Expert Calls 'Book on TripAdvisor', 'Book on Google' a Hospitality Nightmare
Are you scared of “instant book” features generated by TripAdvisor and Google? Industry expert Max Starkov, President & CEO at HEBS Digital, thinks you should be, and calls them both a nightmare for the hospitality industry. Below is his opinion column, recently featured on hospitalitynet:
Following the lead of Kayak.com, which has turned itself into a meta-OTA-type of a service for quite some time now, TripAdvisor rolled out their "Instant Book" feature over the past year or so (now called "Book on TripAdvisor"), which, at up to 15% commission, is a de facto OTA-like channel. Recently Google launched a copycat service -"Book on Google," which is a similar OTA-like/commission-based option in their Hotel Price Ads (HPA) meta search program.
Now both Google and TripAdvisor are running two parallel tracks within their meta search programs:
1.OTA-type of a program, based on commissions of 15%, where users book on Google or TripAdvisor respectively ("Book on Google" and "Book on TripAdvisor").
2.Meta search advertising program, based on CPC (cost per click) and advertising budgets, where after they click on the meta listing, the users are sent to the property's own website booking engine to complete the booking.
We see similar OTA conversions from other smaller meta search players like Hipmunk, Skyscanner, and others.
What do these new type of OTA services mean for hoteliers?
I see several major issues with the OTA-type, commission-based "Book on Google" and "Book on TripAdvisor" programs:
•These programs ARE NOT "direct-with-the-hotel" bookings
•They will increase hotelier's OTA dependency
•They will drastically decrease hotelier's ability to generate online demand
•They will diminish hotelier's competitive advantage online
•They will worsen ROIs and lead to increase in COS (Cost of Sale)
Here is why we believe these two new OTA-type services are bad for hoteliers:
1. "Book on Google" and "Book on TripAdvisor" ARE NOT "direct-with-the-hotel" bookings
Both Google and TripAdvisor have made numerous claims that "Book on Google" and "Book on TripAdvisor" are de facto bookings directly with the hotel. Let's not fool ourselves: Both of these programs are not some CPA (Cost per Acquisition) advertising formats. These are pure OTA services where both Google and TripAdvisor insert themselves between the travel consumer and the hotel, take over the customer engagement and relationship, and close the deal/the booking on its own website, and get an agency commission for doing the "agency work", similarly to all OTAs and traditional travel agents.
These new programs contradict the mere definition of the direct online channel. The Direct Channel is a "Distribution channel in which a producer (manufacturer of good and services) supplies or serves directly to an ultimate user or consumer, without any middleman (agent, distributor, wholesaler, retailer)." (BusinessDictionary.com). "Owning the customer" and engaging the customer on a one-to-one basis is the ultimate objective of the direct online channel.
Let's examine this claim from 2 perspectives: the travel consumer and the property.
Travel Consumer:
•They search hotels on "Book on Google" or "Book on TripAdvisor"
•They identify a hotel that they like most
•They check dates/availability and pricing
•If they like what they see, they book right on Google or TripAdvisor
•They are asked to enter their names, address, credit card info, billing address, etc.
•The reservation is confirmed
•Google and TripAdvisor pass the guest information and credit card to the property
•Any post-reservation customer service is referred to the hotel directly (floor and room preferences, etc.)
How is the above different from a booking on Expedia, Booking.com or on any OTA site? It is exactly the same flow for any travel consumer on any OTA site.
????? Hotels:
•The hotel CRS has to interface with "Book on Google" or "Book on TripAdvisor"
•The hotel has to be in rate parity and provide last room availability, the same as with any other OTA
•If a consumer books on "Book on Google" or "Book on TripAdvisor", the hotel receives the guest information and credit card, the same as with any booking on an OTA site
•The hotel pays a commission to Google or TripAdvisor, the same as with any other OTA
•The hotel proivides the post-reservation customer service
How does the above make a booking via "Book on Google" or "Book on TripAdvisor" a direct booking for the hotel? Indeed, it does not. It's no wonder that TripAdvisor recently abandoned any pretense that this is a direct booking with the hotel and has renamed its Instant Book feature to "Book on TripAdvisor", which in most cases is powered by JetSetter, an OTA owned by … TripAdvisor.
