Over the past few weeks there has been a major shift in the travel industry that has the potential to significantly impact booking revenue for hospitality organizations.
NB This is a guest article by Michael Svatek, CEO and co-founder of Rivet.
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.
Impending conflicts of interest
As Google starts to experiment with instant bookings, it begins to directly compete with its largest advertising clients. As TripAdvisor enters direct bookings, it loses its claim as an independent review aggregator. While on the surface these claims may create conflicts of interest, unfortunately for hospitality organizations, business parallels show they don’t have to be an impediment to enormous growth.
Amazon relies heavily on user-generated content with a clear intention to drive sales. Additionally, it is also one of Google’s largest direct search spenders while directly competing with Google Shopping for conversion.
Amazon also offers insights for hospitality organizations to successfully compete in frenemy-filled online marketplaces.
Steps to success: the Amazon way
- Own your own user-generated content
Amazon makes a key strategic decision to directly collect user-generated content and not rely on, or allow, intermediaries to participate. This allows them to create direct relationships with customers and enjoy benefits such as customer profile data and direct communication avenues.
- Allow users to share content in any way, easily
Amazon lets customers tell their stories in any medium they desire including long-form text, five-star ratings, photo, video and more. Providing all of these mediums reduces friction for users and provides a path for comprehensive and authentic stories.
- Harness stories to drive organic search traffic
As the number of reviews on a site increases, long-tail keywords and other search terms will surface, driving organic traffic to the site. When brands such as Amazon are strategic about effectively sharing the most effective organic content, it adds value for website visitors, and itself.
How Travel Brands Can Get Started
Knowing that TripAdvisor already has 250 million reviews on-site can be daunting when a hotel decides to take control of its user-generated content. But don't forget that hospitality organizations have the most sincere connection with travelers, can offer the most rewards for participation, and generate high-margin revenue increases as a result.
- Create on-site pathways to contribute to your user-generated content
There are innumerable opportunities to ask for UGC contribution. Front desk attendants can make it a standard part of check-in/check-out to remind travelers to share. They can also ask for an email address to send a post-stay email to a UGC submission activity. Or, organizations can share a link on signage throughout the hotel and in communal areas to make it easy for guests to share.
- Make it easy for travelers to share in the form they desire
Much like Amazon, do not create friction by only allowing guests to share in certain ways. Photos, videos, short captions and/or long-form review could be your guests’ preferred method of sharing. Make it easy for guests to share their story and find ways to display them compellingly.
- Interact with guests providing valuable feedback
When guests share directly with your organization, it is easy to see and engage in real-time feedback. When guests give criticism, you have the ability to respond and create positive engagements that boost authenticity. Guests that provide valuable feedback, positive or negative, can be rewarded with small tokens such as loyalty points or free breakfast.
- Capture experience rather than features
As seen above, guests are more interested in learning about the entire experience of staying at a hotel location, not just the room they will be assigned. Capture that experience and display it in form factors such as maps that will go hand in hand with organic searches.
- Encourage direct bookings with your content
Once you create a content collection strategy and the stories begin to accumulate, associate them directly with revenue events. Creating a booking event around an experience will increase the intrinsic value of your offering and drive the high margin conversion your organization desires.
Google and TripAdvisor have clearly identified a new revenue stream that complements their existing competencies. However, hospitality organizations still control their own destiny in the bookings game – they just need to make sure they’re set up to provide the traveler with the information they desire.
NB This is a guest article by Michael Svatek, CEO and co-founder of Rivet.
NB2Image by Shutterstock