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Brands Take A Stand For Direct Distribution

publication date: Jan 19, 2012
author/source: Dan Marcec

Brands Take A Stand For Direct Distribution

Industry partnership changes the rules of the game in the competition for online bookings.

Dan Marcec

The exponential growth of online shopping and bookings has led to an industry-wide dash for virtual market share, with the recent economic downturn and subsequent rate erosion across the hotel landscape leading to often less-than-friendly competition in the online marketplace. But despite hotels and their brands’ notorious challenges with OTAs, the fact is that having your hotels on the shelf in as many places as possible is good for overall awareness and drives reservations.

However, just having your hotel’s website in various channels doesn’t mean it’s priced right or that your distribution strategy is optimized. Even if your rate is right (though in many cases I assure you it’s not), OTA commissions cause considerable financial strain if you give away too much business to those third parties. 

It’s with that in mind that six major hotel global companies came together with a management team of industry experts to develop Roomkey.com, which provides travelers a search and booking experience tailored with hotel information straight from the source.

Founded by Choice Hotels International, Hilton Worldwide, Hyatt Hotels Corporation, InterContinental Hotels Group (IHG), Marriott International and Wyndham Hotel Group, the site is designed to provide the same open marketplace that consumers see on an aggregator, but with the added advantage of driving each inquiry directly to the hotel’s front desk, rather than sending the transaction to yet another third party. Best Western International was announced as the inaugural commercial partner of the venture just one day after the site’s January 11, 2012, launch. 

“The driving force for Room Key was the need to solve two different problems, first and foremost for the consumer to provide an easy, elegant way to book directly with the hotels,” says John F. Davis III, chief executive officer of Room Key. “The second reason to create the site was to provide a better link between online booking and the hotel itself.”

Both of these solutions address issues encountered through OTA bookings. First, Davis says he believes there’s a growing tendency for third-party intermediaries to function more as advertising platforms rather than booking engines as they’ve become more popular and widely used. Because third-party sites are used more often to shop than to book, the sites focus on profitability through slinging ads.

“Some sites are so busy sites guests can’t even find a way to book a room, and the industry by and large was not pleased with what was out there for their consumers,” says Davis.
On the other hand, brand.com sites serve a sole function: to take reservations and welcome guests to hotel accommodations. And that’s where the second motivating factor comes into play. When dealing with a third-party, there’s an obvious potential for miscommunication between the customer and the front desk. If there’s a question about or a change to the reservation, getting the third party involved can needlessly complicate the process.

And these two issues come before even addressing the question of cost. Even though some OTAs claim to have the lowest prices on the Web, most hotels actually offer the best rates on their own sites. IHG even went so far as announcing its Best Price Guarantee last year, which lets guests know that they literally cannot find a better price online, or they get the first night free. Then, of course, for hotels themselves, a better solution to book direct improves their cost of sale and bottom line, which underscores the impetus for the hotel companies to get together for a common purpose.

“We have good relationships with other channels, but it was important to create something user-friendly and low cost for both consumers and franchisees,” says Steve Joyce, president & CEO of Choice Hotels International. “As leaders of the industry we are expected to take a more aggressive stance on distribution to help our franchisees, so we worked together to help consumers who are looking to compare pricing and offerings and products, but in a way that doesn’t redirect to an entity that takes more than their fair share of those transactions.”

Steve Sickel, senior vice president, distribution and relationship marketing for IHG, agrees. “Room Key came together because we have a common need in the market; we know it’s nothing unique to IHG, Choice or Marriott,” he says. “Travelers like to shop, and while each of our IHG brand websites has the best price guarantee and the information to find a great hotel, guests only see the choice of our brands. We know that customers like multiple choices, but they want to be able to book direct as well, so we all saw the common need that led to a common solution.”

The site works pretty straightforwardly. The brands provide their own information in any way they desire, and Davis says that even though there is still a commission to direct the booking, that commission is significantly less than the normal price point for your standard OTA. Room Key initially will focus on serving U.S. travelers, followed shortly after launch by the expansion of the site to English-speaking regions outside the U.S., and also will evolve presently to offer social media functions such as independent reviews, as well as the ability to compare, plan and share with friends and family.

“The brand experience doesn’t start when guests walk in the hotel, but at the first point of contact,” says Sickel. “Direct booking allows us to interact with them earlier on in the purchase life cycle.”

The search for a better way to drive direct bookings isn’t a new process. Hotels have had a very public love-hate relationship with OTAs in the past couple years as the recession played out, and feedback from the field has been mixed on whether OTAs should be a stronger part of distribution, or if they should be abandoned completely. With a unified front on this initiative, these companies are making clear stand on how they are working to manage distribution. It’s not about an all-or-nothing solution or about crushing the OTAs, it’s about finding a better way to let hotels do what they do best – serve guests.

“The exciting part of Room Key is that it’s an industry initiative,” says Davis. “I’ve participated in the past in these kinds of efforts, and they have a history of changing the landscape for the better.”

Brands and hotels are still going to use OTAs, because they’re not going away. In fact, don’t be surprised if they only becoming stronger in an online marketplace that is becoming more customized and shopper-friendly. But rather than battling the OTAs again on their home turf, Room Key went above and beyond to change the rules of the game.

Thursday, January 12, 2012

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