Growth may be small at this stage but it shows that IHG is making some inroads into cutting its dependency on online travel agencies.
InterContinental Hotels Group’s (IHG) latest attempt to wrestle back some control from online travel agencies is proving a hit with customers.
Earlier this year, the British firm rolled out a new scheme offering exclusive rates for members of its IHG Rewards Club loyalty program.
Having debuted in Europe and the Americas, the Your Rate plan is now available in 4,500 properties across all the company’s regions, apart from Greater China.
During an earnings call with analysts, following the release of IHG’s half-year results, Chief Executive Officer Richard Solomons talked about the initial success the scheme had had in driving direct bookings versus those on online travel agencies (OTAs).
“We continue to utilize the OTA channel where it can create incremental, profitable business for our hotels. It is a relatively expensive channel but it can be an efficient way for us to access price sensitive, brand agnostic leisure guests. However, the cheapest most effective route to market is generally via our direct channels and Your Rate provides us with the opportunity to strengthen or create that direct relationship with guests,” Solomons said.
Since the launch of Your Rate in May, direct website growth has improved by 2 percentage points. During the same time period OTA growth dropped by the same amount. IHG’s attempt to increase its proportion of direct bookings followed similar moves by rivals Marriott, Hilton, and Hyatt.
Loosening the reliance on OTAs is attractive to hotel companies because they can have a closer relationship with the person making the booking and don’t have to pay out as much commission.
Despite the fact that IHG is attempting to push more consumers to book through its direct channels, Solomons stressed to analysts that it wasn’t quite the fight that some had described it as.
“Some of this has been reported as a sort of battle with the OTAs, it really isn’t that. It really is about trying to optimize the channel mix and, as I said, we’re very happy with our OTA business but it is an expensive channel. So for the right circumstances it works but other than that direct is much better for our owners, much more profitable for hotels, and does enable us to build up these relationships with guests, which is very important over time. That loyalty, having engaged guests, is a big piece of how we add value to our owners,” Solomons said.
In its results for the six months to the end of June 2016, IHG reported a 2.1 percent rise in operating profit before exceptional items to $344 million. Revenue fell by 8.4 percent to $838 million following the sale of a number of owned hotels in the prior year.
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Photo credit: IHG's Rewards Club card. The company is talking up the success of its latest loyalty initiative. InterContinental Hotels Group