Consumer Booking Behavior in the Age of Comparison Shopping

The hotel industry is officially in the age of comparison shopping. More consumers search for hotel rooms on online travel agencies than ever before, regardless of where they conduct their final booking.

“This most recent downturn has made consumers more value-seeking and at the same time made them a little more conscious of their  dollar even if the economy turns around quickly,” said Chris Anderson, assistant professor at Cornell University’s School of Hotel Administration. 

Anderson knows a thing or two about consumer booking behaviors. His study on the so-called “billboard effect”—which suggests a hotel’s presence on an OTA boosts bookings on its direct website—created a ripple of debate in the industry when it was released in October 2009. Many disgruntled hoteliers, having long bemoaned the OTAs’ stranglehold on the industry, dismissed the implications, criticizing the study’s sample of four properties and short data window.

Anderson has since conducted follow-up research to expand on his initial findings. He identified approximately 2,000 bookings made on InterContinental Hotel Group’s family of brands websites, and then examined all upstream online traffic in the 60 days prior to those reservations. The goal: Track where consumers went prior to transacting with IHG.com.

Though Anderson still is poring over the data before officially publishing his results, some of his early findings—which he shared with HotelNewsNow.com—underscore the prevalence of OTAs in consumer booking behavior:

Overall booking trends
Overall consumer booking data seems to confirm as much. Of hotel stays and/or air travel booked by American travelers during 2009, 38% were booked through OTAs; only 23% were booked through the hotel’s direct website, according to PhoCusWright. (The remainder booked via phone, walk-up, travel agents or other channels.)

The research firm has not yet finalized 2010 data, though research director Carroll Rheem shared some projections. Hotel company’s direct websites accounted for 54% of gross booking dollar volume during 2010; OTAs accounted for 46%. (The numbers include only online leisure and unmanaged business travel.)

“OTAs capture more consumers as a percentage, but in terms of dollar values, hotels book more,” Rheem said.

Of the OTAs, Expedia and its affiliated websites held a 44% market share in terms of gross domestic sales during the first half of 2010.

Forrester Research provides a look at purchasing patterns. Among travelers who booked hotel stays during 2010, 63% used an OTA while only 39% used a brand website, according to Henry Harteveldt, the company’s VP and principal analyst of airline and travel research. (The survey question was multiple-response, hence the numbers add to more than 100%.) 

Consumers were more likely to shop on OTAs if they were booking a stay at an unfamiliar or international location, Harteveldt added. They also are more likely to shop on OTAs if they are brand agnostic. Not surprisingly, supplier sites tend to be favored by people who travel more often and identify themselves as loyal to a particular brand.

“OTAs are really travel supermarkets now,” Harteveldt said.

Consumers are hitting those aisles later than ever, according to Kristi White, director of revenue optimization at TravelClick. The booking window shortened drastically during 2009, to an average of three to five days from an average of seven to 14 days.

“(Hotels) started to be panicked at seven days out when rooms weren’t sold, so they gave up the rooms to the OTAs so that came at a 30% discount,” she said. “Hotels finally caught on to that and adjusted accordingly. We’ve seen it lengthen a little bit, but it’s not back to seven to 14 days yet.”

The exception is the leisure customer. “They have learned that if they wait, they get a good deal,” White said. “What they’re going to find is that we’ll break that learned habit in the next seven to 12 months and grow rates closer in.”

The direct booking channel
Booking traffic historically swings back and forth between hotels’ direct websites and OTAs. During times of economic growth, more consumers book directly on brand.com. But during down markets, price-conscious consumers turn to OTAs to compare prices, PhoCusWright’s Rheem said.

Rheem emphasized an important point here: Consumers don’t necessarily think they’ll find the cheapest price on an OTA—just the ability to compare affordable prices. Most online shoppers still view the direct booking channel as the most reliable and trustworthy when it comes to finding that best rate guarantee.

Both Harteveldt and Anderson corroborated Rheem’s findings.

“Supplier sites are viewed as being more trustworthy and accurate and are believed to have the most current up to date pricing and inventory,” Harteveldt said.

“Most people want to transact with the owner of the inventory. … That behavior is always going to be there. People are going to shop the third parties and are going to book with the suppliers,” Anderson said.

Armed with this information, hotel revenue managers should adopt a two-pronged approach to drive bookings to that direct channel:

1. Provide robust information to OTAs. Consumers are shopping on OTAs, so if you have to be there, then you might as well be there with gusto. 

“At the end of the day, hoteliers have to be working with their market managers to make sure they have solid content at the OTA; to make sure they have great images, monitor user reviews that are being posted,” Anderson said.

That also means coordinating content, Harteveldt said. If your hotel offers a best rate guarantee on its website, then it had better be the best rate offered across every booking channel.

2. Improve the booking experience on brand.com. “You have a responsibility to make your own website the most useful it can be to your guests,” Harteveldt said.

Information should be presented in a clear, logical manner. Room information should be up to date. Pictures should accompany product offerings to enhance understanding.

Anderson said the booking process should comprise a single page. The idea is to streamline the process and make it as easy as possible for potential guests to conduct business with you.

Fortunately, hotel marketers are more sophisticated with their direct-booking channels—so much so that Harteveldt sees the pendulum swinging back in favor of hoteliers.

“I believe that in both airlines and hotels the trend is going to favor the supplier site as they build out capabilities and do more marketing and enhance the product offerings to their websites,” he said.

HotelNewsNow.com editor Stacey Mieyal Higgins contributed to this report.