Hotel Industry Blog

Booking buttons from the channels - proof of the power of direct booking

By Des O'Mahony | On Thu, January 22, 2009

The big name third party accommodation channels have served an important role in the online travel arena. In the years when search engines were only beginning (Google started in late ‘98) and hotels did not have the knowledge to market themselves properly online, third party channels were the very necessary middle-man between the online booker and the accommodation provider, facilitating indirect booking. Their generally high commission charges were justified by the delivery of business that otherwise was lost to the hotel.

As direct search moved to dominance, as online bookers became more savvy and in particular as hotels embrace online marketing, the need for customers to use third parties is rapidly diminishing and the opportunity for direct booking between customer to hotel is rapidly rising. Not only can this direct booking model providing better value for the online customer, it is also helping hotels strongly reduce their commission charges while allowing them build their own brand allegiance online to capture repeat business.

Bookassist was the first to push this direct booking model for hotels, since its foundation in 1999, constantly highlighting its growth and its importance as the key booking strategy for hotels. An average of 50% of hotel business is now generated online, and the more of this that comes direct, the better for the hotel.

In this changing environment, third party channels are beginning to recognise this shift in consumer habits which will begin to erode their indirect booking income stream. In recent months, two large third party accommodation channel sites have launched booking services of sorts to allow hotels capture bookings directly on their own websites, and others will surely follow. If anything proves the rising dominance of direct bookings on hotel websites versus indirect bookings on third party channels, it is the launch of these services by third parties. Hotels should recognise the reality in this move.

Typically, the third party offering has taken the form of a button or simple form which the hotel can embed on its website. The customer clicks to book and is taken back to the third party channel to complete the booking.

This is bad news for hotels, and here’s why.

A booking button, form or link-off service to a third party channel is not a direct booking facility. It merely cannibalises the business that has already arrived directly at the hotel and which should be serviced by the hotel. The facility seriously devalues the service presented to the customer in the hotel’s name, leaving the customer with a “passed over” feeling that the hotel would rather not deal with them. Usually, there is no way to continue navigating throughout the hotel website or returning to it with a single click. Customers can be re-directed to third party channel website where offers from other providers are displayed. Hotels will likely find it extremely difficult to request upgrades or new features and the technology will be limited, since this does not represent core business for the third party channel.

A booking button, form or link-off service to a third party channel is not a direct booking strategy. Direct booking is about more than a booking facility, it should be a key strategy to drive an increasing percentage of your online business to the hotel website and as such the booking facility chosen is only a small part of that. What a third party channel cannot and (for obvious reasons) will not do is aid the hotel in building a direct online marketing strategy and in reducing their reliance on high commission third party fees. This is where the long term damage can occur for hotels that do not adopt their own direct booking strategies.

We view this move by third party channels as a strategic move to increase control on the hotels as those hotels become more and more aware of the importance of direct distribution strategies and online marketing, and to placate hotels considering a direct strategy into thinking that their third party channel can provide one.

The fact is that while third parties can and do deliver valuable business to hotels, they are none the less in competition with the hotel website online. Using third party “direct” booking facilities can mean allowing those channels to have full information on the hotel’s inventory, pricing strategies and yield strategies, as well as full access to the hotels customer’s database. Such information could allow a third party channel to assess everything happening on a hotel website in comparison with a hotel’s direct competitors.

Our advice for hotels is that they can still work with third parties on channel distribution, but when it comes to their direct distribution they should partner with a true technology company that understands their challenges and requirements, a company that shares the same goals as the hotels themselves: to build the hotel’s own brand, to handle the customer online with the highest level of service and security, to make hotel websites the primary distribution channel with the lowest commission rate possible and the highest margin for the hotel.

Authors
Dr Des O’Mahony is co-founder & Managing Director of Bookassist, Yahya Fetchati is Head of Business and Operations at Bookassist.

Labels: sem, pricing, brand, booking systems

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