In my view, both "Book on Google" and "Book on TripAdvisor" OTA-type services "deface" the hotel, remove the brand equity from the customer engagement and convert it into an engagement and brand interaction between Google or TripAdvisor and the customer.
2. Increasing your property's OTA dependency by converting two important direct online channels into OTA-type channels and adding them to the OTA mix
How is this for a wake-up call? For the top 40 hotel chains and brands in North America, back in 2007 85% of all online bookings were via brand.com (i.e. direct) vs. 15% via the OTA channel.
Fast-forward to 2012, when as a result of the great recession this ratio brand.com vs. OTA has already shifted in favor of the OTAs to become 72:28. Another fast-forward to 2015 when the recession is long gone and our industry has been enjoying 4 years of steady growth in occupancy, ADRs and RevPARs, can you guess what the brand.com vs. OTA ratio is? Well, it is now 64:36 in the first half of 2015, a serious shift in favor of the OTAs. And all of this with only two main OTAs in existence?
Throwing another two heavy hitters (TripAdvisor and Google) into the OTA mix will undoubtedly further erode the direct online channel (brand.com) and shift the scales in favor of the OTA channel. In our view, this would lead to brand.com vs. OTA ratios shifting to 50:50 in less than 3 years from now.
3. Losing control over the ability to generate demand for the property when you need it most
Signing up with Google's "Book on Google" and TripAdvisor's "Instant Book" is opening another permanent distribution channel, which similar to the major OTAs is ruled by rate parity and last room availability (LRA) provisions, which are mandatory for both programs. What does it mean for your property? It means you will be receiving OTA-type bookings with a hefty distribution price tag when you least need them: in high season and high occupancy levels when travel demand is naturally high; and conversely receive very few or no bookings during low season or whenever travel demand is low. Hoteliers do not have to look far to find glaring examples of this user case: where are Expedia's or Booking.com's bookings for New York City hotels in January? Or February?
This is why hoteliers need robust advertising and digital marketing budgets, including sufficient ad dollars for meta search, which would allow them to spend more and bid higher on TripAdvisor Meta and Google HPA when they need more business (i.e. during low season or when having group cancelations, or having low occupancy days, etc.), and spend less or not spend at all when they least need help (i.e. in high leisure travel season or during high convention/corporate meeting season, or during holidays, etc.).
By signing up for "Book on Google" and "Book on TripAdvisor," the hotel completely loses its control to manipulate travel demand to its advantage and the ability to gain incremental business when they most need it.
4. Losing your property's competitive advantage online
Meta search, if used as a direct customer engagement tool, fits very nicely in the overall direct online channel strategy. Our client portfolio consists of smart and innovative hoteliers who are early adopters of new digital marketing initiatives such as meta search. This gives them a major competitive advantage over their comp sets who are typically "asleep at the wheel." The main competitors in meta search are not only other hotels in the destination, but the OTAs themselves. By participating in meta search advertising, our clients gain "double" competitive advantage: on one hand over their comp set of other hoteliers who typically do not advertise on meta search, and on the other: against the OTAs since the majority of travel consumers prefer dealing directly with the "owner of the goods/services" (i.e. the hotel vs. the OTAs).
By signing up for Google's "Book on Google" and TripAdvisor's "Book on TripAdvisor" the hotel completely loses this competitive advantage and becomes one of the many commoditized offerings in the destination, without any ability to "rise above the fold" and differentiate itself from the competition.
How would the property differentiate itself from its comp set on two crucially important online channels like Google and TripAdvisor? How does the property differentiate from its comp set on Expedia? On Booking.com? There is no differentiation, since all properties have been commoditized on the OTAs and the only difference is the lower price, not the value proposition or guest experience.
5. Worsening ROI and creeping distribution cost increase
The new OTA-type of programs on Google and TripAdvisor charge hefty commissions of 15%, which coupled with serious CRS fees, reach typical OTA commission levels of 20%-22%. A commission of 20% means Cost of Sale (COS) of 20% or is equal to Return-on-Ad-Spend (ROAS) of 500%. Many of our clients enjoy meta search advertising ROAS of 800%-1,200. Some well-funded properties with the right revenue management strategy reach ROAS of 1,500%-2,500%. Just for comparison purposes, ROAS of 1000% equals COS of 10%. Compare this to the OTA-type of distribution cost of 20% of the new OTA-type of programs from TripAdvisor and Google.
