Deeming online travel agency fees too high, hotels turn to loyalty programs to push direct bookings.
Last week we launched the latest report in our Skift Research service, The State of Loyalty in Hospitality 2017.
Below is an excerpt from our Skift Research Report. Get the full report here to stay ahead of this trend.
While online travel agencies have been instrumental in helping attract new business to properties, hotels have a clear interest in reducing the true cost of guest acquisition, especially when it comes to repeat bookings. As we explored in-depth in our recent 2017 Outlook on Hotel Direct Booking, OTAs take between 10 and 15 percent of room rates in commission from large branded chains and between 15 and 25 percent for independent properties.
While OTAs are certainly a crucial part of the booking ecosystem, most hoteliers across property types agree that OTA fee structures are on the excessive side, with the majority of groups indicating that a commission rate of around six to 10 percent would be more “fair.”
Preview and Buy the Full Report
A big focus of many loyalty programs is to incentivize direct bookings, aiming to cut the true cost of acquisition. However, establishing what a true acquisition cost is can be challenging, particularly when vast amounts of marketing and ad spend are not counted as acquisition cost, but rather offset as a marketing/advertising expense. For example, Your Rate by IHG Rewards Club offers its members special rates, allowing them to get around price parity agreements with OTAs.
“There’s no question that a loyalty program is the most effective tool we have to defend ourselves against OTAs and the one problem we haven’t been able to solve, as an industry, is that the distribution costs keep rising, and there’s no end in sight,” says David Kong, CEO, Best Western. “I think next year we’ll see an even higher distribution cost for our hotels, so we have to offset that by producing more business through the brand channels, and the loyalty program is a good reason for people to book with a brand directly because, if they don’t, they won’t be able to earn points.”
Subscribe now to Skift Research Reports
This is the latest in a series of research reports, analyst calls, and data sheets aimed at analyzing the fault lines of disruption in travel. These reports are intended for the busy travel industry decision maker. Tap into the opinions and insights of our seasoned network of staffers and contributors. Over 200 hours of desk research, data collection, and/or analysis goes into each report.
After you subscribe, you will gain access to our entire vault of reports, analyst calls, and data sheets conducted on topics ranging from technology to marketing strategy to deep-dives on key travel brands. Reports are available online in a responsive design format, or you can also buy each report a la carte at a higher price.
Have a confidential tip for Skift? Get in touch
Photo credit: IHG Rewards Club InterContinental Hotels Group