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Booking.com: Your Worst Best friend?
In a time not so far away...
In recent years, mostly in Europe tour operators would book entire hotels to fill up with guests that would travel on the tour operator's planes. Hoteliers loved this model, because while price was low, occupation was guaranteed and often paid upfront.
However, as service degraded or competition increased, Tour Operators would book other hotels. Hoteliers that relied solely on a few Tour Operators would struggle establish new channels, or fail and go out of business. But what does all of this have to do with Booking.com?
Booking.com's success for independent hotels
Booking.com has taken Europe by storm, and is now making inroads into the US. Studies show that over 50% of all hotel nights booked in Europe are booked through booking.com.
This level of market consolidation has been a bonanza for independent hotels. Without any brand recognition, booking.com has become the ideal digital marketplace to promote and sell their rooms to guests from all over the World.
Booking.com's has been able to create a formidable marketplace with a large amount of inventory (many consumers consider that "all hotels are on booking.com, at least all that matter"), it does not take payments upfront, and booking.com's increased focus on user reviews provides a one-stop-shop for consumers.
Booking.com now claims to be the number one online hotel reservation service in the World. From our experience with hoteliers, booking.com certainly has significant distribution power, and there is no doubt that it represents an increasingly significant portion of the income of numerous hotels throughout the World.
Booking.com's obsession with price
Booking.com is obsessed with providing the best possible prices to consumers. J.D. Power and associates reported that Booking.com has the highest customer satisfaction rate of independent travel websites, mainly due to competitiveness of pricing.
This obsession with price causes the relationship that hoteliers have with booking.com to frequently be one of love-hate. They love the reservations that Booking.com brings in, but they hate it when they have to sell for low prices, preventing them from differentiating their hotel on any other factor.
To add insult to injury, Booking.com's flat commission model has been replaced by one of bidding for position on the first page of a destination. It is not infrequent that hotels pay over 20% in commission to be on the first page of the recommended properties in their city.
These issues and Booking.com's market power, make its relationship with hotels uneven. Hotels might be receiving significant revenue from the reservations that are made through the site, but if they depend on Booking.com for their reservations, they have little bargaining power.
The playing field is tilted
Booking.com recently started taking one-sided decisions on how their system operates and forcing hotels to adapt. For example, booking.com recently reserved the right to automatically resell a room that one of its customers has canceled, apparently to protect their commission. Booking.com also changed their information policy and now blocks access to the customer's information, e.g. by eliminating customers' e-mail addresses apparently to prevent direct contact between hotels and customers.
Even appreciating all the revenue they get from Booking.com, most hotels' situation may be so precarious that if Booking.com were to raise its commission margins there is little that they can do about it.
In a recent debate at Phocuswright Conference, hoteliers divided channels between good channels (the ones that extend reach or create new markets) and bad channels (the ones that cannibalize their natural markets, e.g. by bidding on their keywords, e.g. Hotel XYZ).
With booking.com taking all these steps, how can hoteliers really trust that booking.com has their best interest in mind and is not their worst best friend?
Balance your Booking.com presence through hotel digital marketing
Hotels need understand how to use Booking.com for their benefit, but not be overly dependent on it. They need to understand how to keep the reservation service at arm's length by having a sound hotel digital marketing strategy.
It's important to have a multi-channel digital marketing strategy that gives hotels digital presence. Achieving such online presence would include, among other factors:
No hotelier wishes to have their hotel completely booked this year if they are to find themselves empty and helpless next year, because their reservations only came from one channel and they didn't have any other channels established.
Hotels need to have a multi-channel digital marketing strategy, so as to avoid any kind of dependence on any one service for their online revenue. They need to have a digital presence that safeguards them from other companies having power over them. One that guarantees that they are sought out by potential clients no matter on what search engine these are conducting the search.
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