its Lodging Partner Services team doesn’t hurt the effort nor do business model changes such as the lower commissions and the addition of a pay at the hotel option for consumers and properties.
Expedia and Booking.com, which realizes the scale advantages of highly efficient conversions on its sites and the consequent ability to plow revenue back into sales and marketing, are on a multi-year journey to corral as much lodging supply as possible.
On a smaller scale, deal-publisher Travelzoo, which has been trying to evolve into a hotel-booking site, has realized over the last year or so that offering just a few hotels in a given destination just doesn’t work. Travelers want choice and comprehensiveness or they will search elsewhere.
There’s a lot of talk, too, that Airbnb is increasingly looking to work with hotels, instead of just alternative accommodations, because it too realizes that comprehensiveness wins.
Marriott Likes Bigness
On the hotel chain front, Marriott’s on again, off again, on again acquisition of Starwood is largely about scale. The combined entity would feature 5,700 hotels and 1.1 million rooms in more than 100 countries, and synergies could generate $250 million in cost savings.
Although Marriott-Starwood would be expected to eliminate some brands they would begin their journey with 30 of them.
Importantly, Marriott, as have Hilton Worldwide and others, has embarked on a campaign to take bookings away from big online travel agencies such as Expedia and Booking.com in favor of processing them on Marriott’s own websites.
Getting bigger gives Marriott more leverage against the online travel agencies, and that’s one reason it partnered last year with TripAdvisor in its Instant Booking program.
In Marriott’s conference call with analysts and investor presentation yesterday to outline its latest bid to acquire Starwood, the chain emphasized how the merger would deliver new clout to the combined companies.
“Enhanced loyalty programs will increase access to new customers, create opportunities for new partnerships, and provide greater competiveness in the digital marketplace,” Marriott stated.
Boutique may work when it comes to a relatively small business and finding a nice hotel room for the night, but the biggest travel companies need to get bigger to keep up with the competitive pack.
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Photo credit: The rich are getting richer when it comes to big travel companies such as Marriott and Expedia flexing their bigness. Pictured here a Marriott in Lima, Peru. Walter Bakker / Flickr