Thursday, 5 February 2015

Have we reached peak Online Travel Agency hotel bookings? Wotif this is the end of Online Travel Agencies?

This week as American company Expedia finalizes its $703 million dollar takeover of Australia's leading Online Travel Agency, 'Wotif', we ask the question in this blog, 'have we reached peak Online Travel Agency Hotel bookings? Is 2015 going to be the year that guests turn back to the hotel chain websites to make their hotel bookings?

Perhaps the Wotif story is an example of a changing trend going on. Wotif was launched in 2000 in Brisbane, pioneering online accommodation booking in Australia, and it quickly established itself as the go to 'low-cost' Hotel online booking site for Aussies. By 2010, Wotif had virtually built a monopoly on the Australian online hotel booking market with around 6 out of 10 online bookings occurring through Wotif and its subsidiaries. Wotif's closest rival back then was hovering around 5% market share. In the last few years though, Wotif lost momentum. Its profits and market share soon became eroded by Expedia, Stayz, and Priceline. (booking.com). Each of these companies were about ten times the size of Wotif, with marketing budgets ten times the size too - and in the end it was too much for Wotif to hold on to its monopoly. And in the end its market share dropped, share prices and profits dived, finally succumbing to the acquisition to Expedia late last year.


But for about 5 years there, no matter how hard Expedia and others tried, they just couldn't break Wotifs market share. That's because Wotif had built such a fantastic reputation and loyatly with Australians as the site to go to for cheap, reliable bookings.

Have the Hotel chains learnt anything from the Wotif loyalty story?

The statistics, industry groups and trends will tell you 'no' - revenues in hotel bookings through Online Travel Agencies(OTA's) show growth rates in excess of 10% annually.  Revenue is soaring due to mobile technology and higher internet usage. Expedia's market cap is $11billion and Priceline's market cap is $65 billion (Priceline own booking.com, Agoda.com, priceline.com, kayak.com and others). New last minute hotel booking apps like Hotel Tonight are seeing explosive growth. Hotel meta search engines(websites that search all the OTA's) like Hotels Combined are springing up all over the place. The OTA's are snapping up competitors, increasing their revenues and reducing costs (including employee's). There is speculation that up to 95% of Wotif's 580 employee's will be terminated over the upcoming weeks as Expedia leads its expansion into the Asia Pacific region.  Managing OTA's aren't exactly labor intensive.

A battle between the OTA's and the big Hotel chains for your loyalty has been raging on for quite a while now. You can understand why - the hotels have to pay commissions of between 10-30% to the OTA's for you to make a booking through the OTA websites. This is of course wasted and lost money for everybody, except for the OTA. The OTA's are the only winners here and they're loving it. You as the guest have to either pay 10-30% more for your hotel room, or the hotel has to discount their room tariff's by 10-30%, so that you pay the same room tariff price as that advertised on the hotel website.

But the big hotel chains are fighting a comeback this year - they've finally woken up and realized that their own primitive management practices are partly to blame for the growth of the OTA's. In addition the Hotel chains have finally realised that instead of fighting against technological trends that has helped spawn the growth of OTA's, they're now going with the flow of the technological trends. The hotel chains are using technology to improve services, reduce costs, offer competitive advantages, increase loyalties, and offer some of these improved services by only booking through their website.

And instead of only the OTA's being the winner, you the guest will now be the winner; Here is a list of the management or technological changes hotel chains are making to bring you back to their website for the booking, and to make you stay at their hotel everytime you travel;

  • Many hotel chains have removed last minute cancellation policies (management change) - by removing cancellation policies it means guests can't cancel their booking at the last minute and go to the OTA's and last minute apps like Hotel Tonight, and snap up a cheaper room, often in the same hotel (which are often sold by the hotel to the OTA's to fill rooms at the last minute)
  • We've seen Hilton announce plans to offer exact room selection only on their apps and their website; (technological and management change). Hotels have been obsessed for so long with holding onto this policy of allocating your room when you check-in. But this year at Hilton Hotels you will be able to book an exact room as it appears on the plan, and as it appears in videos of the room on the hotel website/app. Finally you will be able to see first exactly what it is you are going to get, and actually get it - just like on the airlines. With the airlines if you wan't to be guaranteed a emergency exit seat, or a window seat (or even a first class seat), they you simply pay for it, and you get it. As occupancies increase because of your guarantee of getting a good quality room in advance, then the hotels won't need to release rooms at the last minute to OTA's at discounted prices anymore.
  • We've seen Hilton, Accor and Starwood hotels announce plans to offer smartphone self check-in with digital keys (technological change to increase loyalty). By booking on the hotel website/hotel app you will be able to download your time-sensitive digital key to your room onto your smartphone. This is finally following in the footsteps of the airlines website too - just like you do now with downloading boarding passes onto your smartphone, and bypassing check-in queues. You also won't have to worry anymore about carrying around metal keys, or being locked out by your keycard de-magnetising.

  • The rise of Tripadvisor providing reviews of rooms/hotels, especially highlighting ones which aren't up to scratch (e.g see story here). - the hotels really aren't doing anything different here - Tripadvisor has provided a platform for people to complain if they're not happy with service.

Hotels are now learning the value of loyalty, and the value of technology to improve services and make your stay so much better and cheaper too! Do they deserve your loyalty?


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