NB: This is a guest article by Mike Nelson, president of the Partner Services Group at Orbitz Worldwide
In recent months, much has been written about the relationship between hotels and online travel companies, in part due to ongoing debate over public policy matters.
These are difficult and complex issues to be sure, but we can’t lose sight of the valuable underlying asset at stake – a healthy, long-term business partnership.
As market conditions fluctuate and individual hoteliers evolve their pricing and distribution strategies, online travel companies remain an important part of the overall equation.
In any economic climate, online travel companies are a strategic resource for hotels that want to stimulate demand, access a global distribution platform and benefit from vast marketing and promotional investments.
From a category perspective, I believe the advent of online travel companies and their current roots remain the same – to lower travel barriers by making the planning, search and booking of hotel rooms easier, especially for customers that are not loyal to a particular hotel brand.
Each day, tens of millions of potential travelers search for hotel rooms on an travel site. A majority of those visitors are supplier agnostic.
When a customer is loyal, they’ll most often book directly with the supplier. As depicted in the chart, the percentage of customers booking directly with suppliers is expected to remain constant.
The growth of online travel companies is expected to come from other third party sources.
The defining value of OTCs is turnkey access to millions of global customers that a hotel would not otherwise reach.
This is true in established markets like the US and Western Europe, and will be even more critical for hotels looking to attract customers in high-growth regions like Asia Pacific and Latin America.
Online travel companies with a strong global footprint are especially helpful in driving bookings outside of a hotel’s domestic market where its brand is not as strong.
Using Orbitz as an example, our percentage of hotel bookings coming from destinations outside of the US has nearly doubled in the last three years.
Online travel companies also make steep investments in sales and marketing activities. The top three publicly-traded online travel companies by total booking volume spend nearly $2 billion annually in sales, marketing and advertising programs.
These investments range from online search engine placements and integrated print and broadcast advertising campaigns to time-sensitive web promotions.
As a result hotel partners benefit from broad-based customer pull and the ability to manage pricing through the use of promotions and the opacity associated with packaging.
Pricing flexibility is particularly helpful in spurring seasonal or off-peak travel demand. A recent example was a Winter Hotel Blowout Sale on Orbitz, which offered our hotel partners the opportunity to reach millions of customers with promotional offers.
Partner hotels that participated in this broad promotion achieved 26% year-over-year room night growth versus flat year-over-year performance for those that did not.
In addition, an online travel companies diverse mix of traffic – including customers searching primarily for airfare – provides a qualified customer that is highly engaged in the travel planning process.
These customers are exposed to real time pricing and availability along with user reviews, virtual tours, and photos.
In fact, many of these customers will choose to book a hotel directly with the supplier after researching on an online travel company.
Independent studies have shown that listing on an OTA can drive a 25% increase in direct bookings. As a result, the true distribution costs of working with an online travel company are in fact much lower than typically perceived.
To whatever degree a supplier chooses to work with an online travel company, we’re but one piece of the larger puzzle.
In good times and bad, online travel companies should be focused on building stable long-term partnerships with their hotel suppliers. We remain focused on working with our hotel partners to build new distribution channels and products, reach new customer segments and deliver an industry-leading travel experience.
For our part, the balancing act will always rely on our ability to win each and every day on behalf of our suppliers and customers.
NB: Mike Nelson is president of the Partner Services Group at Orbitz Worldwide, running the worldwide business operations for the company’s supplier relations, customer experience and partner marketing organizations.