How hotels can avoid marketing "traps"
Hoteliers have been reacting to the official rollout of TripAdvisor's Sponsored Placements, with some gladly welcoming the new slots - and with others, like one hotelier we spoke to, accusing the metasearch site of "double-dipping" in hotels' advertising spend.
It's not the first time such a scheme has been met with divided opinion. The Booking Genius programme, for example, is held by some hotels to provide a valuable segment of incremental bookings, but has been criticized by others for cannibalizing bookings and engendering loyalty for Booking.com at the expense of the hotel.
So, when how can hoteliers know when to take part in new OTA or metasearch schemes - and when to abstain? Is it possible for such programmes to serve the interests of both the hotel and the third party? Let's take a look at some examples.
This week, we spoke to a Canadian hotelier about their battle to remove their hotel from one of the major OTAs' member pricing schemes.
"It was a fight to remove this clause from our contract, but I can't wait to see the results," the hotelier, who did not want to be named, told us. "Why do hotels offer 10% discounts off the rack for OTA customers? Not to mention the commission cost on top of that. I get baffled by other hoteliers who sign up for these traps. It is all false ROI."
Hoteliers take part in programmes such as Booking Genius often for reasons like filling low-occupancy dates, or accessing a supposedly higher-quality group of guests from the OTAs' frequent traveler programmes. Chief Tease Charlie Osmond, though, warns of the 'perverse incentives' that can actually lead to the hotelier losing out.
"What we're seeing is, as soon as a hotelier gives e.g. Booking.com the ability to charge a lower rate to their closed user group, Booking.com suddenly have an incentive to actually increase their competition with the hotel. They know that they'll convert guests better, as they have a lower rate. Now they've got an incentive to go and spend more money on Google ads and bring people to Booking.com," Charlie tells us. "The immediate positive impact of increased bookings from OTA member rates is often offset by the negative hit hotels take on their AdWord pricing."
In general, it's probably not a great idea to knowingly allow cheaper rates to be distributed on other websites - even if they are only shown to closed user groups. The impact can be hidden, or negatively affect you where you don't expect it.
Single-channel schemes often blinker your view of your wider cost of acquisition. While taking part in e.g. Booking Genius may make your Booking.com conversion figures look better, it may inadvertently be making your Google AdWord spend much worse. Taking a holistic view of your total spend is crucial - and the same is true when it comes to advertising.
TripAdvisor: Mixed motivations
Not long ago, we wrote about TripAdvisor's new advertising slots and the calculation hoteliers need to make to decide whether they're worth it. While the ads provide a great opportunity for properties to get in front of guests before they've chosen a purchasing channel, hoteliers need to be careful that they don't end up increasing their OTA commission spend without a sufficient increase in booking revenue to balance it out.
"There's no guarantee that by promoting your hotel with a Sponsored Placement that the guest will book direct," says Joanna Ziolkowska, Senior Online Advertising Strategist at 80 DAYS. "If you're going to run a Sponsored Placement, make use of metasearch advertising too and ensure you have rate parity - else you could be paying to promote your property online to lose out on a direct booking at the last moment to an OTA."
It looks like many hotels using Sponsored Placements are not yet using them in combination with TripAdvisor's metasearch offering. Hoteliers in this position will need to decide if the increased exposure is worth the potential increase in commission fees.
To some hoteliers, the new ads are more than a risk - they're a cynical move.
"The setup of Sponsored Placements demonstrates yet again that TripAdvisor is 'double dipping,'" the same Canadian hotelier told us this week. "They [TripAdvisor] charge hoteliers an annual business fee while allowing OTAs to bid on top placement for the TripAdvisor booking engine."
The conjunction of straightforward listings/review site with metasearch engine is what makes TripAdvisor's business model contentious for some hotels. TripAdvisor's reputational heft among travellers makes it almost inconceivable for a hotel not to have a listing. A recent ComScore study, paid for by TripAdvisor, found that TripAdvisor is the 'most visited' travel site before booking. Hoteliers aren't ignoring that kind of influence (regardless of whether the inclusion of Google and Facebook in the ComScore study would have skewed the results, as Skift point out).
Alongside this, though, you have TripAdvisor's metasearch offering - which is dominated by OTA advertising spend. While a recent study from Pace Dimensions notes that hotel websites fare better on TripAdvisor's metasearch compared to Kayak, trivago or Skyscanner, it can't be ignored that Booking Holdings and Expedia together outspend all hotel brands combined. Hotels can pay for their annual business listing - and now, with Sponsored Placements, can pay for that listing to feature prominently in search results - but unless they are also bidding on TripAdvisor's metasearch, any immediately influenced bookings are likely to go to an OTA.
"I think a big issue here is the brand integrity and positioning of TripAdvisor," says Mark Forrester, Chairman of 80 DAYS. "Are they a review website any more? As they become more like accommodation booking engines, will they lose the unique positioning that they currently have?"
"TripAdvisor's Sponsored Placements are an obvious monetization opportunity for TripAdvisor, but I do feel there's a risk they could tarnish the trust guests have in their review quality and objectivity," continues Sam Weston, 80 DAYS' Marketing Manager. "They could well be helpful to hoteliers looking to stand out in their respective destinations, but it needs to be absolutely clear where an advert is sponsored so they don't work against the guest."
The value of Sponsored Placements to your hotel will depend on both who you are trying to target and how else you are using TripAdvisor. Success stories on TripAdvisor's website include hoteliers using the ads in conjunction with, for example, Business Advantage features, allowing guests to 'click-to-call' and navigate directly through to the hotel website. If you are already investing in metasearch with TripAdvisor, then it may well make financial sense to invest some of the money you save in OTA commissions on prominent ad placements in order to draw in new visitors.
And, while many are put off by the seemingly high cost of metasearch, it could be beneficial to take a holistic view of your marketing spend before investing in the ads without investing in meta first. We're reminded of Deutsche Hospitality's Dr Jan Sammeck at the Direct Booking Summit: Europe in 2017, when he suggested that not being on meta was "leaving money on the table."
When it comes to deciding on new OTA or metasearch schemes, it's crucial to look across your total spend rather than siloing into advertising, metasearch and distribution. What adds value in one area may detract in another. The 'right' balance will be individual to every hotel, with one property's 'trap' being another one's treasure.