Some of the main customer acquisition techniques of online travel agencies were analysed in the first part of this article.
NB: This is an analysis by Francesco Canzoniere, ex-CEO of Viajar and now founder and managing director of Travel Performance.
Now we will take a look at how OTAs improve customer loyalty.
Key factors in generating loyalty
What most customers value and what feeds loyalty when deciding where to return to purchase online, according to a report from Phocuswright are:
- Trust and zero problems/barriers with previous purchases
- Best prices and offers
- Ease of use (usability) and adequate product offers
In this article I will focus solely on points two and three.
1. Loyalty programmes
As I mentioned in the first part, loyalty programs are important in the acquisition phase, because they influence the purchase intentions of travellers.
However, I consider it more appropriate to analyse them at the loyalty stage because this is where they play their most important role.
With the arrival of metasearch websites, the strong position that OTAs have been building for years, while investing heavily in brand campaigns, has been undermined.
Whereas before now, OTAs were the best tool for tourists who wanted to compare flight options, hotels, etc., now this is no longer the case.
Metasearch websites, such as Trivago, Kayak etc, have allowed travellers to not only compare prices of hotels and flights, but also to compare the different prices hosted by various OTAs, including the hotel website itself.
This has generated an intense rivalry between the various reservation pages and the actual hotel to win clients.
For this reason, fostering customer loyalty is much more difficult because switching from one distribution channel to another has become a lot easier.
Therefore to fight this phenomenon the main incentive offered to the client to register and share information could not be other than financial.
And if there is a loyalty scheme that actually works well, it has to be Booking.com's Booking Genius!
The greatness of this system applies not only for the end user but for the competitive advantage that Booking.com has achieved through it.
How does it work? Simply put; hotels, in exchange for having more visibility with regular Booking.com customers, offer a 10% additional discount, which also includes the usual commissions and costs.
Ultimately it is Booking.com which fosters the loyalty of the customer, because it gives the discount and not the hotel. However, more interestingly, it is the hotel that pays the cost of this loyalty program!
Thus, the programme which for its breadth and positive results is priceless, costs Booking.com almost nothing. Furthermore, although Booking.com through Genius is selling at below the official hotel price, at the same time, the hotel still has to respect the contract clause of rate parity!
2. Best prices
The best price guarantee has been one of the best moves of online travel agencies, which guarantees the customer that there is not another website with a rate lower than that which appears on its website.
They have educated the customer not to visit directly the official website of the actual hotel being booked.
If during the last few years, the vast majority of customers have found, time after time, the same price on Booking.com (as well as in other OTAs) as appears on the hotel website - what reasons would they have to visit the hotel website to check prices again?
This is probably why the so called Billboard Effect (basically the increase in numbers of visits and reservations to a hotel website as a result of its inclusion in an OTA such as Expedia) has diminished a lot in the past few years, according to data which includes quite a large number of hotels.
This perception that the Hotel website’s price is never cheaper than that of an OTA has been further reinforced by metasearch websites such as Trivago and TripAdvisor.
Even when there is parity between the websites, i.e. when the hotel has the same price as the OTAs, what is being ingrained is that the OTAs are more reliable, that they have the best price!
Furthermore, if we include in the previously mentioned loyalty programmes - opaque discounts, flash offers and so on - it is clear that the ‘convenience promise’ offered to customers by OTAs continue to gain credibility.
3. User experience and product offering
This is actually all about adapting to the changing consumer.
The use of new devices in the purchase process and the subsequent change in how the customer interacts with brands online, is the one change in traveller behaviour whose effects have been overwhelming.
When we talk of mobile devices and technologies, we are not talking of a new trend but a fundamental change in customer reservation habits, and what’s more, it can only become more dominating.
Winning more customers through offering a superior user experience whilst booking across smartphones and tablets, is the new rule of engagement in the battle between hotel chains and online travel agencies.
The company that achieves to associate its brand, in the minds of the customer, with search & reservation of a hotel or other travel related products across mobile devices, will be guaranteed a future of high yields.
In this sense, it is worthwhile highlighting the recent release of the new Expedia App, which in my opinion, offers the best user experience and functionality for a customer wanting to reserve a flight+hotel using a tablet device.
And what happens if we don’t embrace these new mobile device developments? Well, simply put, the customer will stop interacting with the brand and go straight to another website to book their holiday!
And this obviously explains why the mobile arena is today’s great battlefield. If you want to keep your customers, adapt or lose them!
The vast majority of hotels fail when it comes to mobile.
Few dare to experiment, invest and improve the omni-channel experience, not realizing that if they do not offer an excellent multi-device and multi-channel customer experience, then the OTAs will be the ones that will leverage (intelligently) this new opportunity.
OTAs are gradually gaining traveller’s preference. Many hoteliers have already given up the fight for direct online sales, but in reality the fight is wide open because most importantly, the client stays at the hotel, establishing a direct connection that can be leveraged by hoteliers.
But is it possible to defeat OTAs? Airlines seem to demonstrate that it is, although, in many respects there is a fundamental difference between the aviation sector and that of hospitality, making the former’s success in direct selling more achievable (not to take from the efforts of the airline sector).
In general, investing in online marketing systems, to improve hotel's direct online sales, is not only affordable but an absolute necessity. However, the first step is to start to learn all we can from them!
Neither the price war nor the payment of disproportionate commissions is the solution to the problem of hotel profitability.
Standing still, waiting for the upward trend of OTA’s commissions to either stop or decrease, or just hoping for a miracle, seems to be the worst strategy.
And the data is also very clear - by type of hotel, over the last three years, commissions have increased by up to 72%!
So what are you going to do today to improve your online direct sales?
NB: This is an analysis by Francesco Canzoniere, ex-CEO of Viajar and now founder and managing director of Travel Performance. It was written to coincide with the first IT Travel Madrid event with Enterprise Ireland in October 2014.
NB2:Loyalty image via Shutterstock.