Lodging Recovery: 4 Years Away, OTAs vs. Suppliers, Google vs. TripA and Other Good Discussions

Check out the blog over at uptake.com for some good thought-provoking discussions following the PhoCusWright conference down in Orlando.

Yen does a nice job of explaining Bill Carroll, Chris Anderson and Jake Fuller's analysis of the lodging cycle and the opportunities for the OTAs. In a nutshell, look for another 4 years of pain for hoteliers and substantial continued opportunities for OTAs.

Solid musings on the potential GDS IPOs along with HomeAway, Kayak and ITA - should be a big year in travel IPOs

And what would a travel discussion be without thoughts on google and tripadvisor?

Catch all the details here including my thoughts on OTA vs. supplier.com innovation and growth. The reply below is in response to Yen's thoughts around the growth of OTAs during the last economic blip - good supply helps but innovation is critical as well:

I think the question is as much around supply vs. demand as it is innovation vs. the lack of it. Hotels.com and Expedia built their businesses just as much around great pricing as they did around great websites, content and functionality. The chains and airlines fought back and brought their sites (somewhat anyway) up to snuff. But, particularly for airlines, they have relied on booking fees charged by the OTAs as a crutch to create differentiation. With those fees now moot, is it any wonder why consumers, for the same price, aren’t booking where a better booking experience happens – the OTAs? No wonder OTA air segments are way up – which obviously feeds the hotel and car lines of business. The innovation pendulum has swung squarely to the OTAs from the suppliers. Just look at Orbitz Price Assurance for air and hotel or Travelocity’s Guarantee or Expedia’s packaging product to see how the OTAs are changing the game. The suppliers are nowhere in these customer friendly areas. Will the airlines fight back with more negatives (as they are sooo prone to do) by restricting seat assignments or frequent flyer mileage accumulation to their own websites? (Remember when hoteliers did this?) Or will they match the innovation of the OTAs and really attempt to compete? We’ll see next year."

Expedia Billboard Effect: Cornell agrees that it is real

Expedia and other OTAs have long touted what has become known in the industry as "the billboard effect" whereby they have claimed that positioning on their sites generates not only bookings through the OTA but also a halo effect on the hotels' own sites by generating brand awareness. Non-loyal consumers start many of their searches at an OTA to gain a perspective on the options available, relative costs and positioning of the hotels in a given market against one another. Then, they often check other sites to compare pricing - usually including the website of the hotel they are interested in.

Personally, I saw strong evidence of the billboard effect while I was at Starwood and Expedia has long claimed that for every booking generated on Expedia, another booking is generated on the hotel's own website.

In a new whitepaper, Cornell assistant professor Chris Anderson has measured the billboard effect with a several branded and unbranded hotels. The results are striking, particularly for the independent hotel in the test.

For the study, Prof. Anderson worked with Expedia and JHM Hotels, an ownership group with hotels under the Starwood, Marriott, Hyatt and Hilton flags to cycle specific hotels on and off of Expedia over a three month period. That is, the hotel was listed at the top of the search results when the hotel was participating on Expedia and and removed altogether from search results listings when the hotel was dark on Expedia. By the conclusion of the study, each hotel was listed on Expedia for 40 days and dark for 40 days.

The results are below:

According to the study, the hotels saw a boost in reservations ranging from 7.5% to as much as 26% for the inde hotel when they were listed on Expedia vs. when they were dark.

Prof. Anderson suggests that the branded hotels may not have seen as large of a boost because when consumers go the brand websites they are presented with other "in-chain" hotels, e.g they are searching for a Marriott but upon arriving at marriott.com they are presented not only with the Marriott they saw on Expedia but also a Courtyard where they may actually end up booking.

We'd like to see an expanded test at some point with some slightly different parameters. For example, what happens if the hotel isn't listed at the top of the search results on Expedia? Could the brand numbers be further refined if the test was conducted in markets without sister hotels nearby? What would the results look like for resort hotels? How did the booking curves differ? And the cancellation rates? Could leveraging the billboard effect actually be cheaper than buying google key words? And of, course, what do the bottom line ROIs look like after all distribution costs are taken into account. Those questions may be ripe for another study - any of you OTAs or chains reading ready to sign up? Lets talk....