Direct channel vs intermediaries… The battle has begun online and it seems that marketing has become a weapon that is constantly gaining strength: a study claims that during 2014 for largest part of advertising investment will come from OTAs. Today we will analyse with Tomeu Vich, head of ecommerce and online distribution at Valentin Hotels, his vision and hotel distribution strategy in the current online tourist scene.
In the case of Valentín hotels, and after searching in Google, we can see marketing actions, like an SEM campaign, that have aided the direct channel in the search engines.
Does Valentín Hotels rely on marketing for the race to the first places?
We try to. We are starting to allocate resources to promote sales through our direct channel, as by just carrying out basic campaigns, like protecting the trade mark “Valentin Hotels” or the name of each or our hotels, we see that we can achieve a return that involves a cost that is infinitely lower than the commission payments to OTAs.
Not only do we have to have a presence in the digital media, we also have to invest part of our time going after some of the OTAs.
Secondly and hot on the heels of the powerful Booking, is it complicated to stay ahead in the competition for first place?
Sadly it is very complicated. They all have a strong desire to sell and some of them, in their bid to be first in sales and attracting the most clients forget their profit margins, destroying the price and rate competitively between channels, this seriously penalizes the sales through one’s own direct channel. Not only do we have to have a presence in the digital media, we also have to invest part of our time going after some of the OTAs that don’t respect the sales margins and could ruin all the advertising investment made, specially B2B channels with whom there is no direct contact and that are fed through third parties.
What else does Valentin offer through their direct cannel?
We are presently implementing fidelity options, being able to have direct contact with the clients, being able to keep them up to date with news, offers, etc., through social media, email marketing, among others.
We also offer a series of extras to clients that book through our website. These suppose a small cost to us but the client really appreciates them, like for example:
- Free parking at the hotel
- Free Wi-Fi
- Fruit basket and water on their arrival
A second phase that we have in mind is to become part of the meta-search engines, showing rates and availability as if we were just another OTA, we must point out that it is a risky option, as we first have to be sure to keep competitive rates with the rest of the OTAs that feed the meta-search engines, otherwise the investment would be wasted as clients tend to book the best rate on offer.
It is hard to build loyalty if you do not have a good base for rate competitiveness
Loyalty schemes…Also a weapon for future bookings through the direct channel. Who gains more loyalty, the direct client or the intermediary?
These days there is a bit of everything, specially taking into account the economic climate around us, where, more and more people are looking to the internet and end up booking the room at the cheapest price. It is hard to build loyalty if you do not have a good base for rate competitiveness. What is more, clients that you thought were loyal, surprise you when they tell you they booked through another because they found a much cheaper offer than on your own website.
Parity is a great enemy of hotels. In the last few weeks it’s been on the news that the French minister of economy took legal action against Booking. Arnaud Montebourg has questioned the price parity clause enforced by the website belonging to Priceline. This price parity clause, though avoided by many hotels, constituted, up until now a clear, standardized contractual framework for consumers and made the life of hoteliers that bit easier.
If the abolition goes ahead, not just in France but in Spain as well, what would be the consequences of this change in paradigm?
A lot of direct sales would be lost and the hotel wouldn’t have the chance to increase their average price, as it would start a price war among the different providers. The hotels would not only have to compete against other hotels in the area, but would also have to compete against the online agencies to release the most economic rates as their only sales trick, decreasing profit and therefore calling into question profitability.
It would also directly affect the TTOO and retail agencies who would be the most affected, as they have additional costs (catalogues, travel agency commission, resort guides, etc.).