Exploring symbiotic relationship between hotels, OTAs

SINGAPORE — In the dance between hotels and online travel agencies (OTAs), there’s a careful balance between hotel companies enjoying the marketing involved in driving customers to their properties and the desire to capture those customers and book them directly going forward.

Choe Peng Su, CEO of Singapore-based Pan Pacific Hotels Group and Laura Houldsworth, managing director and vice president of Asia Pacific for Booking.com, had a “Face Off: Friends, Foes or Fancy Partners” conversation at the Web in Travel (WiT) event in Singapore last week that ranged on topics from loyalty programs to pricing sensitivity.

Houldsworth shared Booking.com internal research about how often their customers will book the same property twice. The answer was only 2%.

“So, with that in mind, why do you think so many of our chains, including yourself, would prefer a book-direct strategy?” she asked.

Su said it’s easy for booking.com, which has $20 billion-plus in annual revenue, to think of that 2% as a “drop in the ocean,” but he pointed out that if you aggregate all of the OTA bookings together, it can amount of almost 30% to 40% of the entire hotel sector and as much as 15,000-20,000 room nights.

“Hotels want to go direct booking because we want to keep our loyal customers,” Su said, mentioning that Booking.com certainly isn’t going to share its database with hotel companies. “With direct booking… we get to keep our database, we get to talk to our customers and we get to enhance their experience.”

Su mentioned an example of Pan Pacific’s loyalty program that, once customers reach the platinum or titanium levels, their repeat stays rise dramatically, but “that’s only because we engage them. We have the database. We touch base with them.”

He also mentioned that while many hotel companies think of F&B as expensive, especially compared to room revenue, the reality is that “F&B restaurants and bars create that kind of special experience for the loyal guests. If you remember his birthday or you remember his favorite drink, those small little things make a memorable experience. And guess what? When we do that work, they’ll come back.”

Houldsworth mentioned that even when customers book with OTAs, once the customer comes to the hotel, “they are all yours.”

Su said he agreed and noted that his company’s younger generation customers often prefer to book through OTAs. He also noted OTAs’ key role in bringing new customers to hotels.

“If this is your first or second or third time in a different country, you really want that whole spectrum of comparison that you, that you and then reviews and all that,” he said. “So we do coexist, and I think it’s a great synergy. It’s just that, you know, maybe these hotels don’t really do a good job signing up loyal members.”

Benefiting from ‘expensive’ marketing

Houldsworth said there is a perception that it’s expensive for hotels to work with OTAs, but those same companies also benefit from massive marketing budgets.

“We looked at our individual customers, and we are bringing travelers from over 180 customer country desk locations booking on our platform…. So [a question for all hotel companies is] how do you reach 180 countries? It’s very expensive marketing,” she said.

Su said he agreed and that the amount of money OTAs spend on marketing is “amazing.”

“You guys are really, really good at it,” he said. “You reach those countries, you bring them over, and we’ll take over from there.”

Houldsworth said Booking.com also wants its customers to book directly on its platform, especially with the company’s “Genius” loyalty program.

“We obviously want travelers to book directly the same way that you do, and we also want to lower our marketing costs, but we also understand, without the search engines and all the different sites, we also can’t do it,” she said.

Houldsworth said the company’s loyalty programs have learned much about price sensitivity from customers who travel a lot.

“It’s really about price. We know customers are price-sensitive. They have a big range, so we want to ensure that the right price is displayed,” she said. “We realized our ‘Genius’ customers are the frequent travelers, and then they bring significant value to our partners because they typically are the ones that stay longer, potentially pay more and don’t cancel as much.”

Houldsworth asked Su, with the number of different channels available now for hotels to distribute, how do hotel companies keep control of price?

Su said price strategy is important because every customer doesn’t just come from one segment. “We concentrate on different market segments. We look at what’s trending and we look at the history,” he said. “Customers from different segments buy differently, are reached differently and pay differently.”

Su noted the difference between customers for corporate and those who prefer OTAs or MICE. “If we get pricing based on the segmentation, we won’t cannibalize on each other,” he said.

Everyone is moving toward dynamic pricing, Su said, but that often still won’t work for corporate clients. “If the price is higher than the OTAs, it’s just driving the corporates into OTAs, right?”