Hotels might finally be wresting back some control from
After years of ceding ground to the online giants, hospitality's online supplier-direct channel is now
slightly outpacing OTA bookings, according to Phocuswright data. Last year,
direct bookings accounted for around 49% of U.S. hotel and lodging online gross
bookings, versus OTAs at 51%.
By 2022, Phocuswright predicts, direct bookings are on track
to grow to a 50% share.
The turnaround follows a period of intense investment for
many major hotel companies that have encouraged customers to book direct by
beefing up loyalty programs, launching marketing campaigns and offering
exclusive discounts or "best price" guarantees.
Though denied to OTAs, Hilton's direct booking benefits
extend to the travel agent channel, with guests able to take advantage of the
same discounts and perks available via Hilton's web-direct channels when
booking with an agent.
Hilton's efforts appear to be paying off. In the company's
recent fourth quarter earnings call, Hilton CEO Christopher Nassetta told
investors that over the past year, direct web bookings grew three times faster
than other channels.
"We're focused on driving direct relationships and
direct business," Nassetta said. "If you look at web-direct channels,
they remain the fastest-growing channels we have and are growing at a much
faster rate than OTA channels."
He attributed the direct-booking surge in part to robust
marketing efforts, including Hilton's recent "Expect Better" ad
campaign launched in September. Featuring actress Anna Kendrick, the campaign
highlighted Hilton Honors loyalty program perks like discounts when booking
direct online or through its mobile app and access to exclusive Hilton Honors
experiences, among others.
The campaign also appears to have boosted Hilton Honors
membership numbers and engagement levels. Nassetta estimated that five or six
years ago, just 15% to 20% of Hilton Honors members could be categorized as "engaged,"
as measured by a recent stay or purchase activity. Today, he said, nearly 50% --
about 42 million Hilton Honors members -- are considered engaged. And the
program is set to expand to more than 100 million members by the end of 2019.
"We're experiencing very high growth rates,"
Nassetta said. "To some degree, I suspect, we are getting members from
other programs who are shifting their loyalty."
Hilton isn't alone in leveraging its loyalty program to
drive direct bookings. Hyatt has positioned its World of Hyatt platform in a
similar manner, offering loyalists a Best Rate Guarantee and member discounts
of up to 10% in many markets when they book direct.
While Hyatt didn't divulge specifics regarding
direct-booking growth on its latest earnings call, CEO Mark Hoplamazian did
highlight the fact that the World of Hyatt program saw a membership increase of
nearly 50% in 2018, with members' share of revenue also seeing fast growth. The
World of Hyatt platform has more than 16 million members.
Likewise, InterContinental Hotels Group (IHG) is reporting
solid engagement within its IHG Rewards Club loyalty program as well as strong
traction for direct mobile app booking, in particular.
"We have continued to grow the percentage of revenue
generated by our most loyal guests," IHG CEO Keith Barr said on the
company's preliminary full-year results teleconference earlier this month. "IHG
Rewards Club program member contribution grew by four percentage points over
the past four years. Downloads of our mobile app have also continued to grow
and are delivering increasingly more revenue to our business as a booking
The company said IHG mobile app downloads were up 21% in
2018. That increase parallels Phocuswright data showing that 26% of
hotel-direct room revenue is booked on mobile devices, with 40% projected to be
by 2022. And while just 6% of total hotel gross bookings were made via mobile
app in 2018, that share is expected to rise to 10% by 2022.
Meanwhile, IHG's Barr unveiled a new guest reservation
system feature called "attribute pricing," designed to offer more
customization options and optimize value for guests who book direct. Set to
begin in a pilot phase later this year, the attribute-pricing platform will
enable guests to select rooms based on attributes like bed size, floor, view
options and quietness, rather than by a more generic room type.
"Once completed, this will offer guests a much greater
degree of customization over their stay," Barr said. "They'll be able
to book a room based on the specific attributes that matter most to them, and
it will enhance our book-direct proposition, as this functionality will only be
available to IHG reward club members who come through our direct channels."