Hotels' direct bookings making up ground on OTAs

Hotels' direct bookings making up ground on OTAs
Photo Credit: Keport/

Hotels might finally be wresting back some control from OTAs.

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 platform."

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."


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