Two of the largest global web presences, TripAdvisor and Google, have started to add an instant booking function, facilitating bookings directly on their site in an OTA-like manner. Hotel owners, management companies, brands, and other hospitality organizations need to recognize the potential impact of this shift now and create a plan to keep direct bookings, brand loyalty, the corresponding revenue share and margin.
Indirect Bookings Drive Margin Pressure
Let’s establish the baseline fact: indirect bookings are the least profitable source of booking on a per-transaction basis. Commissions are reported to hover around 20% from OTAs, metasearch sites and other indirect booking streams.
Insiders claim commissions are even higher, and this does not take indirect costs into account. When travelers book indirectly, inventory suppliers receive little or none of the customer information that is essential to effective marketing, customer retention, and brand loyalty.
But despite the cost, indirect channels are still an important demand driver for booking. According to Phocuswright, around 59% of all online bookings come through these channels. WithPriceline and Expedia spending more than $4 billion on advertising in 2014, it is unrealistic for hospitality organizations to expect to eliminate these channels.
And as Tripadvisor and Google enter the market space, it is essential for hotels to understand and appeal to the traveler behaviour that drives them to book indirectly so that they can reposition their direct strategies accordingly.
Google and TripAdvisor already dominate the decision-making process
While Google and TripAdvisor have only recently begun to get closer to the transaction, they are already deeply ingrained in the decision journey. 74% of leisure and 77% of business travelers rely on the internet as their top source for travel planning with search engines the most popular planning source.
The trend is increasing as well. The percentage of travelers starting their planning with search engines increased 44% between 2013 and 2014 while those starting on brand sites/apps simultaneously decreased 16%. When starting with search engines, travelers place a premium on location-based search over brand name or other hospitality-focused terms.
While travelers may rely heavily on Google at the top of the funnel, TripAdvisor is already dominating mid-funnel research and evaluation.
According to a 2013 Phocuswright study:
· 80% of respondents read 6 to 12 reviews on average before booking
· 73% of visitors rely on user-submitted images to make a decision
· 87% of users agree that management response to a bad review “improves my impression of the hotel”
These trends reveal travelers prefer making purchase decisions with a wealth of information, generated by trustworthy sources, that revolve not only around a hotel property, but also the experiences in and around that location.
But Google – and Tripadvisor in particular – are the go-to source for potential guests to find out about what’s happening near the hotel. With instant booking now possible, it is more likely that the potential guest will stay on the site and book from there.
