Commissions paid by hotels to intermediaries have risen by more than 7% over the course of the last year.
This is according to the 2017 Trends In The Hotel Industry study from CBRE.
This is ringing alarm bells across the industry.
Not only because it eats further into hotel profits, but because it is also the clearest sign yet that we have been thinking about the booking ecosystem the wrong way around.
Most industry observers were expecting to see intermediary commissions falling. Hotels have successfully upgraded their loyalty schemes and launched new marketing campaigns to encourage guests to book directly.
The rationale goes that if customers are encouraged to book directly, and are incentivised to do so, a proportion of them will.
But this doesn’t appear to be happening. We have to look again at our assumptions because something is clearly going wrong.
It’s not wise to launch intermediaries first and add direct booking second
I think the most common error has been to underestimate the power of launching direct booking first.
Many believe that the order we launch our online booking facilities doesn’t matter; that, as a hotelier, it makes no difference whether you launch a direct booking platform first or list your rooms on third-party websites first.
But, it does make a difference. It makes a huge difference.
Because the first booking channel launched gets a head-start on building a trove of customer data, such as names, preferences, travel history, and email addresses, that can be leveraged for marketing.
In the bedroom booking space, for example, OTAs got a three-to-four year head start on direct channels.
Within a few more years, third-party websites had ownership of a wealth of customer data.
It’s now very difficult for even high-quality direct booking channels to have a major impact when they are launched.
The intermediaries are out in front, leveraging their stash of emails and data to counter hotels’ offers with clever marketing and better discounts, increasingly engaging customers in very personalised ways.
This would explain why it is difficult to reverse the rising tide on commissions.
Undoubtedly, it is also true that as intermediaries get a firmer grip on the market, they also have the power to increase their fees. But the role of data is also very big.
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