Are hotels’ direct booking efforts really working? That was the question on many analysts’ minds during the first quarter earnings calls hosted by major U.S. hotel companies.
While Hilton and Marriott have been leading the charge to push for more direct bookings in an effort to take away market share from online travel agencies (OTAs) like Expedia and Booking.com, they’ve been joined in recent weeks by their fellow hotel competitors, including Hyatt, Wyndham, and Choice, to name a few.
Judging by their collective statements, it’s clear hotel CEOs aren’t going to stop their campaigns for more direct bookings any time soon, even if they’re quietly making arrangements to offer those exclusive lower rates to travel agents. Or even if the OTAs themselves are hoping to strike deals with them to offer those preferred lower rates, too.
Here’s what the hotel CEOs had to say, put into context with comments they’ve made previously about booking direct.
Hilton: Direct Bookings Are Working
In February, Hilton launched its largest global marketing campaign ever, called “Stop Clicking Around,” encouraging guests to become Hilton HHonors loyalty program members so they can secure the lowest possible room rates on Hilton.com or via the Hilton HHonors app.
Although, Hilton CEO Christopher Nassetta made some conciliatory remarks about the OTAs being Hilton’s “good partners” during the World Travel & Tourism Council’s Global Summit in April, he was much more confident about touting his company’s direct booking successes during the first quarter earnings call.
“Early results are very positive with HHonors enrollments increasing nearly 90% since launch, helping drive HHonors occupancy to a record 55% in the quarter, an increase of more than four points versus last year,” he said. “The business we’ve received through web direct is higher than it’s ever been and is growing faster than ever, thanks to increasing share shift. The share of web direct channels in our distribution mix is growing five times that of the OTA share growth in the quarter, and business generated from our mobile app is up nearly 150% year-over-year with downloads exceeding 70,000 a week, an increase of 200% over last year.”
Later in the earnings call, Nassetta said direct channels (referring specifically to Hilton.com and the Hilton app) accounted for 25 percent of Hilton’s business, while “OTAs are, plus or minus, 10 percent of our business.” He also added, “The direct channels are significantly larger than those channels and they are growing at a much faster pace.”
However, those figures Nassetta listed seem to veer widely from industry averages that usually peg OTAs as comprising at least 20 percent of a hotel company’s distribution business.
Marriott: It’s Too Soon to Tell
Although Marriott was the first big hotel company to enter the direct booking wars with its “#itpaystobookdirect” campaign from August 2015, the company hasn’t revealed many details about whether or not this campaign, or the company’s new Marriott Rewards Member Rates are translating into more market share and more bookings.
Marriott CEO Arne Sorenson said that, currently, 65 percent of transient room nights for Marriott are coming from Marriott Rewards members but because the new discounted rates for loyalty members are still fairly new (they debuted on April 4), it’s “too early to give you statistics.”
“The member-only rates that we rolled out are very new in the market,” Sorenson said. “We announced them about a month ago but they became effective a little bit after that. It’s still quite early and we have not put as many dollars into marketing those rates yet. Obviously, they are visible online and we’re doing some things. I think the early response has been positive but it’s too early to give you the kind of statistics that you’ve heard from some others who have been out there on market longer with us. We’ve obviously done it because we’re optimistic about this approach driving an increase in direct bookings and driving that much more awareness of the advantages of direct booking.”
Hyatt: This Is Helping Our Hotels
One of the claims made by OTAs is that these discounted member rates ultimately hurt individual property owners’ bottom lines, but Hyatt CEO Mark Hoplamazian said it’s quite the opposite with Hyatt’s approach to direct booking rates, which the company debuted in April.
To test whether or not the discounted loyalty rates would work, he says Hyatt embarked on a pilot program of select hotels and, thus far, results have been positive.
“We’ve been tracking a number of metrics over the last eight months, namely RevPAR index for the hotels in those respective markets. And we haven’t seen any impact. In fact, in several cases, index in individual hotels is up. So that was an important factor,” Hoplamazian said.