Hotel chains used to consider online booking sites like Expedia Inc. (NASDAQ:EXPED), Priceline Group Inc. Stock not found PCLN and others valuable business partners. Not so much any more. Marriott International Inc. (NYSE:MARC), Hilton Worldwide Holdings Inc. (NYSE:HLTC) and InterContinental Hotels Group (NYSE:IHGC) are in a turf war with online sites to regain bookings.
Much of the reason has to do with the heavy duty (as much as 30%) commissions online sites get for each reservation. This is lost profit as far as the hotels are concerned and they are not about to give it up without a fight.
An Uphill Slog
Hotels are now offering lower nightly rates and loyalty-related perks to customers who book directly through the hotel sites instead of online travel agencies. It’s not easy to get back what’s been given away for years, however. Online sites booked $99 billion worth of stays last year according to Phocuswright.
Online sites offer the ability to book rental cars and airline tickets and have a whole host of options hotel sites have been scrambling to replicate. In addition, younger travelers tend not to be interested in hotel-based rewards. Simply put they don’t want to spend time and effort dealing with and cashing in points – they just want the cheapest price.
Hotels Fight Back
To combat all this hotels have launched advertising campaigns to remind customers that booking direct can be less expensive. According to Hilton executive vice president, Chris Silcock, “There had been this perception that to get the best price, you book through a different channel than going direct. That’s never actually been the case.”
In addition, brands have been tweaking loyalty programs to extend immediate perks to casual travelers – not just long-time loyalists. For example, earlier this year Hilton began allowing its points to be used toward Amazon.com Inc. (NASDAQ:AMZNC) online purchases, and Choice Hotels (NYSE:CHHC) now lets customers redeem points for Starbucks (NASDAQ:SBUXC) gift cards and gas discounts.
As If That Wasn’t Enough
While the war wages with online travel agencies, another battle has been taking shape – with Airbnb and Expedia-owned Homeaway and its subsidiary sites. These sites connect individual owners with travelers wishing to book private homes, condos and apartments.
Hotels complain that these sites compete unfairly by avoiding regulations and the need to be licensed, something hotels deal with as part of the cost of doing business. The concern is not without merit, especially since Morgan Stanley reports that nearly 20% of business and leisure travelers have used Airbnb alone at least once in the past 12 months.