A new report published by research firm Piper Jaffray suggests it doesn’t necessarily pay to book direct with hotels instead of with an online travel agency (OTA) such as Expedia or Booking.com, or a metasearch site such as Kayak or Trivago.
Analysts looked at hotels from the top four hotel chains (InterContinental Hotels Group, Marriott International, Hilton, and Wyndham Hotel Group) in the largest 25 cities worldwide and found that booking direct on a hotel’s website was a less expensive booking option for only 14 percent of the hotels in the sample.
There were more instances (21 percent) in which an OTA or metasearch site had a lower price for a room. The majority of hotels in the sample (66 percent) had the same listed price on OTA, metasearch, and brand.com websites. This means that 34 percent of hotels included in the sample had inconsistent pricing across different channels. In cases when an OTA/metasearch website offered cheaper prices, the price was less expensive by 4.2 percent on average, versus hotel direct websites averaging a 3.8-percent lower price.
|Least Expensive Booking Option||No. Of Hotels||% of Hotels||Average % Price Below Others|
|*In 14 cases, one of the hotel chains did not have hotels in the cities included in the sample|
|Source: Piper Jaffray and Company Websites|
“I would have expected the percentage of hotels with same price to be higher across all channels,” said Michael J. Olson, senior research analyst for Piper Jaffray and co-author of the report. “I would have expected in most cases where it was a lower price, it would have been directly from the hotel.”
Olson and his colleague, research analyst Yung Kim, wrote: “We believe these results provide further evidence as to why consumers will not begin to shift towards hotel direct as a primary booking option, despite increased marketing resources, loyalty efforts, and product enhancements that the hotel chains have attempted to put in place.”
The analysts also noted that Priceline and Expedia, the two largest online travel agencies, only account for an approximate 10 percent of worldwide travel bookings (including not just hotels but flights, etc.).
Piper Jaffray’s Methodology
In total, Piper Jaffray found prices for 86 hotels worldwide on both hotel websites and from OTA/metasearch websites. For comparison purposes, the analysts compared regular/flexible rate prices (rates that include free cancellations versus non-refundable prices) between the hotel direct site and the OTA/metasearch site. The metasearch and online booking sites included in this study were Priceline.com, Booking.com, Expedia, TripAdvisor, and Kayak.
“In order to ensure we didn’t have any bias around it, we took the top 25 cities in terms of largest global cities,” Olson said. “We randomly chose the hotels within one of those four hotel chains within each city. We stuck to that formula.” Olson also said all the rooms chosen for price comparisons were for the same room types with the same cancellation policies and the same date (October 23, 2017).
However, it’s important to note that Piper Jaffray did not consider discounted loyalty member rates in their comparisons. Olson said they decided to just compare “normal rates to make it apples to apples, as if this were a normal, everyday consumer booking a trip without any points or loyalty status.”
Some chains, including Marriott and Hilton, however, do offer discounted room rates for loyalty members who book directly on their brand.com sites, and those rates were the centerpieces of various hotel direct booking campaigns.
Hotels and Direct Booking Pushes
In the past year, the major global hotel chains, including Hilton, Marriott, InterContinental Hotels Group, Hyatt Hotels & Resorts, and Choice Hotels, among others, have launched a variety of different initiatives and campaigns designed to encourage consumers to book direct, as well as join their respective loyalty programs if they haven’t already.
The most prominent of these campaigns was Hilton’s “Stop Clicking Around” campaign, which debuted in February 2016. In May, Hilton reported that its efforts to drive more direct bookings and increase loyalty membership appeared to be working: Web-direct business accounted for 30 percent of Hilton’s bookings in the first quarter, “the highest level ever,” according to Hilton CEO Christopher Nassetta, and is now the “fastest-growing channel, up 200 basis points year-over-year.”
Skift reached out to Hilton and Marriott International about the findings of Piper Jaffray’s report. Marriott International issued the following statement: “While we can’t speak to the validity of this report, direct booking continues to be the best way that Marriott loyalty members are guaranteed the lowest rate, with benefits and services at one of our hotels.”
Hilton’s executive vice president and chief commercial officer Chris Silcock said, “We appreciate the invitation to comment on the report, but can’t really speak to its methodology. However, we are confident that Hilton Honors members who book direct, not only get a better price — every day at every hotel — but also a better and more personalized experience, with unique features like chose your room and digital check in, digital key, Hilton Honors points, and free Wi-Fi.”
The tension between online travel agencies and hotel companies is one that has existed for quite some time, and it doesn’t seem to be ending anytime soon — along with hotels’ efforts to encourage more direct bookings.
Hyatt, for one, is currently engaged in contentious contract negotiations with Expedia. In an effort to gain leverage, Hyatt quietly signed a new and restructured distribution agreement with Expedia’s main competitor, Booking.com, in early June. It also contacted its property owners, informing them that the company may withdraw all of its listings from Expedia in the event that no new agreement is reached. Hyatt and Expedia have until July 31 to negotiate new contracts with one another.
In June, Skift also spoke to various hotel executives and CEOs to ask them for their thoughts on direct booking pushes. Some, like Choice Hotels’ CEO Stephen Joyce, remained bullish.
Joyce told Skift: “I think we’re finally in a position where we’re going to start eliminating the misperception, on the consumers’ part, that the lowest rates available are anywhere else other than ChoiceHotels.com, and we’re making really strong headway because we can see it in the numbers.”
He added: “For the first time in a long time, our proprietary growth rate is higher than the OTA growth rate, and we think we’re in a position to actually shrink the OTA contributions. Not that we don’t want the OTAs.”
Red Lion Hotels Corporation (RLHC), on the other hand, is working directly with booking sites by offering its member-only rates on Expedia.com and Hotels.com. RLHC CMO Bill Linehan told Skift his company saw its customer acquisition increase since announcing its partnership with Expedia in August 2016.
“You know, consumers click around,” Linehan said, adding that trying to change consumer behavior — to shift travelers away from booking on sites like Expedia or Booking.com — is in some ways futile. “In fact, there’s a recent study that, particularly for leisure travel, 45 days out from their travel, [consumers] click around 140 times,” Linehan said. “That’s a lot of clicking around. This information is available to us on multiple devices and every place we are all the time. Recognizing that an OTA is where consumers go to book, isn’t that a mass-market merchant marketplace? As a marketer, it’s my job to make certain that we’re in that mass-market marketplace, and that we stand out from the crowd in that mass-market marketplace.”
Linehan’s statement about consumer online travel booking behavior is backed up by recent research also published by Piper Jaffray. Its recent survey of 1,000 consumers showed that more travelers are beginning their booking process online, fewer are booking directly on hotel websites, and Priceline is gaining market share in the U.S. while Expedia is stable.
Both reports suggest that if hotels want more direct bookings, they’ll need to do more to ensure that customers are educated about the potential benefits of booking direct and becoming a member of their loyalty programs to have access to loyalty rates that are actually cheaper than the rates being advertised on OTAs and metasearch sites.
“As long as there are inconsistencies in pricing across channels and OTAs are periodically offering a lower price, that’s going to keep consumers wanting to check multiple sites before they book,” said Olson, the Piper Jaffray analyst. “Which means OTAs remain a critical component of the consumer travel booking process.”