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Vladimir Ilyich Lenin's 1902 classic

Speaking of revolution, in 1902 Vladimir Ilyich Lenin published “What Is to Be Done? Burning Questions of Our Movement”.  It was intended in part to mark the end of one period of political development in Russia and to give practical tips for what was needed next.  So not very different from this post…

This might seem like the farthest thing from hospitality marketing and distribution, but actually the parallels are striking.  After a period of turmoil and the rise of alternatives to direct sales and classical GDS — such as Google, OTAs, Metas, and media-commerce entities like TripAdvisor – hoteliers are plagued by symptoms similar to what Lenin described as “disunity, dissolution, and vacillation”.

Lately, new questions face hoteliers every day:

  • Google – paid search or booking commissions or both?
  • OTAs – straight or pay for premium display?
  • Metas – Kayak, Trivago, the smaller ankle biters or all of them?
  • TripAdvisor — meta referrals or Instant Booking or both?

In addition, these questions are clouded by organizational disputes.  Some brands may have PPC campaigns under marketing, while OTAs fall under distribution/revenue management, and special media-commerce offers are left to individual properties.  Groups, corporate and other “structured” demand may fall within sales, while with respect to OTAs, merchant rate deals (AKA classic Expedia) are handled by different people than retail commission deals (AKA Booking.com).

With all the departmental barriers, you can imagine the drama when TripAdvisor knocked on the door offering both PPC and Instant Booking options…  In a similar development, “Book on Google” was also a bracing development, but as everybody knows “what’s good for Google is good for America”.  Furthermore, being able to get wide distribution on Google is a nice strategic counter point in negotiations with OTAs, and managing a CPA/commissionable program is less risky than PPC campaigns, so on one hand hoteliers seem generally at peace with “Book on Google”.

On the other hand, the TripAdvisor Instant Booking question is one that both brands and independents pose more often and more sharply.  To answer that question, we need to acknowledge, much like Lenin, that a discontinuity has occurred and it poses burning questions for hoteliers.  The first hard notion to accept is that the old departmental divisions don’t make a lot a sense.

For transient/FIT business, the distinction between PPC (search and metasearch) and distribution (OTA merchant rates and commissions) never made much sense and makes even less now.  Hoteliers need to be looking at the all-in costs of putting heads in beds.  As shown in the Fall 2015 issues of Hospitality Upgrade (Hospitality Demand Generation Trends and Opportunity Costs) the all-in costs of a PPC-driven booking are remarkably similar to an OTA commission.

Failing to understand that, you might fall prey to silly arguments against TripAdvisor Instant Booking such as “but it’s additional unbudgeted spend” or even less logical, “the conversions are low so ROI must not be good”.

Let’s address those myths head on:

  • First, no, getting rooms filled through TripAdvisor’s Instant Booking is not “additional spend”. As long as you’re keeping your channels open, paying a commission to Booking or Expedia is not different than paying it to TripAdvisor.  If anything, a new entrant might help the market be a little more competitive and arguably prevent commissions from raising as fast as they otherwise might.
  • Second precisely because it’s a CPA/commission based product whether conversions are one way or another is largely immaterial since the commission is only paid upon conversion and hoteliers with any sense will have negotiated a commission due only for net (not canceled) bookings.

That said, there are also “early bird gets the worm” arguments for opting in favor of TripAdvisor’s Instant Booking sooner rather than later:

  • For your average independent hotel, Instant Booking CPA is less than or close to 12%. Getting the same exact booking from a main line OTA is likely to cost 16%.  So striking while it’s hot and getting a long term deal with TripAdvisor at 12% is an obvious plus.
  • Another argument is that if your hotel is on Booking.com, chances are you are already participating in Instant Booking. So if Booking.com is selling your hotel on Instant Booking, why wouldn’t you?
  • Finally, there’s an argument for cutting a deal while TripAdvisor is still trying to push this feature rather than wait until it’s fully established. If you negotiate today you’re likely to get commission rates that are at least 5% less than traditional retail commission rates.  If you wait too long, it’s likely that by the time you want in market competition will have driven the rates up.

Netting it all down, whether for strategic reasons or commissions savings or both, now is a good time to join TripAdvisor’s Instant Booking.

Also published as an Hospitality Upgrade Tech Talk