Hotels, OTAs and Airbnb are firing up for a new war
Tuesday, August 15, 2017
By the time I finished writing the article, "Expedia, Priceline join battle against Airbnb," hotel giants Marriott and Wyndham announced bold new strategic moves:
Marriott is going to team up with Alibaba to serve Chinese tourists abroad. The deal will enable Chinese travelers to book a Marriott hotel on Alibaba's travel service platform, Fliggy, and to process payments with Alipay, Alibaba's online payment platform.
Wyndham purchased Love Home Swap for $53 million, a startup that allows people to swap homes. Moreover, Wyndham is going to consolidate its timeshare business and turn its hotel unit into a new publicly traded company.
Hotels, online travel agents (OTAs) and Airbnb are basically competing for the same type of business — accommodations for travelers who are away from home. As the competition heats up, does it mean hotels, OTAs and Airbnb are now at war against one another? Let's check out what they do when facing stiff competition.
Hotels — the long-time big player in the lodging market
Not long ago, travelers made hotel reservations over the hotels' 1-800 hotlines or in a travel agent's office. It was not until the '90s that hotels began selling rooms directly to consumers on hotel websites. That was also about the same period when OTAs started gaining popularity among consumers.
The tragedy of the 9/11 attack in 2001 made a detrimental impact on the world's tourism and lodging industry. It became difficult for hotels to fill their empty rooms, and OTAs turned into a critical distribution channel for hotels to make sales.
It did not take long, however, for hotels to realize the big price they were paying to OTAs. For every room sold on an OTA website, hotels are paying a commission — sometimes at a level of 25 percent of the hotel rate.
It was in the hotels' best interest to encourage customers to skip the middlemen (OTAs) and book directly on the hotels' websites. For instance:
- Hotels are making efforts to build strong customer relationships through their loyalty programs, aiming to get more direct business through the hotels' own distribution channels.
- In January 2012, six of the world's leading hotel companies worked together and launched a new hotel-booking website, Roomkey.com. The goal was to encourage travelers to use Roomkey.com instead of an OTA site when they plan a trip.
- It did not seem Roomkey.com was a success. Then, starting in 2016, more hotels were rolling out their "book direct" campaigns, which guaranteed travelers would get the best rates available if they booked directly on the hotels' websites.
- More recently, hotels targeted Priceline and Expedia for being a "duopoly."
Then, another competitor — room-sharing websites — entered the field, which made an innovative disruption to the lodging industry. Airbnb, for example, added millions of room inventory to the global lodging market almost overnight. Airbnb successfully attracts a large number of young travelers who are seeking unique experience in a new destination.
Hotels must find ways to fight against Airbnb, too. Besides the above strategies that are used for OTAs, which can also be used in the case of Airbnb, hotels have adopted the following approaches that are specific for Airbnb:
- A lobbying push against Airbnb
- Adding new brands with local flavors, or adding local flavors to existing brands to lure customers
- Being proactive in responding to the shifting needs of customers
Of course, we should also consider the two updates at the beginning about Marriott (and Alibaba) and Wyndham as another two new strategic moves made by hotels.
OTAs — a big distribution channel for hotels
Many OTAs began business in the late '90s. Expedia, for example, was founded in 1996, and Priceline started in 1997. Within years, OTAs became a reliable and important distribution channel for hotel sales.
OTAs are taking two major approaches in fighting against hotels and Airbnb:
- They acquired startups that were considered rivals of Airbnb and began embracing the room-sharing trends into their services. For example, Expedia purchased HomeAway.com for $3.9 billion in 2015, a key rival site of Airbnb. Then, Expedia began putting the listings on HomeAway.com on a few of the OTA websites that Expedia operates.
- Many OTAs have introduced similar reward programs to what is commonly found in hotels and airlines. That way, travelers can also be "loyal" to an OTA website.
Airbnb — the innovative disruption
Founded in August 2008, Airbnb made a disruptive impact on the traditional lodging industry. For every room that is sold on Airbnb, it could mean either a loss of business for a hotel or a loss of commission for an OTA website.
Even though it is commonly believed that Airbnb's real threat to hotels comes from its multiunit operators, Airbnb is taking the following approaches that could make even more damaging impacts on hotels and OTAs:
- Airbnb is making big efforts to attract business travelers
- Airbnb wants to be a full-service travel company rather than just a room-sharing website
A concluding remark
More than ever, hotels are taking an active approach in fighting against OTAs and Airbnb. The war among these three key players in the lodging industry has begun. Would you agree?
- 13 ways to screw up your RV
- Trails for two-wheelers: A look at the United States Bicycle Route System
- New York employees traveling to COVID-19 hotspots won’t get paid sick leave
- 6 All-American Roads that you simply can’t miss
- How the pandemic is changing employees’ summer vacation plans
- The 7 P’s marketing mix of home-sharing services: Insights from over 1 million Airbnb reviews
- The best of America’s Shakespeare festivals
- America’s 10 deadliest national parks
- Stay on track with your content marketing
- A massive no-no: Hiring to repay a favor, not because someone is the best candidate
- Has telehealth had its day? It depends on who you ask
- Is your spa menu optimized for 2020 and beyond?
- Improving in-person and remote instruction: Critical elements
See your work in future editions
Your content, Your Expertise,
Your Industry Needs YOUR Expert Voice & We've got the platform you needFind Out How