“Facebook hits 2 Billion daily users, iPhone turned 10, what does that mean, did direct booking campaigns dent OTA’s, Morgan Stanley chimes in”
Live Show Player
:08 Discussion of the recent Morgan Stanley report of Direct channel BPO – Based Point
:12 Tim points out that maybe the early cost represented may be worth it for long term value cost.
:27 Open discussions on missed opportunity that brands don’t have by not allowing for independent websites
:30 Trivago has passed TripAdvisor in value.
:32 How Independents can handle Keyword strategy compared to branded hotels limitations
:43 Holly departed
:45 Hotel Del Coronado in San Diego going to a Hilton Curio was it influenced by its ownership of Blackstone being 21% share in Hilton Ownership
:54 The real value of membership rewards programs
1:04 options to do content as a branded owner
1:12 Brands are in trouble that’s why the have been introducing more and more soft brands.
1:15 iPhone turned 10
1:21 Tim departs
1:24 How the CVB’s and TDC’s lost their ‘mojo’ about 6 years ago when they tried forcing Hotels to pay for channel distribution.
carry over from last week
Facebook now has 2 billion monthly users… and responsibility
Incremental Revenue (n.) The amount of revenue a campaign delivers minus the revenue a campaign was expected to deliver (actual revenue – expected revenue).
Note that #3 – #4 & #8 – #9 are related topics.
1. It’s Show 100 – That’s news enough…!
2. Improving guest personalization begins, ends with data – http://www.hotelnewsnow.com/articles/149362/Improving-guest-personalization-begins-ends-with-data
3. Trivago Is Spending Three Times More Than TripAdvisor on U.S. TV Ads – https://skift.com/2017/07/06/trivago-is-spending-three-times-more-than-tripadvisor-on-u-s-tv-ads/
4. Trivago Market Cap ($5.66 B) just overtook TripAdvisor Market Cap ($5.08 B) – RockCheetah Breaking News Service J
5. Sabre updates on unauthorized access, confirms payment details hacked – https://www.tnooz.com/article/sabre-update-unauthorized-access-payment-details-hacked/
6. Hotel CEOs Love Direct Booking But They Have Varied Views About Strategy – https://skift.com/2017/06/26/hotel-ceos-love-direct-booking-but-they-have-varied-views-about-strategy/
7. US lodging association calls out online travel agencies on misleading strategies – https://www.tnooz.com/article/online-travel-agency-ahla/
8. Don’t Expect Hotel Companies to Stop Launching New Soft Brands Anytime Soon – https://skift.com/2017/06/27/dont-expect-hotel-companies-to-stop-launching-new-soft-brands-anytime-soon/
9. Historic Hotel Del Coronado to Become Hilton Property – http://www.nbcsandiego.com/news/local/Historic-Hotel-Del-to-Become-Hilton-Report-432785823.html
10. Google funds automated news project – http://www.bbc.com/news/technology-40517420
here is a new Morgan Stanley research abstract –
Lodging and Internet: Are Hotels Better Off from Brands’ Direct Booking Push?
We believe that branded hotels are paying on avg 20bps more for distribution than they were ~18 months ago. However, through increased loyalty members and contribution, and a slowing shift to OTAs, one can argue this could be a cost worth paying, depending on the quality of the new members.
~18 months ago, hotel brands began campaigning consumers to book more direct rather than through OTAs. We discussed potential outcomes in our 5/18/16 report, Hotel Brands vs. OTAs: Who Will Win the War? and have seen the following changes.
Hotels have seen short-term pain, hoping for long-term gain. Hotel brands’ discounts have led to an increase in brand.com mix, but also cost. Despite the brands’ efforts, OTA mix continues to rise, but at a slower rate than before. We calculate on average the cost of distribution for our covered hotel brand companies has risen 20bps since ’15, though with a wide range. We believe that Marriott, STAY, and Whitbread have either lowered their distribution cost or kept it flat, while Hyatt, LQ, and IHG have seen their distribution cost rise by >30bps.
Long-term success will be realized by brand companies’ ability to monetize loyalty members. Loyalty members across our coverage rose 17% in ’16, up from 14% growth in ’15. As a result, loyalty members made up an avg of 40% of hotel brands’ occupancy in ’16, from 38% in ’15. Our sensitivity shows that if hotel brands can continue to grow their loyalty programs >10% / year and can monetize at historical levels, there should be mid-single-digit system net revenue upside, despite distribution cost headwinds. However, if new members are less “loyal” and just looking for discounts, there’s downside risk.
Hyatt’s ultimatum to Expedia could force a major change, but more likely not. Hyatt has threatened to remove its hotels from Expedia on 7/31. When Choice pulled its inventory from Expedia in Oct ’09, its RevPAR underperformed peers by 90bps. Separately, American Airlines saw a ~30bps revenue headwind when it de-listed from Orbitz in Nov ’10.
The latest trends reinforce our bullish OTA view. OTAs’ growing share of hotel brands’ room nights despite the loyalty push speaks to 1) The power of the OTAs’ ~$7.3bn in annual ad spend (~2x more than the brands combined) and 2)Consumers’ (in particular millennials’) preference for the meta / OTA model. OTAs’ mobile advantage should continue to support this shift, though the OTAs’ app download edge has fallen over the past year. OTAs’ revenue diversification is also defensive if the brands do get more concessions on comm. rates or if hotel loyalty accelerates as we estimate that EXPE/PCLN only generate ~27%/~13% of hotel bookings from brands, and independents pay 1.5-4.0x higher rates.
END OF RESEARCH ABSTRACT
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