On top of that, what is the monetary damage to the property for reservations received via "Book on Google" and "Book on TripAdvisor" during high season and high occupancy days when the property does not need distribution help?
There is no doubt that opening the property to two new additional OTA-like channels (Book on Google/TripAdvisor) will result in increased distribution costs and unpredictable COS (Cost of Sale) – due to the lack of predictable budget management and lack of inability to turn off these channels because of the last room availability clause in contracts.
Hoteliers must be prepared to write unpredictably hefty checks each month instead of having a predictable fixed cost via the approved marketing budget.
HeBS Digital recommends:
•Meta Search is a powerful direct online channel marketing initiative that should not be replaced by an OTA-like commission-based program, which will only increase OTA dependency and deprive the hotel from a potent direct response and direct-to-consumer advertising initiative.
•Hoteliers should stay away from the new OTA-type of "Book on Google" or "Book on TripAdvisor" programs, and focus on boosting revenues via the direct online channel via website optimizations, SEM, SEO, meta search, social media engagements, email marketing, as well as innovative programs such as dynamic rate marketing, dynamic content personalization, reservation recovery applications, multi-channel marketing campaigns, LTOs, etc.
Max Starkov, President & CEO at HEBS Digital
Max Starkov is President & CEO at HeBS Digital. Max is a recognized "thought leader" in Internet marketing strategies in hospitality and is a frequent guest speaker and presenter at industry events and conferences. His eBusiness expertise is sought after by a diverse client portfolio of top tier hotel brands, luxury and boutique hotel chains, hotel management companies, resort and casino companies, franchisees and independents, as well as major Wall Street investment banks and financial institutions. Max has spent his entire professional career in hospitality and travel. He has an extensive Internet marketing and online distribution experience. He co-founded and served as CEO of three eBusiness companies: Travelbreak.com 1995-2000 (Innovative direct supplier-to-consumer online travel marketplace, ranked 3rd in traffic after Priceline.com), WhaleMedia.com 2000-2001(Winner of the coveted Microsoft RAD Award for hotel online booking systems), and HeBS Digital (since 2001). Under Max's leadership, HeBS Digital has pioneered many of the "best practices" in hotel Internet marketing and direct online channel distribution, and has won many prestigious awards for its groundbreaking website design and Internet marketing campaigns.
Following the lead of Kayak.com, which has turned itself into a meta-OTA-type of a service for quite some time now, TripAdvisor rolled out their "Instant Book" feature over the past year or so (now called "Book on TripAdvisor"), which, at up to 15% commission, is a de facto OTA-like channel. Recently Google launched a copycat service -"Book on Google," which is a similar OTA-like/commission-based option in their Hotel Price Ads (HPA) meta search program.
Now both Google and TripAdvisor are running two parallel tracks within their meta search programs:
1.OTA-type of a program, based on commissions of 15%, where users book on Google or TripAdvisor respectively ("Book on Google" and "Book on TripAdvisor").
2.Meta search advertising program, based on CPC (cost per click) and advertising budgets, where after they click on the meta listing, the users are sent to the property's own website booking engine to complete the booking.
We see similar OTA conversions from other smaller meta search players like Hipmunk, Skyscanner, and others.
What do these new type of OTA services mean for hoteliers?
I see several major issues with the OTA-type, commission-based "Book on Google" and "Book on TripAdvisor" programs:
•These programs ARE NOT "direct-with-the-hotel" bookings
•They will increase hotelier's OTA dependency
•They will drastically decrease hotelier's ability to generate online demand
•They will diminish hotelier's competitive advantage online
•They will worsen ROIs and lead to increase in COS (Cost of Sale)
Here is why we believe these two new OTA-type services are bad for hoteliers:
1. "Book on Google" and "Book on TripAdvisor" ARE NOT "direct-with-the-hotel" bookings
Both Google and TripAdvisor have made numerous claims that "Book on Google" and "Book on TripAdvisor" are de facto bookings directly with the hotel. Let's not fool ourselves: Both of these programs are not some CPA (Cost per Acquisition) advertising formats. These are pure OTA services where both Google and TripAdvisor insert themselves between the travel consumer and the hotel, take over the customer engagement and relationship, and close the deal/the booking on its own website, and get an agency commission for doing the "agency work", similarly to all OTAs and traditional travel agents.
