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Hotels and online travel sites battle on discounts

Annie Baxter Jul 11, 2016
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Hotels have to pay online travel agencies like Expedia, Travelocity and Priceline commissions that can range from 13-35 percent.
William Thomas Cain/Getty Images

Online travel agencies like Expedia, Travelocity and Priceline have grown in influence in recent years. For some consumers, they’re a key way to discover hotels, and they can help hotels out by removing the burden of managing reservation systems and marketing.

“They do a great job at marketing. Everyone sees the commercials,” said Robert Mandelbaum of CBRE Hotels’ Americas Research. 

Online travel agencies currently capture about 15 percent of U.S. hotel bookings, according to Cindy Estis Green at the market research firm Kalibri Labs.

But Green said sites like Expedia, Travelocity and Priceline haven’t brought hotels much incremental business overall. 

“They’ve just shifted business that might have come in direct to the hotel or to some other channel,” she said. 

Still, Green said hotels have to pay those sites commissions that may range from about 13-35 percent. To avoid those costs, some big hotel chains are now trying to lure guests into booking directly on their own sites and apps with special member deals. 

Case in point: Earlier this year, Hilton launched a big marketing campaign called “Stop Clicking Around.” It currently highlights discounts for Hilton HHonors members that include 10 percent off the best available rate for weekend stays. 

Hilton’s chief marketing officer, Geraldine Calpin, said skirting commissions to travel sites “was not the intent of the strategy,” which she said was more focused on better anticipating and serving guests’ needs. That’s easier to do when they book directly through Hilton. 

“If you’re booking through a third-party site we know less about you,” she said. 

But Sarah Gavin, vice president of global communications for Expedia, Inc., said when hotels tout loyalty program discounts publicly on their sites—and keep them off Expedia—they won’t be placed high in the site’s search results. 

“It’s less about it being detrimental to Expedia and more about it being detrimental to the customer,” she said. 

Kalibri’s Cindy Estis Green said so far hotels that may be getting less advantageous placement from online travel agencies appear to be making up the lost business on their own sites. 

“It doesn’t appear to be very damaging to the hotels,” she said. “But it’s still too early to tell.”

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