Hotels Up 'Member' Discounts to Battle Travel Websites
July 07 2016 - 12:34PM
Dow Jones News
By Drew FitzGerald
Major hotel operators including Hilton Worldwide Holdings Inc.
and Marriott International Inc. are taking a new tack to reduce
payments to fast-growing online travel websites: lower prices to
direct-purchase customers.
The chains have started offering exclusive discounts as high as
25% this year to members of their loyalty programs who book through
the hotels' own websites, a bid to avoid double-digit commissions
charged to the hotels by online travel agents like Expedia Inc. and
Priceline Group Inc.
Hilton launched an advertising campaign earlier this year to
convince guests to "stop clicking around" and book stays through
Hilton's website or app. The promotion is closely tied to the
hotelier's loyalty club, which offers members discounts of up to
10%. "It's time to be aggressive, " said Geraldine Calpin, Hilton's
chief marketing officer. "Now, we go big on marketing."
Although the hotels advertise the "member rates" or "exclusive
discounts" broadly, they are technically only available to the
millions who have signed up for their loyalty programs, which means
the hotel brands don't have to provide the same discounts to online
travel sites.
The contracts that hotels sign with third-party websites often
prevent them from offering lower rates on their own sites, though
hotel brands say they are free to offer the discounts to members of
their loyalty programs.
In the past, most loyalty programs only offered perks like free
Wi-Fi service, room upgrades and rewards points. This year, hotels
started offering the discounted rates at RoomKey.com, a travel site
several own.
Expedia, which owns travel portals including Hotels.com, Orbitz
and its namesake website, has responded by penalizing hotels that
publicize loyalty discounts by pushing those chains' search results
lower on its own website. A Priceline spokeswoman declined to
comment.
"The owners are going to be the ones to pay the price for the
discounting strategy," said Cyril Ranque, president of lodging
partner services at Expedia. "We believe that it's not a
sustainable situation," referring to the loyalty discounts.
Choice Hotels International Inc. started testing its "member
rate" in June after a string of competitors rolled out their own
discounts. Like Hilton and Hyatt Hotels Corp., Choice offers
members up to 10% off at some hotels. The Marriott rewards program
discounts range from 2% on weekdays to 5% on weekends. Wyndham
Worldwide Corp. offers up to 25% off standard rates, but only on
bookings made through September. Hilton's discounts also ratchet up
to 30% this summer.
The moves step up the tug of war between hotel brands, which
have tried for years to convince guests to book through their own
apps, and websites such as Expedia and Priceline that have been
gaining a greater share of hotel bookings. Investment funds and
franchisees that actually own the properties are caught in the
middle.
Bob Habeeb, chief executive of First Hospitality Group Inc., a
Midwest hotel operator that runs 53 hotels for other brands, said
hotel brand owners know they have to appeal to price-sensitive
customers and "get real with bottom-line pricing."
Online travel agents captured about 15% of U.S. net bookings
last year, up from 11% in 2010, according to market researcher
Kalibri Labs LLC. About 19% of bookings are made through hotels'
own websites and apps. The rest come from corporate travel agents,
group bookers and offline channels. Outside the U.S., where
independent hotels dominate, online travel websites make up an even
bigger share of the business.
Priceline's total room-night reservations rose 25% last year.
Expedia clocked 36% room-night growth in 2015 after a string of
acquisitions.
The travel websites' popularity has put hotel brands in a bind.
They need the sales that the sites provide, but each new
reservation chips into the hoteliers' profitability. Marriott,
Hilton and Starwood Hotels & Resorts Worldwide Inc. all say in
regulatory filings that the online travel agencies could cut into
their revenue.
"Some internet reservation intermediaries are attempting to
commoditize hotel rooms by increasing the importance of price and
general indicators of quality (such as 'three-star downtown hotel')
at the expense of brand identification," Starwood said in its
annual filing to securities regulators.
InterContinental Hotels Group PLC beat the rush by testing
discounts as early as 2014. Chief Commercial Officer Keith Barr
said he wasn't worried about fraying ties with online travel sites.
"There always will be tension at the end of the day," Mr. Barr
said. "That exists in any sort of supplier-vendor
relationship."
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com
(END) Dow Jones Newswires
July 07, 2016 12:19 ET (16:19 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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