It’s going to happen – eventually.
As many of the major hotel chains have begun to offer loyalty program members who book directly on their own websites lower rates than they distribute to online travel agency and metasearch sites, as well as traditional travel agencies, the pleas for change are already mounting.
And on Thursday TripAdvisor CEO Stephen Kaufer gave notice that he would like those special hotel rates and can envision a model where he can get them.
Why A Few Bucks or Euros Here and There Is So Important
These direct-booking rates from hotels for loyalty program members usually amount to a mere few dollars in savings – perhaps a $208 nightly rate for two double beds instead of $212 – but it’s apparent from the history of online travel and distribution that such discounts can be very meaningful in triggering share shift.
That’s why online travel agencies such as Priceline.com, for example, began eliminating booking fees for airline tickets in 2007 because the pricing difference was pushing travelers to book on airline sites instead.
Online travel agencies and metasearch engines today desperately want to get access to these lower rates from hotels. If you look at hotel pricing in TripAdvisor, Kayak and Google, there are indeed pricing differences but so many times all of the distributors are providing the same hotel rates.
If TripAdvisor can offer a rate for the Holiday Inn in Chicago from Holiday Inn that’s $3 lower than Expedia or Booking.com is offering for the same property, then that’s meaningful and will eventually draw more consumers to TripAdvisor as the place to find the lowest rates.
So with their book-direct rates, major chains such as Hilton, Marriott, Hyatt, InterContinental and Choice are making a very strategic move to finally stamp their feet and win back share from the online travel agencies.
Why share revenue when you can win these customers on your own?
George Harrison Knew All Things Must Pass
But it won’t stay this way forever – the online travel agencies and metasearch engines have too much market power and too many tools at their disposal.
One of the major chains told me it is already talking to traditional travel agencies about giving them the chain’s direct-only rates although the chain has not had discussions with online travel agencies or metasearch sites about it.
I’m not saying that Expedia, Booking.com, TripAdvisor or Kayak will get access to hotels’ special rates in 2016 or that it will be an avalanche of third-party distribution – but eventually the boycott will break.
Do You Remember Airlines’ Web-Only Fares?
For example, who remembers airlines’ Web-only fares?
These were special fares in the early 2000s that many airlines offered on their own websites only? For a couple of years, Orbitz.com was the only online travel agency to get access to them because major U.S. airlines owned Orbitz.
This was a big issue with antitrust implications. On a Wednesday or a Thursday perhaps, airlines would send out emails or promotional advertising informing travelers that they could purchase discounted fares that day on airline websites — fares that you couldn’t find on Travelocity, Expedia or ebookers, for instance.
But in 2002, Sabre signed a full-content agreement with US Airways that began to put an end to it all as Galileo, Worldspan and Amadeus and the other airlines followed. In exchange for lower booking fees from the global distribution systems, the airlines agreed to give them basically all of their fares, including those that were heretofore Web-only.
One or two of the chains – or perhaps more – will eventually make a deal with Expedia, Booking.com, TripAdvisor or Google to provide them with the hotels’ book-direct rates in exchange for reduced commissions or other marketing/promotional advantages.
One of the chains is already talking to traditional travel agents about it.
Choice Hotels officials signaled as much Thursday when the they discussed the chain’s recent move to provide lower rates to loyalty program members who book direct.
Joyce said he has nothing against the online travel agencies as distribution partners in theory but they have to provide more services and at lower price points to make such partnerships advantageous for Choice.
Choice CFO David White chimed in, as well: ““So look, we openly welcome them [OTAs] as a channel,” White 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.”
Every person – and every hotel chain – has a price.
Expedia is already experimenting with new models to entice hotel distribution, including even powering hotels’ direct-booking efforts, in this new era. These new models, such as linking off from Expedia to hotel chains metasearch-style, coupled with substantially lower commissions, could be enough eventually to tip the balance.
Just wait and see.