These new programs contradict the mere definition of the direct online channel. The Direct Channel is a "Distribution channel in which a producer (manufacturer of good and services) supplies or serves directly to an ultimate user or consumer, without any middleman (agent, distributor, wholesaler, retailer)." (BusinessDictionary.com). "Owning the customer" and engaging the customer on a one-to-one basis is the ultimate objective of the direct online channel.
Let's examine this claim from 2 perspectives: the travel consumer and the property.
Travel Consumer:
•They search hotels on "Book on Google" or "Book on TripAdvisor"
•They identify a hotel that they like most
•They check dates/availability and pricing
•If they like what they see, they book right on Google or TripAdvisor
•They are asked to enter their names, address, credit card info, billing address, etc.
•The reservation is confirmed
•Google and TripAdvisor pass the guest information and credit card to the property
•Any post-reservation customer service is referred to the hotel directly (floor and room preferences, etc.)
How is the above different from a booking on Expedia, Booking.com or on any OTA site? It is exactly the same flow for any travel consumer on any OTA site.
????? Hotels:
•The hotel CRS has to interface with "Book on Google" or "Book on TripAdvisor"
•The hotel has to be in rate parity and provide last room availability, the same as with any other OTA
•If a consumer books on "Book on Google" or "Book on TripAdvisor", the hotel receives the guest information and credit card, the same as with any booking on an OTA site
•The hotel pays a commission to Google or TripAdvisor, the same as with any other OTA
•The hotel proivides the post-reservation customer service
How does the above make a booking via "Book on Google" or "Book on TripAdvisor" a direct booking for the hotel? Indeed, it does not. It's no wonder that TripAdvisor recently abandoned any pretense that this is a direct booking with the hotel and has renamed its Instant Book feature to "Book on TripAdvisor", which in most cases is powered by JetSetter, an OTA owned by … TripAdvisor.
In my view, both "Book on Google" and "Book on TripAdvisor" OTA-type services "deface" the hotel, remove the brand equity from the customer engagement and convert it into an engagement and brand interaction between Google or TripAdvisor and the customer.
2. Increasing your property's OTA dependency by converting two important direct online channels into OTA-type channels and adding them to the OTA mix
How is this for a wake-up call? For the top 40 hotel chains and brands in North America, back in 2007 85% of all online bookings were via brand.com (i.e. direct) vs. 15% via the OTA channel.
Fast-forward to 2012, when as a result of the great recession this ratio brand.com vs. OTA has already shifted in favor of the OTAs to become 72:28. Another fast-forward to 2015 when the recession is long gone and our industry has been enjoying 4 years of steady growth in occupancy, ADRs and RevPARs, can you guess what the brand.com vs. OTA ratio is? Well, it is now 64:36 in the first half of 2015, a serious shift in favor of the OTAs. And all of this with only two main OTAs in existence?
Throwing another two heavy hitters (TripAdvisor and Google) into the OTA mix will undoubtedly further erode the direct online channel (brand.com) and shift the scales in favor of the OTA channel. In our view, this would lead to brand.com vs. OTA ratios shifting to 50:50 in less than 3 years from now.
3. Losing control over the ability to generate demand for the property when you need it most
Signing up with Google's "Book on Google" and TripAdvisor's "Instant Book" is opening another permanent distribution channel, which similar to the major OTAs is ruled by rate parity and last room availability (LRA) provisions, which are mandatory for both programs. What does it mean for your property? It means you will be receiving OTA-type bookings with a hefty distribution price tag when you least need them: in high season and high occupancy levels when travel demand is naturally high; and conversely receive very few or no bookings during low season or whenever travel demand is low. Hoteliers do not have to look far to find glaring examples of this user case: where are Expedia's or Booking.com's bookings for New York City hotels in January? Or February?
This is why hoteliers need robust advertising and digital marketing budgets, including sufficient ad dollars for meta search, which would allow them to spend more and bid higher on TripAdvisor Meta and Google HPA when they need more business (i.e. during low season or when having group cancelations, or having low occupancy days, etc.), and spend less or not spend at all when they least need help (i.e. in high leisure travel season or during high convention/corporate meeting season, or during holidays, etc.).
