NASHVILLE, Tennessee—After an opening day chock full of data analysis, attendees of the inaugural Hotel Data Conference began day two peering through the looking glass to gain a new perspective on the industry and the market trends affecting it.
The most controversial of those viewpoints during the general session came from Brian Ferguson, VP of lodging demand and analysis for
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Brian Ferguson, Expedia |
Expedia. As a representative of a third-party reservations Web site—which many hoteliers criticize for contributing to rate erosion and an alleged commoditization of the industry during the downturn—Ferguson was asked bluntly whether Expedia and other online travel agents are a friend or a foe of the hotel industry. “In terms of friend or foe … What people are trying to get at is that seeing all of these rates together and having consumers go through and choose the cheapest three-star in the neighborhood is what’s really driving down rate,” he said. “I don’t really see that as an Expedia issue. I see that as a reality of where we are today. That’s the Internet.”
And while he admitted that consumers do use Expedia simply to choose the cheapest rate regardless of brand, he also said, “There are no rates that are on our site that aren’t given to us by hoteliers. We don’t set the rates.”
Ferguson later said the increased swings in market share that Expedia and some other OTAs generate during downturns are offset by declines in average daily rate. Yes, third-party reservation sites might have higher volume at present, but they also make less per transaction. When the market picks back up again and rates increase, so will margins on each transaction. Therefore, Expedia is not rooting for the industry to remain stumbling along the bottom.
10 hotel booking trends
Before he was asked about being a friend or foe, Ferguson shared 10 hotel trends using data generated from hotel bookings on Expedia.
1. Exchange rates are shifting travel patterns. “There are a lot more Americans traveling to the U.K. despite the economy. That’s simply because it has gotten so much cheaper,” he said. “It’s 35-percent cheaper just because of the exchange rate. Add to that the discounts U.K. hotels are giving, and it’s become a bargain.”
2. Consumers are looking for a deal. Year-over-year share of bookings with promotions has increased and will continue to do so throughout the third-quarter of 2009.
3. Promotions matter more than ever. Year-over-year percent change on rooms booked with major promotions has increased in 2009. There were 68 percent more travelers who booked their stays during a 4th of July promotion this year than last year, for example.
4. Promotions are getting more creative. “Before, it used to be all about cutting rates on the sites,” Ferguson said. Now, hotel companies are offering free nights, value-add packages and other incentives to drive demand.
5. Customers who book online are trading up. “Customers are finding that the four- and five-star hotels are getting more affordable.”
6. There are massive swings in online market share. In Nashville, Tennessee, for example, the most booked hotel during second-quarter 2009 jumped 13 spots before landing in that position and increased year-over-year room nights by 413 percent. However, its year-over-year ADR declined by 34 percent.
7. Booking window compression. Travelers are waiting longer than ever before to book their stays.
8. Leisure rates are leading the way. “Leisure rates went down first and are going down more,” Ferguson said.
9. Hotels are using the package channel to fence rates. Examples of this semi-transparent technique including bundling a hotel stay with airfare or a stay with a car rental.
10. Opaque channels are growing faster than non-opaque channels.
Air travel trends
One of the most striking, albeit expected, trends in consumer spending during the downturn has been the shift of discretionary dollars away from travel and moving toward more essential, everyday items such as groceries and medicine, said Gary Portuesi, VP of lodging account development for American Express Merchant Services.
“We’re seeing the most contraction in lodging and airlines,” he said.
Because the pains of the former were one of the main focuses of the conference during other sessions, the panelists mixed it up and turned their attention toward airlines.
Fortunately, most air carriers already had adopted a crisis-mode operating strategy after the astonishing hikes in oil prices more than a year before, Ferguson said. In addition to decreasing airlift, they also increased airfare.
“Turns out oil went down, but the recession came in. It was very fortuitous that they did this … They were in much better shape than they would have been otherwise,” he said.
But while those moves have helped to soften the blow, declines in demand have only just leveled off, said Eric Deichmann of statistical research company SH&E. Furthermore, fares have continued to decrease and don’t appear to be slowing down.
“The airlines aren’t terribly optimistic that their corporate bookings are going to return any time soon,” he said.
“The International Air Transport Association tracks monthly premiums and economy passengers on international flights only. They’re looking at an 8-percent decline in economy traffic worldwide and a 23-percent decline in premium travel worldwide.”
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