This is the second part of our look at the distribution and marketing challenges facing hotels and online travel agencies. Part One is here.
Logically, hotel reward program members have always booked a disproportionate amount of business.
This strategy has nothing to do with loyalty; it’s a transactional gamification tactic combining a price discount and value-add to incent program registration and booking channel shift.
It should also be noted that the hotel brands are not footing the bill for the direct booking programs. The bad news is for the hotel owners that are bearing the full brunt of funding the rate discounts, free wifi, and accrual of loyalty points.
Hotel brands would be well advised to proceed with caution when employing strategies that create value by reducing prices.
If the hotel “book direct” battle turns into a legitimate pricing war, hotel brands and hotel owners have a considerably worse downside than OTAs, by more than a factor of 2x.
However, the winner of the OTA v. Hotel Brand battle won’t ultimately be decided by the hotel owners.
Signs of flagging growth or share shift will invite scrutiny from investors. Notoriously impatient equity markets will then reward the victors and mercilessly vanquish the losers.
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