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Making Peace With Disruptors

Making Peace With Disruptors

This op-ed by Magid’s Vice President, Strategy Consultant, Rick Garlick originally ran on Hotel Online.

When TripAdvisor was first founded in 2000, it was created with the intent of being a travel information site. While the original focus was on professional content, it soon found itself to be the social media site of choice for user-generated travel reviews. Of course, this transparency was not always welcomed by hotel chains. It used to be that hotels could maintain control over the guest feedback process through their internal guest surveys, comment cards, and escalated complaint process. However, TripAdvisor was a very visible resource for guests to bare their hotel experiences, positive and negative, in a public manner. As a result, TripAdvisor was frequently seen as more of a thorn in the side rather than a welcome source of information by hotels and their parent brands.

Things started to change as hotel brands placed greater importance on social feedback. In fact, some chains today place as much, or more, importance on TripAdvisor feedback as they do their own internal surveys and feedback tools. Many proprietary guest surveys include a link to TripAdvisor to leave public feedback. As TripAdvisor will not allow hotels to cherry pick who gets to go to their site from a guest survey link, the volume of reviews is increased, along with the validity of the information. Since most hotel stays are positive, many properties and chains have benefitted from the increased, more representative volume of public guest feedback. This is a great example of how hotels learned to work in partnership with a one-time disruptor to their advantage.

Now, times are changing again. In an effort to continually create value for its shareholders, TripAdvisor has now become a direct booking site for hotels rather than simply a travel review site. There are many who feel that ‘TripAdvisor has become an OTA’ (e.g., online travel agency). TripAdvisor argues that it is not an OTA because the confirmation and post-sales customer service is provided by the hotel. However, TripAdvisor charges a commission for the booking, and actively pursues customers to book on TripAdvisor rather than having a direct relationship with the hotel or brand. Given how much effort hotel brands are putting into campaigns that promote booking directly, this once again potentially puts TripAdvisor back in the frenemy category.

Can’t live with them, can’t live without them
Of course, OTAs are here to stay. Both Expedia and Booking Holdings (formerly Priceline) drive around $60 billion in annual revenues and dominate the market. OTAs argue they are important distribution channels that provide visibility, and ultimately revenues, for all of the major brands as well as independents. Hotel brands claim they are overpaying commissions and some are trying to renegotiate their deals. With TripAdvisor entering the fray, this is just one more potential source of revenue loss for hotels through paying commissions.

The answer is ultimately to find some middle ground so that both sides can prosper to the maximum degree. Just as TripAdvisor went from being a place where you could see a hotel’s dirty laundry (both literally and figuratively) to a strategic partner, there is an opportunity for OTAs and hotel brands to work more collaboratively with each other. OTAs clearly have the marketing power brands need, whereas the hotels have the power to access the guest directly. It may be that OTAs will have to accommodate the hotels’ request for a lower commission structure, based on the overall value of the business. It doesn’t help anyone when a large chain, such as Hyatt, gets into standoff with Expedia, such as it did a few years ago. Hyatt lost the advantage of a powerful distribution channel while Expedia lost the opportunity to drive revenues from a prominent brand. The standoff approach ultimately benefits no one.

Online travel sites, including TripAdvisor, have technology and marketing power that most hotel brands can only envy. As more and more people are booking online, driving search engines to help find that ideal hotel experience is an area where hotels and OTAs can work more collaboratively. OTAs also appear to have a unique ability to create travel packages, which hotels, airlines, and others are working toward, but perhaps don’t have the marketing gravitas to effectively create awareness.

Of course, the person who ultimately benefits the most is the consumer. With more channels available to book hotels both directly and indirectly, the customer can choose whichever is most convenient, or attractive. With OTAs, and TripAdvisor, you get the benefit of being able to cross shop and link purchases to informational content. With direct booking, you are able to realize all of the benefits that come with being a loyalty program member and have the opportunity to deal with the hotel directly if there is a problem or conflict. Perhaps that competition is why the guest experience is better today than ever before. Not only have products and services improved, but there are far more tools available to match the right customer with the right offering. This is again, an area where the TripAdvisors, Expedia and Booking.coms of the world ultimately drive guest satisfaction. Information is a powerful resource for choosing well. A good choice raises the likelihood of a return visit or a recommendation.

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