Travelers getting ready to head out on their summer vacation need travel options, including airline tickets and car rentals, but they also require a place to stay. Although all the major hotel brands have their own dedicated booking sites, they generally are not enjoying the same level of success that broad-based online travel agencies enjoy. Part of the reason seems to be that these latter service providers essentially are marketing agencies, and they are very good at what they do.
For example, Expedia (which owns several brands, including Trivago, Orbitz, Hotels.com, and Hotwire) ranks as the 25th biggest advertiser in the United States, spending an estimated $1.6 billion to market its various brands and services. In this marketing, it makes sure to differentiate the offers of its various brands, such that Trivago provides insights into prices but cannot complete a booking for users; Hotels.com is, obviously, focused solely on accommodations, rather than enabling travelers to cover all their tourism needs in one place.
By maintaining multiple brands that perform different functions, the major booking sites can perform another key marketing task: detailed market analysis. They experiment with various promotions, communications, and links on the different sites, then measure the results to find the best options. In addition, evidence gathered from the market has led some sites to expand or revise their offerings. TripAdvisor has a great reputation as a review site; it currently is seeking to gain a foothold as a booking resource too.
Using spokespeople who are either famous already (e.g., William Shatner for Priceline) or quickly become so (e.g., the “Trivago guy”), the marketing efforts also spark substantial customer engagement, as evidenced by the word of mouth that people share. On a measure of “offline brand sharing,” or talking about the brand with friends in person, travel sites consistently rank higher than brands for most other industries, such as retailers, media firms, or automotive dealers.
Such sophisticated and substantial efforts by booking sites also appear in combination with their relatively low costs, especially compared with the hotel chains that actually maintain the products. Companies such as Marriott and Hilton would likely love to spend as much as their online counterparts on marketing, but they have cost commitments related to maintaining their properties and paying their thousands of staff members to consider as well. Still, they are unlikely to give up the competition, because when guests book through the travel sites, the hotels wind up paying commissions that can reach 30 percent of the guests’ payment. Therefore, dedicated sites often promise that they offer the lowest rates, lower than what anyone would be able to find on a booking site. But in that case, the hotel limits its own pricing flexibility, and it also enters into a direct price competition with other chains.
- List the strategic competitive advantages possessed by online booking sites. What could hotel brands do to overcome these advantages, if anything?
Source: E.J. Schultz and Adrianne Pasquarelli, “Online Travel Agencies Go on $ummer $pending $pree,” Advertising Age, June 28, 2017