By signing up for "Book on Google" and "Book on TripAdvisor," the hotel completely loses its control to manipulate travel demand to its advantage and the ability to gain incremental business when they most need it.
4. Losing your property's competitive advantage online
Meta search, if used as a direct customer engagement tool, fits very nicely in the overall direct online channel strategy. Our client portfolio consists of smart and innovative hoteliers who are early adopters of new digital marketing initiatives such as meta search. This gives them a major competitive advantage over their comp sets who are typically "asleep at the wheel." The main competitors in meta search are not only other hotels in the destination, but the OTAs themselves. By participating in meta search advertising, our clients gain "double" competitive advantage: on one hand over their comp set of other hoteliers who typically do not advertise on meta search, and on the other: against the OTAs since the majority of travel consumers prefer dealing directly with the "owner of the goods/services" (i.e. the hotel vs. the OTAs).
By signing up for Google's "Book on Google" and TripAdvisor's "Book on TripAdvisor" the hotel completely loses this competitive advantage and becomes one of the many commoditized offerings in the destination, without any ability to "rise above the fold" and differentiate itself from the competition.
How would the property differentiate itself from its comp set on two crucially important online channels like Google and TripAdvisor? How does the property differentiate from its comp set on Expedia? On Booking.com? There is no differentiation, since all properties have been commoditized on the OTAs and the only difference is the lower price, not the value proposition or guest experience.
5. Worsening ROI and creeping distribution cost increase
The new OTA-type of programs on Google and TripAdvisor charge hefty commissions of 15%, which coupled with serious CRS fees, reach typical OTA commission levels of 20%-22%. A commission of 20% means Cost of Sale (COS) of 20% or is equal to Return-on-Ad-Spend (ROAS) of 500%. Many of our clients enjoy meta search advertising ROAS of 800%-1,200. Some well-funded properties with the right revenue management strategy reach ROAS of 1,500%-2,500%. Just for comparison purposes, ROAS of 1000% equals COS of 10%. Compare this to the OTA-type of distribution cost of 20% of the new OTA-type of programs from TripAdvisor and Google.
On top of that, what is the monetary damage to the property for reservations received via "Book on Google" and "Book on TripAdvisor" during high season and high occupancy days when the property does not need distribution help?
There is no doubt that opening the property to two new additional OTA-like channels (Book on Google/TripAdvisor) will result in increased distribution costs and unpredictable COS (Cost of Sale) – due to the lack of predictable budget management and lack of inability to turn off these channels because of the last room availability clause in contracts.
Hoteliers must be prepared to write unpredictably hefty checks each month instead of having a predictable fixed cost via the approved marketing budget.
HeBS Digital recommends:
•Meta Search is a powerful direct online channel marketing initiative that should not be replaced by an OTA-like commission-based program, which will only increase OTA dependency and deprive the hotel from a potent direct response and direct-to-consumer advertising initiative.
•Hoteliers should stay away from the new OTA-type of "Book on Google" or "Book on TripAdvisor" programs, and focus on boosting revenues via the direct online channel via website optimizations, SEM, SEO, meta search, social media engagements, email marketing, as well as innovative programs such as dynamic rate marketing, dynamic content personalization, reservation recovery applications, multi-channel marketing campaigns, LTOs, etc.
Max Starkov, President & CEO at HEBS Digital
Max Starkov is President & CEO at HeBS Digital. Max is a recognized "thought leader" in Internet marketing strategies in hospitality and is a frequent guest speaker and presenter at industry events and conferences. His eBusiness expertise is sought after by a diverse client portfolio of top tier hotel brands, luxury and boutique hotel chains, hotel management companies, resort and casino companies, franchisees and independents, as well as major Wall Street investment banks and financial institutions. Max has spent his entire professional career in hospitality and travel. He has an extensive Internet marketing and online distribution experience. He co-founded and served as CEO of three eBusiness companies: Travelbreak.com 1995-2000 (Innovative direct supplier-to-consumer online travel marketplace, ranked 3rd in traffic after Priceline.com), WhaleMedia.com 2000-2001(Winner of the coveted Microsoft RAD Award for hotel online booking systems), and HeBS Digital (since 2001). Under Max's leadership, HeBS Digital has pioneered many of the "best practices" in hotel Internet marketing and direct online channel distribution, and has won many prestigious awards for its groundbreaking website design and Internet marketing campaigns.