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A New Era for OTAs

The big online travel agent players are changing their rhetoric in response to shifts in consumer behavior. Will that change their relationships with hotel partners?

Tuesday, March 06, 2012
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Tension between hotels and online travel agencies has been palpable for the past several years, as the Web distribution marketplace has seen heated competition both online, through the battle for booking revenue, and off, through business negotiations and legal disputes. But as economic purse strings have loosened, consumer demand has risen, and hotels themselves have become more savvy in corralling their own direct customers, several of the major online travel brands have changed their game to reflect what they see as the current state of the business.

In each of these cases, the OTA players have softened their competitive – and in some cases, antagonistic – rhetoric in their consumer-facing advertising channels. Their new strategy appears to extend an olive branch to their hotel partners in recognition of the fact that potential guests can be overwhelmed by the travel shopping process, and if both OTA and hotels are going to be successful in attracting these customers for mutual gain, the competition needs to shift more toward cooperation.

Hotels.com recent rebranded, signifying what the global online travel giant believes is an important shift in the online marketplace. The three-phased approach first focused on a new logo and company identity; followed then by structural changes to the site; and finally, its public image through marketing channels.

“Because the online travel space is obviously highly competitive, the new brand is a way for us to differentiate,” says Vic Walia, senior director of global brand advertising for hotels.com. “Our story is that we are focused on hotels, unlike competitors that are great superstores for all travel needs. Our slogan is ‘finding you the perfect place is all we do,’ and we want to be known in the consumer space as a service that can get the best hotel for every traveler’s trip.”

The site itself was overhauled to reflect that personal touch, which is the core of hotels.com’s entire new messaging. Walia explains that the previous site, as well as many of its competitors, are very “corporate, stark experiences.” The goal was to change the look so it reflected the thousands of employees that make up the hotels.com team, creating content, handling bookings and running customer service, rather than just being an empty transaction portal.

“We want to be sure that human touch is communicated,” he adds.

The third prong of hotels.com’s rebrand is perhaps the most important for hotels themselves. Because of the way several OTAs television commercials portrayed the value of their services as the best way to get a good deal, rather than a good room, hotels understandably were upset by the way this advertisement style misconstrued their business goals, and in many cases made them feel depicted as a bad guy.

“The OTAs have done a wonderful job convincing the consumer they have some special rate, and everyone has too many rooms,” says John Davis, CEO of Room Key.

However, hotels.com’s spokesperson, SMART, has now changed his persona from a savvy consumer (some might say smug) to a hotel concierge. Rather than simply bragging to his friends and family about what a great deal he got, SMART’s new persona takes on the role of a hotel employee, trying to help travelers have a great vacation, not just get a good deal.

“We want to expose consumers the mythological or metaphorical world of shopping at hotels.com,” says Walia. “Moving to CGI from claymation allows us to create these fantastical worlds, and SMART’s role has changed from casual fan to hotel concierge who helps travelers find the perfect place. We rely on our partners and their inventory, so we are trying to take more of a holistic approach and not be overly controversial in the space.”

Other OTAs have followed suit. Expedia no longer proposes it has special rates, and has shifted its spokespeople to celebrities talking about finding good packages, rather than an anonymous traveler giving tips on how to beat the hotels’ pricey system.

And, after 14 years, the Priceline Negotiator is dead. Literally. The company’s new campaign centers on ease and efficiency of booking rather than taking time, energy and risk to negotiate for the lowest price.

“People don’t need more options, they need better options,” says Noreen Henry, senior vice president of global partner services for Travelocity. “Our job is to inspire customers to travel.”

The takeaway from all this is that OTAs are now publicly projecting their job as complementary to hotels, not competitive. The tension in OTA/hotel relationships – particularly during the recession – are certainly justifiable, but at the core, online intermediaries are meant to be incremental business. Especially considering the relatively small percentage of overall bookings OTAs represent, it’s easy to wonder how the opposition became so strong.

“The types of packages we offer allow for longer length of stay, for example, which is what OTAs provide for consumer AND hotel,” says Nick Graham, senior director of market management for Expedia. “The innovation in the industry is incredibly exciting right now, and through all these muddy waters, need partners.”

So what does this change for hotels? Nothing really. They still have to continue to remind themselves that THEY control their inventory, not the OTAs. However, the OTAs taking this consumer-facing initiative will be good for hotels if they are savvy with their rate management and rooms distribution.

“The definition of competition and cooperation is getting more mixed; we to some extent compete with Google because we want the same customers, but we need to work with Google to get consumer demand,” said Dara Khosrowshahi, president & CEO of Expedia, this past December in our interview with him during the company’s Partners Service Group conference. “We compete against metasearch, we use it. We compete against Google, but we use it. I imagine a hotel might think of us the same way. There will be a lot of overlap, and we have to get comfortable with it.”

Will hotels take the peace offering, or will they try to take advantage of this changing marketplace to crush these online intermediaries out of spite for past transgressions? Given the budget and innovative expertise these companies have, the latter would be a considerable challenge. But after so many years of perceived attack, hotels may not be willing to accept a more cordial culture. Time will tell.

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