Online Booking Is Making It Harder To Keep Customers Loyal

Customer loyalty is a financial asset for any enterprise that can establish it. Marketing costs are lower and loyal consumers tend to trade up when they are able.

But the ease of online booking for hotels, restaurants and the other facets of the hospitality industry are making it harder to sell potential guests on the tradeoff between loyalty and convenience. The answer would appear to be offering more convenience to more loyal customers. Surely there's an app for that. JL

Amy Zipkin reports in the New York Times:

The world of digital selling is more complex. Companies like TripAdvisor with its instant booking service and Google were transitioning to models that resemble online travel agencies. Google sees a lot of money being made down the booking funnel. Hotels want to own you as a customer.

For the past six months, Erin Gifford, a marketing director based in Washington, has traveled for business at least once a month, mostly to Boston.But she has yet to see a single reward from a hotel chain.

“I’m not big into loyalty programs,” said Ms. Gifford, who works at Cove.is, a work space provider. Instead, she books hotels on Priceline about two weeks ahead. She typically picks an area that is a 15-minute walk from her meetings and pays around $100 a night with taxes. She has never stayed at the same hotel twice.

She created this approach when new colleagues traveled to Washington for training. They lodged at the Dupont Circle Hotel one week, then moved on to the Hotel Palomar for another week before spending several weeks at an Airbnb property.

In the end, she said her hodgepodge approach, made possible by online booking, offered greater flexibility and savings than loyalty to a single chain.

As hotel groups consolidate, occupancy rates remain high and technology becomes more sophisticated, online bookings are undergoing a transformation while hotel chains compete to retain a customer’s loyalty.

“It’s a tricky transitional period,” said Christopher K. Anderson, a faculty member at the Cornell University School of Hotel Administration. The industry, he said, is adopting new technologies but at the same time the hotels are very competitive in vying for customers.

It’s not always easy to persuade them.

In a closely watched decision, the Justice Department declined to challenge Expedia’s acquisition of Orbitz last September, saying that it was “not likely to substantially lessen competition or harm U.S. consumers.”

The Expedia umbrella already included the booking sites Hotels.com, Hotwire.com, Trivago.com and Travelocity.com. Customers who use them typically do not accrue loyalty points, and the sites charge hotels commissions for any bookings.

“The world of digital selling is more complex for hoteliers,” Mr. Anderson said, adding that companies like TripAdvisor with its instant booking service and Google were transitioning to models that resemble online travel agencies.

The move to third-party sites has proved hard for hotel chains to ignore. In June, TripAdvisor announced an agreement with Marriott that allows travelers shopping for hotel rooms on its site to book directly at any of Marriott’s 4,200 properties worldwide without leaving the website.

TripAdvisor said more recently that it had added partnerships with the Priceline Group to include its Booking.com brand, with 840,000 properties worldwide. The site has also signed other hotel partners including Wyndham Worldwide, Hyatt Hotels and Carlson Rezidor Hotel Group, all of which do not offer reward points through TripAdvisor.

Google started a program last fall called Google Hotel Ads, which allows travelers to book on a personal computer, tablet or smartphone.

“Google sees a lot of money being made down the booking funnel,” said Douglas Quinby, vice president for research at Phocuswright, a travel industry research firm. Priceline and Expedia advertise extensively through the Google service.

Hotel chains have their own booking site called Room Key, which has 73,000 properties globally across 100 brands. It was started in 2012 by six hotel companies: Choice, Hilton, Hyatt, Marriott, Intercontinental Hotel Group and Wyndham.

Unlike the heavily advertised booking sites, Room Key is relatively low profile. “We don’t spend a lot of media money,” said Steven Sickel, interim chief executive of Room Key.

A guest who shops on one of the founding companies’ websites, but chooses not to book on that site, will be directed to Room Key and will still receive the lowest price, Mr. Sickel said.

Still, some believe booking directly with a hotel is a prudent strategy. Marc A. Hoffman, chief operating officer of Sunstone Hotel Investors, is one. “You get much more positive service by booking direct,” he said, including loyalty points, specific room types and views.

Scott Shugrue subscribes to that, but only to a point. He is based in Boston and is a product manager at Liquid, a mobile advertising subsidiary of Publishers Clearing House. He estimates he travels 30 percent of the time for business.

He said he belonged to Hilton’s and Marriott’s loyalty programs, and enjoyed room upgrades and additional benefits if they were available, but choosing to stay at one of their hotels is not an automatic decision.

“What it comes down to is the price, where the meetings are, what I’m doing the next day,” he said. In late December, for example, he said he opted for a boutique hotel in Manhattan for meetings and a chain hotel on Long Island for a company party.

For all the possibilities online booking offers, sometimes having hotel loyalty status is a necessity, as A. Blayne Candy, co-founder of Showcall, an events production company in Washington, found out.

He had a last-minute business trip to San Francisco in early January and “availability was coming up nil,” he said. Through the Starwood loyalty program he was able to secure a room.

“The hotels want to own you as a customer,“ said Steven Carvell, associate dean for academic affairs at the Cornell hotel administration school.