There are some major developments ahead in the hotel sector which will demand attention of hoteliers in order to stay in control of their marketing mix and distribution costs.
Here some of the hot topics of next year:
- Google Hotel Finder
- Metasearch and rate parity
- OTA commission levels
- Direct sales
It is a frantic time in the hospitality sector and in some respects it’s hard to figure out where to start for many hoteliers, but let's focus on potentially the most disruptive and new of the quartet listed above.
Google Hotel Finder
A major development that will almost certainly impact the balance of the distribution world is the continued roll-out of Google Hotel Finder.
Google has developed its own metasearch tool as a counter move to Bing’s acquisition of Farecast, now called Bing Travel (remember that?).
In any case, Google recently started testing Google Hotel Finder ads above the regular Google Ads in search results.
Of course, this is inevitably causing mayhem and concern in the industry. In some respects, Google is effectively outmaneuvering metasearch sites such as HotelsCombined, Kayak and Trivago in one simple step.
Google Hotel Finder compares rates from major OTAs, which are paying a premium to show up feature in the service.
So, no, the OTA will not lose out on volume, but one could conclude that in the initial stages it will be a consolidation of volume to the larger OTAs, at least until Google has integrated more regional and local channels.
But what impact does this have on hotels? There are a few angles to consider here.
First of all, location has become even more important. Is your hotel situated within the preset parameters of your market according to Google Hotel Finder?
For New York, London and Paris the settings are quite all-encompassing, but in Amsterdam, Google Hotel Finder is curiously focused on the city center.
But what else should hotels consider when it comes to Google Hotel Finder? Reviews, is certainly one.
Over the last few years, Google has started collecting reviews from other websites to determine popularity and value of a hotel property.
Moreover, it has been collecting guest reviews also through Google Places (formerly known as Google Local Business Center). A mix of the reviews determines a hotel's user rating, a tool by which consumers can also sort the hotels.
As suspected, reviews which are shown on the hotels page are only the ones from Google Places. For the other sites there is a smaller reference at the bottom of your hotel listing with the number of reviews.
Google does not even show a score for these other websites, which is something we admire from Trivago’s hotel listings.
Yes, hoteliers, Google is clearly on a mission to build the undisputed platform for hotel search. It will use the industry for as long as it needs to in order to get its own initiatives off the ground, but will then quietly move them into the background.
So in your efforts to gain traveler reviews and good guest scores, we now have to look beyond TripAdvisor, Oyster, Zoover, Vinivi,HolidayWatchdog, VirtualTourist, Yelp, etc.
Google Places and Google Hotel Finder have, almost overnight, gained huge significance in the area of hotel reviews.
Just imagine the impact on the demand and sales of hotel when Google launches Hotel Finder into pole position for all hotel searches worldwide if a property is listed as #1 on the preset sort order, such as Hotel de Londres in San Sebastian.
Google will show not only OTAs, but also wholesalers, giving hoteliers a chance to secure reservations through less costly and preferred channels.
Properties will also have to press their representation companies to develop an interface with Google Hotel Finder, especially as it lists the hotel website URL.
See the example below of the Plaza Athenee Hotel in New York.
Of course, listing your website URL and phone number is currently free on Google Places, but we would not be surprised if Google introduced charges in the near future.
In any case it is very important to have the hotel account set up properly in Google Places - it will ensure a property appears in universal search results and Google Maps.
Metasearch and rate parity
Many hotels are trying to maintain a rate parity strategy on OTAs to level the playing field and create transparency for consumers.
However these efforts are being torpedoed by wholesalers publishing net rates at low mark-ups online.
We see wholesalers distributing package rates and net rates at low mark-ups directly and through affiliates that are listed on metasearch sites like Kayak, Trivago and HotelsCombined.
Here is a random date for a search in London on Trivago:
Hotels need to make sure they have their distribution well under control across all channels, online and offline.
Wholesalers are great channels, but hotels have to impose rules on the low net rates they offer and enforce them strictly, otherwise a strategy of rate parity might just be counter effective.
Increasing commissions/distribution costs
Another challenge hotels will be facing in 2012 is the increasing cost of distribution.
Quite a number of OTAs have raised their commissions from 12% to 15% in major destinations (which represents a 25% increase in cost, by the way), which will come straight from the bottom line of the hotel.
Many OTAs have also launched preferred programs for hotels to show up higher in the sort order of their own search results.
Commissions vary from 18% to 20%, and in some cases even 25%. Hotels have to be careful not to simply drive up costs while at the same time become reliant, or even dependent, on OTAs.
Keep in mind, their only mission is to grow in terms of global revenue, and that is not always in the best interests of a hotel.
We have seen some OTAs asking for high fixed allotments, another sign they are trying to penetrate hotels and the market as far as possible.
This happens when they can’t particularly grow any further geographically, but are pressed by shareholders for growth each year.
Frankly, unless we all start opening hotels on the moon in the next few years, the only way some agencies can grow is by getting a higher commission or control more of the inventory in a hotel.
So our advice is to be careful and develop alternative sales channels.
Direct sales
Nevertheless, we are seeing hotels becoming more aware each day of how they depend too much on OTAs, wholesalers and other third party distributors.
The rising cost of distribution and the advantages of direct sales is something hoteliers are starting to understand more profoundly. Therefore we foresee a shift or rather a re-shuffle in the distribution mix in hotels in 2012.
Hotels are willing to invest more in SEO, SEM, SMM and mobile marketing as a result of the increasing costs of distribution. There is a concerted effort to push direct sales, either through their own websites or call centers.
NB: Visit the Xotels blog for more tips and guidance, including a 2012 Marketing Plan for Hotels.