Franchise hotel companies are worried. Traditionally, a franchised hotel that came with a global brand name paid for this exclusivity with a franchise fee, reservation charges, marketing fees and other service-related payments according to its needs, and in line with the contract made with the franchiser. So far, so good. However, this contract was made at a time when online travel agency (OTA) bookings made up less than 1% of the booking volume, so the extra commission for the likes of Expedia, booking.com or hotel.de was regarded as a quantité négligeable.
But things have changed. OTA bookings in some destinations have reached over 10%, a trend that is increasing. Where commissions were once below 10%, they now mount to 17-25% – and some intriguing advertising systems linked to it may even push this to 50%.
To make matters worse, if bookings come through the hotel reservation system, commissions come on top of the franchiser’s reservation and marketing fees. If settled with a credit card, hoteliers might find themselves in a loss position before the clients have even arrived. Some hoteliers are asking themselves why they should pay marketing and reservation fees if global brands are not able to convince clients to book through their own systems – being more loyal to the OTAs than to their brands? What are the reasons for this and what can be done about it?
Franchises left standing
While franchise companies offer their guests fancy loyalty cards, VIP floors and lounges, upgrades and countless gimmicks, they don’t beat the arguments of the OTAs: clients want better rates and the chance to compare hotels with a provision for quality ratings. OTAs have taken on board guests’ needs and wishes, and outsmarted the marketing experts from some of the biggest brands. The franchisee is paying for this obvious marketing deficit.
But there have been protests. Leading global brands have got together to create a new hotel portal, ‘Room Key’; however, this is too little, too late. OTAs like booking.com and Opodo are doing much more: they spend an average of $50-90 a day on advertising, they talk to their customers globally in more than 32 languages and employ a horde of IT specialists to create marketing tricks. What Room Key will yield is yet to be seen; this wonderful US tool has not even arrived in Europe, let alone Asia. But the worst is yet to come: linking credit card information and evaluation and reservation portals, new bidding and auction portals are starting to court hotel customers. Ever heard of ‘domain grabbing’, ‘brand bidding’ and ‘ad hijacking’? And what about names like BackBid, BookItNow, Cancelon, Hallst, Hipaway, JustBook, Room 77, Roomfair and Tingo? Hoteliers be warned.
Stand and be counted
If in the eyes of the customer, rates are the only valid differentiation, we – the hoteliers – must have made a mistake; a deadly mistake for some, but hopefully not for all. So, out of the big ten global players of the hospitality trade, where are the marketing fighters that stand against the OTA goliaths of this world? They need to make their presence felt before the likes of Google and Priceline have conquered the market, the hotels and their guests. And if they think that they can’t win, consider the old English proverb, ‘If you can’t beat them, join them’. Good things can come from working together.
