Report: Hotels Winning Battle with Online Brokers

Report: Hotels Winning Battle with Online Brokers

The war between hotels and online travel agencies is far from over, but hotel operators appear to be getting the upper hand, according to a new report by Rebecca Mowbray of the Times-Picayune (New Orleans).

The initial love affair began when, in the post-9/11 slump, hotels found that online agencies like Expedia and could fill otherwise vacant rooms. In essence, the hotels set aside a contracted amount of rooms for the brokers, which were sold at enormous discounts. The brokers then sold the rooms to their own customers at a 30-percent markup.

But the honeymoon is most decidedly over.

At a time when empty beds threatened the industry, the agreement made sense. But as business travel recovered, the hotel operators found themselves holding the bag. If room prices crept up with demand, it was the online room broker that saw its margins increase, not the hotel. Hotels had become addicted to what Mowbray calls “crack revenue” — an easy but extremely expensive means of selling rooms. And as more customers opted to book through third-party sites, the hotels feared they would lose control of properties entirely.

Renegotiating contracts wasn’t enough. The hotels needed to “train” their customers to enter the loyalty program.

Beginning last year, most of the major programs began to offer bonus incentives for booking directly through hotel Web sites — members could earn extra points, and were guaranteed the best available rates.

At the same time, the programs began “punishing” members for booking elsewhere. Today, precious few programs allow stays booked at third-party sites to earn points.

Starwood offers customers extra points if they book online, but no loyalty points if they book through an online travel agency. If customers find a better rate elsewhere, they get a 10 percent discount off the lower rate or more loyalty reward points.

Hilton offers a $50 American Express Gift Check if a customer finds a cheaper rate.

Hoteliers are pleased with the response, according to Mowbray. At Marriott, more than 75 percent of online sales now come from the company’s own Web site. Marriott, Starwood and Hilton have all had months in which bookings on their own site exceeded those from online brokers, traditional travel agencies and 1-800-calls.

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