Your move, Expedia and Priceline.
Like just about every other hotel company out there, including Hilton, Marriott, Hyatt, InterContinental, and Wyndham, Choice Hotels International is also looking to push more direct bookings among its loyalty members to take back market share from third-party distribution channels, namely online travel agencies (OTAs) that include Expedia and Booking.com.
The Rockville, Maryland-based parent company of such brands as Ascend Hotel Collection, Comfort Inn, Cambria hotels & suites, and Econo Lodge, isn’t afraid to step into the direct booking wars. That was made explicitly clear by remarks made by CEO Stephen P. Joyce and CFO David White during a first quarter earnings call on May 4.
CFO White said “more traditional channels” are driving the company’s gains in earnings per share, and said that although “OTAs continued to grow as part of our business,” the company is “not happy with the price points that they want.”
White said, “You’re going to continue to see us try to drive business to our channels simply because they’re dramatically more profitable than an OTA trying to suck 15% to 20% out of the deal. And so we’re not anti-OTA, but we are not at all happy with some of their practices and we’ve never been happy with their pricing. We think it’s overrated for what they provide. And so as we look at this going forward, one of our sole missions is to try to limit the amount of activity going from the OTAs and coming from into our primary channels. And if you look around the industry, everybody else is doing the same thing.”
“So look, we openly welcome them [OTAs] as a channel,” he said. “We just want it to be priced appropriately and with a business relationship that makes sense for us, but we are going to continue to drive our business and our proprietary channels, because that creates the strongest loyalty loop with the customer and because that they’re most profitable for us.”
In his prepared remarks, CEO Stephen P. Joyce noted that ChoiceHotels.com generates the largest share of the company’s revenue on its distribution channels. Thanks to direct mobile app bookings, Choice saw a 17% increase in revenue for the first quarter of 2016 compared to the same period last year.
Enrollments in Choice Privileges are also up 63% from the first quarter of 2015, totaling more than 26 million members. Activity among existing members, Joyce noted, is also up 17% compared to last year.
So, will Choice launch an advertising campaign to encourage guests to book direct as competitors like Hilton and Marriott have? Maybe, Joyce suggested.
“We are very encouraged by what the other brand companies are doing in terms of the marketing activities and everything else that they’re doing to drive customers back to proprietary sites, because that’s good for the industry, it’s good for our owners or franchisees, and all the hotel companies,” he said. “So you’ll see us very much in the same state. Obviously, we do things our ways, so you’ll see us take a different turn on things. But we are very much supportive of that movement and we will be a major player as part of it.”
Entering the $23 Billion Vacation Rental Market
In addition to driving more direct bookings, the company is also focused on growing its new vacation rentals business in a market estimated to be valued at $23 billion.
In February, the company launched Vacation Rentals by Choice. Unlike other vacation rental platforms, however, Choice is working strictly with vacation rental management companies and not individual property owners, although it hasn’t ruled out that possibility. Guests who stay at the rentals are also able to earn and redeem points through the Choice Privileges loyalty program.
Joyce said, “We recognize the changing dynamics in the hospitality industry and the types of travel consumers now desire. It’s that progression that led us to launch this new product, which includes both a fee-for-service technology platform and a fee-based franchising arrangement.”
This arrangement, Joyce hopes, will benefit vacation rental management companies by giving them access to Choice’s customers, and that it will benefit guests who “will appreciate the reliability of a major national brand.” He said, “Our goal with Vacation Rentals by Choice Hotels is to bring a new level of quality and service to this emerging segment of the lodging industry.”
Currently, Choice’s vacation rentals business operates in eight domestic locations, including Orlando, Aspen, and Phoenix, and the company hopes to add more locations and vacation rental management companies going forward. Joyce said, “While we’re currently investing in this endeavor, we expect it to turn positive within the next 12 to 18 months.”
Photo credit: A rendering of a guest room at Choice Hotels' Cambria hotels & suites Chicago - Magnificent Mile, set to open in 2017. Choice Hotels International / Choice Hotels International