Hotels fight back against online sites

Guests checking in at a hotel. Many hotel chains are using reward points to lure travellers to book with them directly.
Guests checking in at a hotel. Many hotel chains are using reward points to lure travellers to book with them directly. PHOTO: NEW YORK TIMES

NEW YORK • For years, travellers have been drawn to online sites such as Expedia, Travelocity, Orbitz and Priceline to find and reserve hotel rooms, flights and rental cars.

Hotels welcomed the system - or at least learnt to live with it - even though the business came at the cost of substantial commissions. But now, they are fighting back.

With the online giants consolidating and potentially tightening their hold on travel bookings, major hotel chains are offering a host of benefits to lure travellers to book with them directly: digital check-in, free meals, Wi-Fi and even the ability to choose a specific room.

At the same time, the industry has been outspoken with regulators this year in an attempt to block a merger of two of the largest online booking companies, Expedia and Orbitz.

The financial stakes are high. Cutting out the intermediary not only saves on commissions, but also puts the hotel chains in direct communication with their guests. That translates to building customer profiles of preferences and spending habits to help attract guests on future trips.

Competing against online travel agencies on price alone is not easy. A traveller might assume that hotels could offer lower rates to guests who book directly. But generally, they are barred from doing so, both by their contracts with the online booking sites and by government regulators that enforce price transparency for published rates.

Mr Naved Khan, senior vice- president for Internet equity research at Cantor Fitzgerald, said: "Many times, there is a rate-parity clause, which is designed so they can't undercut the online travel agencies and vice versa. So this fight is not really about pricing. It's about sweetening the pot with other benefits."

Hilton has introduced a number of services for guests who book directly, including a digital check- in option that eliminates waiting in line. Quickly adopted by its customers, the app is now used by more than one million people each month, according to Ms Geraldine Calpin, who oversees Hilton's worldwide digital efforts.

Hilton also offers direct-booking guests the ability to choose an exact room, a feature similar to an airplane's seat-map function.

Loyalty programmes also help steer consumers towards booking directly with hotels, with rewards points and "elite" level benefits such as concierge lounges, free meals and upgrades.

"We see people who will book directly just to get their rewards points," said Mr William A. Crow, an analyst and managing director at Raymond James & Associates. "They don't want to give that up and so it can be a powerful lure."

Such efforts show early signs of paying off. The travel marketing firm MMGY Global's 2015 survey of nearly 3,000 leisure travellers found that while third-party sites remained popular for comparing vacation hotels and prices, there was a noticeable drop compared with last year in how often respondents booked rooms through the sites. The sole remaining large player, Priceline, maintains about 20 per cent of the market. A merged Expedia-Orbitz and Priceline would have control of more than nine out of 10 third-party online bookings.

Expedia is vigorously defending its deal. The company says it believes regulators should take a broader view of online travel sites, defining the market as including dozens of sites where consumers can search for rooms, but not book them.

NEW YORK TIMES

A version of this article appeared in the print edition of The Straits Times on September 02, 2015, with the headline 'Hotels fight back against online sites'. Print Edition | Subscribe