Hilton Worldwide, Marriott International, Hyatt Hotels
Corp., InterContinental Hotels Group and Choice Hotels International, have
begun offering discounted rates for loyalty members who book directly on the
brands' websites or mobile apps. The industry move, meant to project that
travelers can find the best deals with a hotel and not through third-party
channels, presents an added challenge for corporates.
"We are seeing a monumental change in behaviors and the
structure of programs, and it really concerns me," said Mary Bastrentaz,
managing director of global travel and events at Accenture. "Many of us
grew up in this industry, and we had a one-stop-shop for booking hotels, air,
limo. They never thought of going outside the system. But over the years,
certainly with the Internet but the onslaught of all the apps and the hotel and
air campaigns, it has continually chipped away, and now we are in a very
fragmented environment."
2016
corporate negotiated rates in North America increased 2.7 percent for BCD
Travel clients and more than 2.9 percent for Carlson Wagonlit Travel clients,
while hotels have started offering rates with discounts around 10 percent,
travel managers face the question of how to address the opportunity for
travel-program savings that direct booking provides.
Why Direct Booking?
Shortly after Hilton announced it would introduce preferred
pricing to HHonors members who book direct, CEO Christopher Nassetta told
investors during the company's fourth-quarter
earnings call: "The ultimate objective is … about having direct
relationships with our customers. We want them to get the best value that they
can get, get the best experience, and we obviously want to lower our
distribution costs for both ourselves and our owners."
Choice CEO Stephen Joyce spoke more candidly during Choice's
first-quarter earnings call, indicating that preferred pricing challenges
online travel agencies, which charge commissions near 20 percent. "We're
not anti-OTA, but we are not at all happy with some of their practices and we've
never been happy with their pricing," Joyce said. "It's overrated for
what they provide, and so, as we look at this going forward, one of our sole
missions is to try to limit the amount of activity going from the OTAs and
coming from [them] into our primary channels. If you look around the industry,
everybody else is doing the same thing."
Less than a week after Joyce spoke on the matter, Choice
announced it would introduce
direct booking rates to Choice Privileges members in the latter half of the
summer.
Industry players may seem to be marching in lockstep
following Hilton's lead, but Hyatt
and IHG
said their implementations were the products of pilots conducted last year. "We
kicked this off in April of 2015 in pilots," Hyatt CEO Mark Hoplamazian
explained during a recent earnings call, adding that the company tested in
seven markets in the United States and one in Australia. "We really tested
what the profile was going to look like before we decided to take it
nationally, and it was really a program focused on driving loyalty and customer
engagement."
Hyatt Gold Passport signups more than doubled year over year
in the pilot markets. He said "a clear majority" of bookings made in
those markets were from new or previously inactive loyalty customers.
Hoplamazian said the discounts are also yieldable rates, which means properties
are not required to sell the discount rates and they can decide how much to
discount.
Hilton saw marked results after the launch of its preferred
rate. "The business we received through Web-direct is higher than it's
ever been and is growing faster than ever, thanks to increasing share shift,"
Nassetta reported during Hilton's
first-quarter earnings call. "The share of Web-direct channels in our
distribution mix is growing five times that of the OTA share of growth in the
quarter."
The Corporate Travel Ripple Effect
The move to tie preferential rates to direct bookings is not
so different from the move hoteliers like Marriott
and Starwood
made in 2014 to tie free Wi-Fi to loyalty and direct booking on brand websites.
In that instance, the hoteliers faced
criticism from groups like the United Kingdom and Ireland's Institute of
Travel & Meetings for being "anti-business travel." Other
companies like Hilton
and Hyatt
also dropped Internet charges for loyalty members, but they didn't tie the
arrangement to any one booking channel.
If the industry shift toward loyalty rates is intended to
challenge the OTAs, the question is whether managed travel programs and
corporates booking through global distribution systems could once more get
caught in the crossfire. "A lot of the TMCs wish that the communication
would be a little bit clearer around lack of impact on travel management
companies," said Eric
Jongeling, Carlson Wagonlit Travel director of Americas hotel solutions. "It
creates a lot of behind-the-scenes saying, 'How does this actually impact us as
a managed travel program?'"
Hyatt at first made its rates available only to corporate
partners and third-party bookers that book directly through the hotel company's
website. The American Society of Travel Agents criticized the program, stating
that forcing agents to book directly on Hyatt's website rather than through the
GDS makes comparative shopping difficult for agents.
Hyatt has since shifted course, joining Marriott and Hilton
in making its rates available on the GDS. When IHG announced its rates on May
3, it stated, "Over the coming weeks, these rates may also be booked by
select travel partners on behalf of any IHG Rewards Club Member through
eligible channels."
As for Choice, chief commercial officer Robert McDowell said
in a statement provided to BTN:
"Given our continued focus on growing share of midweek business, we will
evaluate expansion to travel agents and plan to include input from travel
managers in our decision making process."
One travel manager, who preferred not to be identified,
previously told BTN the trend concerned him: "It confirms my
suspicions that the sales teams are not working close enough with [the loyalty
teams] to protect the integrity of the corporate rates offered. I am almost
convinced that they are trying to take our travelers from our managed programs
and push them right into their own brand.com. This tactic may seem good right
now, but long term they will hurt themselves as they hurt the relationship
between the buyer and supplier."
TripBAM founder and CEO Steve Reynolds said managed programs
could realize savings if they embrace the preferential loyalty rates.
Transparency, though, is still key. "It begs the question, if you've got a
negotiated rate and they're going to offer travelers something less, why do you
have a negotiated rate?" he added. "If the hotel across the street
gives you a better deal, can you get your travelers to shift, or because of
loyalty points are they going to keep sticking to that one property? Then you
have to quantify it. How much is it costing you? If you let your travelers do
this, how much in lost savings did that result in?"
ITW director of global travel and expense
services Cathy Sharpe said loyalty and the benefits that come with it can be an
advantage for corporate programs. "I'm piloting Triplink with Concur, and
we are working with our suppliers, working with Concur to focus on extending
loyalty programs … to include as many employees as possible," Sharpe said.
"What we really want to do with our strategic partnerships is to set their
service apart from everyone else. We are working with them to create programs
that show the ITW traveler … the value of using our strategic partners."