Hilton's decision to enroll in TripAdvisor Instant Booking while the chain is dedicating huge resources into convincing consumers to book direct on Hilton sites is an admission that it needs third-party distributors. TripAdvisor is a favored partner for the moment because it's cheaper than Expedia and the Priceline Group for the chain.
Hilton has been a holdout, along with InterContinental Hotels Group, in jumping into TripAdvisor’s booking program Instant Booking, but is now on board with its 13 brands.
Is it a sign of weakness for the major chain?
The two companies, Hilton and TripAdvisor, announced today that Hilton’s brands, ranging from Embassy Suites to Hilton Garden Inn and Waldorf Astoria, would be joining the program early this year.
With Instant Booking, TripAdvisor and partners share the customer. The booking takes place on TripAdvisor sites or in its apps but Hilton gets branding on TripAdvisor, and handles the transaction and customer service.
For Hilton, TripAdvisor Instant Booking is a way to attract incremental bookings at commission costs that are lower than it has to pay to online travel agencies such as Expedia and the Priceline Group.
Hilton’s decision to sign-on to TripAdvisor immediately raises the question as to whether this signifies weakness in the hotel chain’s direct-booking campaign, which revolves around its “Stop Clicking Around” messaging. Consumers can get lower rates if they join HiltonHonors and book on Hilton.com.
TripAdvisor launched Instant Booking well over two years ago and although brands, including Marriott, Starwood, Best Western, Wyndham, Hyatt, Accor and La Quinta have all enlisted, Hilton and InterContinental Hotels Group have been notable exceptions.
Does it expose a weakness for Hilton?
So Hilton’s decision to sign on immediately raises the question as to whether this signifies weakness in its direct-booking campaign, which revolves around “Stop Clicking Around” messaging.
Michael Olson, senior research analyst at financial services firm PiperJaffray, wouldn’t comment on Hilton in particular, but believes the major chains’ direct-booking campaigns aren’t achieving their hoped-for goals.
“We believe the efforts of the hotel chains to drive more direct traffic have not been met with great success and the fact that nine out of the top 10 hotel chains are now on Instant Book is another sign that this is the case,” Olson tells Skift. “Each hotel chain and OTA (online travel agency) that participates on Instant Book provides TripAdvisor with incremental inventory and more entities competing for the Instant Book slot.”
Separately, in a note to investors this morning, Olson expressed confidence in the trajectory of TripAdvisor Instant Booking while acknowledging that the rollout has faced headwinds.
“The roll-out of Instant Book has clearly not been seamless for the company (or investors), but the trajectory of IB is improving, and we continue to believe it will lead to higher hotel shopper monetization and create stronger long-term economics for the company,” Olso wrote. PiperJaffray maintains a price target of $70 per share for TripAdvisor.
Hilton’s direct campaign has brought its highest Web-direct booking share, 28 percent, in its history as of the third quarter and spurred a 60 percent increase year over year in loyalty sign-ups. While Hilton publicly says the campaign has been working well there are questions about whether the drive has negatively impacted revenue per available room — because of the loyalty member discounts — and top-line growth because of a reduced presence on online travel agency sites.
Danny Hughes, senior vice president and commercial director at Hilton, took a slightly veiled shot at distribution through online travel agencies in the TripAdvisor Instant Booking announcement.
“At Hilton, we’re always reimagining the experience for our guests and looking for new ways to make travel easier,” Hughes said. “We are committed to working with booking partners, like TripAdvisor, who respect our desire to develop direct relationships with our guests, present our hotels in a fair and equitable manner, and increase the value of both our brands.”
The clear implication is that online travel agencies such as Expedia have no such commitments. Expedia has reduced Hilton’s exposure on Expedia sites because of Hilton’s direct-booking campaign.
Marketing and Distribution are Complex Endeavors
Hilton’s decision to join TripAdvisor Instant Booking doesn’t necessarily mean that the chain’s direct-booking campaign is in the tank.
It could just mean that Hilton has crunched the numbers and determined that its return on investment overall will be enhanced by joining this TripAdvisor booking program. Perhaps TripAdvisor made Hilton an offer it was hard-pressed to refuse or that Hilton will adjust its exposure in other channels to make its distribution strategy more efficient.
We should learn more about the context of Hilton joining TripAdvisor Instant Booking when the chain reports its full year 2016 and fourth quarter financial results in the next few weeks.
Impact on TripAdvisor
Enlisting Hilton means TripAdvisor gets more comprehensive with access to Hilton’s 789,000 rooms across 104 countries. Hilton, of course, was already a TripAdvisor marketing partner but now it will let TripAdvisor users book Hilton rooms on TripAdvisor as an alternative to linking to Hilton sites.
The Hilton-TripAdvisor Instant Booking announcement comes as TripAdvisor has started implementing Expedia as a booking partner over the last few weeks. The Priceline Group’s online travel agencies are also major partners.
TripAdvisor has made tremendous headway in signing up a majority of the important hotel chains and online travel agencies that it needed to enroll in Instant Booking. Now it just has to prove that consumers indeed can be convinced to book on TripAdvisor instead of just looking to it for user reviews.
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Photo credit: Guests who want to stay at the Hilton Hotel in McLean, Virginia, where 'Connie,' a robot concierge is in play, will soon be able to book a room there on TripAdvisor. Hilton