“Hoteliers must have a sense of the benefits their schemes offer across all the distribution channels”
Not surprisingly, perhaps, the tax policy
implications of loyalty programmes appear intentionally vague, with the consensus view that such schemes effectively offer a rebate on fares already paid, rather than a monetary reward. Tax authorities on both sides of the Atlantic, it seems, lack the will for a fight over this – at least for the present.
CHANNEL WARS But there are still plenty of players spoiling for a fight elsewhere in the hotel world – and loyalty schemes are the weapon of choice. Nearly 18 months ago, Hilton launched its biggest-ever marketing campaign under the banner ‘Stop Clicking Around’ – alerting potential hotel guests that the best deals on hotel rooms could only be found by booking directly through the chain’s own distribu- tion channels rather than a third party. Hilton’s ire was particularly directed at
the two dominant OTAs (online travel agen- cies); Expedia (
Hotels.com) and Priceline Group (
Booking.com) – which, typically, can charge 10 to 15 per cent commission on chain hotel bookings made through their portals, and between 15 and 25 per cent for independent hotels, according to travel industry analysts. To sweeten the deal, Hilton offered members of its loyalty programme special discounts when booked direct, a best available rate promise. Hilton’s move was soon followed by rival hoteliers, including Marriott, Hyatt, Choice Hotels International and IAG.
The push towards direct booking appears
to be working: in the first quarter of the year, for example, Hilton’s loyalty member- ship had grown 19 per cent year on year to 63 million, and those members accounted for 57 per cent of the group’s occupancy. Moreover, Hilton’s direct online bookings as a percentage of total bookings increased from 28 per cent the year before to 30 per cent in Q1 this year. Hilton CEO Chris Nas- setta told financial analysts: “This was the highest level ever and it is now the fastest- growing distribution channel for us.”
OTA GROWTH But the overall picture is not so clear cut. US travel research group Phocuswright says OTA hotel bookings in the US are accelerat- ing faster than the overall American hotel market. “And they’re growing even faster in the more fragmented hotel markets of Europe, Asia and elsewhere,” points out Phocuswright analyst Douglas Quinby. Yet such growth figures can be mislead-
ing: OTAs in the US still only account for just over one-fifth (22 per cent) of hotels’ gross bookings through all channels (not just online) and even less if newcom- ers such as Airbnb are included, points out Phocuswright. In Europe, a recent GBTA and Concur
survey of business travellers in Germany, the UK and France, found that at least one- third of those questioned in each country had booked directly with a travel supplier despite 60 per cent having access to an
online booking tool (OBT). One-quarter of respondents also used an OTA. The policy implications of this are spelt
out by Concur executive vice-president Mike Koetting: “Unmanaged direct book- ings can undermine travel programme benefits, policy enforcement, duty-of-care obligations and supplier contracts,” he says. Outgoing GTMC chief executive Paul
Wait is also critical of the big hotel brands’ direct booking strategy by promoting their loyalty schemes. “Hoteliers need to have a keen sense of the benefits their loyalty schemes offer across each distribution channel and that these benefits are fair,” he says. “If not, they run the risk of alienating TMCs and the corporate buyer – which will be to their cost.” Wait (who is leaving the organisation
shortly to join Southall Travel Group) believes that the major hoteliers are “in danger of destroying their relationships with TMCs”, and urges them to consider alternative measures “such as reducing supply to the OTAs and taking a more specific and targeted action that does not affect the corporate buyer”. He is supported by Adam Knights, UK managing director of travel management company ATPI Group, who argues that for hoteliers to operate effectively “they must consider the TMC’s value and expertise to deliver bookings and revenue – in short, a much more holistic approach to loyalty and rewards within the business travel community.” Yet Knights also thinks the chain hotels
are increasingly recognising the benefits of working with TMCs in order to make more effective use of loyalty scheme member- ship. “For example, if a traveller stores their
• EMBRACE HOTEL LOYALTY SCHEMES positively as they can help maintain compliance with corporate travel policies, especially when major hoteliers combine programmes across multiple brands (e.g. Marriott). Persuasion can often be more effective than coercion in achieving compliance. • WHILE AIRLINE LOYALTY SCHEMES are formally included in most
66 BBT July/August 2017
Hotel loyalty schemes – tips for buyers company travel policies, hotels
have not always been given the same recognition as the rewards have been regarded as less significant. But now the increased benefits offered by many hotel chains raises their potential value to the corporate travel budget. • EMPLOYEE LOYALTY SCHEME PROFILES should be easily accessible to the travel buyer
and TMC, so that the best rates can be automatically achieved along with the other benefits available. The data captured should be regularly assessed to ensure it meets policy targets. • BE AWARE THAT SOME HOTEL CHAINS are better than others at ensuring that special rates with loyalty benefits are available through negotiated managed programme channels.
Problems, especially with compliance, can arise when these channels are ignored. • DON’T BE DAZZLED by the marketing clout of the big hotel brands: sometimes loyalty benefits obtained with a budget chain or independent hotel group (such as free wifi, parking, and breakfast) can be more useful, especially for SMEs.
BUYINGBUSINESSTRAVEL.COM
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