3 Things to learn from Hilton CEO

OTA giantsHigh levels of cancellation, high commissions from Online Travel Agencies (OTAs) and competition from Airbnb are big issues that a giant chain like Hilton have in common with independent owners.

In a recent interview, the CEO of Hilton talked about rising cancellation rates, high commission from the OTAs and competition from Airbnb. Every day is a school day so I thought I would consider his comments and try and interpret them for independent accommodation owners like yourself.

High levels of cancellation

High level of cancellationNassetta, from Hilton, says “customers…have been trained to do multiple bookings and do things that have created a scene where cancellations…have skyrocketed.” He is talking about certain OTAs encouraging customers to book and cancel. OTAs don’t really care about high cancellation rates if the customer books again through them it doesn’t matter to their profitability, they still get the booking; it’s the cancelled property who loses out.

If cancellation levels are an issue for Hilton they are an even bigger issue for independent accommodation owners where each room is so much more precious. To put some numbers on it I looked at our statistics from the last 10 months and they show that certain OTAs have an average cancellation rate of 26.5% compared to 8% on direct bookings.

Our advice here is to make sure you have a cancellation policy that does not penalise direct bookings. If you can maximise your direct bookings you will also lower your cancellation rate because direct bookings are more than three time less likely to cancel.

Hilton has responded by increasing their cancellation deadline from same day to 48 or 72 hours and made sure that their direct booking cancellation policy is always the best.

High levels of commission

OTA commission risesMany of our customers tell us about the rising commission bills which seem to get larger every year as OTA bookings keep rising. Hilton mentions a lack of competition “More competition would have the effect of driving down distribution [commission] costs.” We have seen less competition as the OTAs take over rivals leaving only two major OTAs (Bookingcom and Expedia, who own most of the others).  Nassetta, of Hilton, thinks that Airbnb could change to become a competitor for the OTAs and help drive down commissions.

Is there a place for another OTA with lower commission? Hilton certainly thinks or maybe hopes so. In common with many independent owners Hilton feels the pressure from very dominant sources of bookings and hope for a path to lower commission.

Airbnb is not competition

Hilton sees Airbnb as catering to “different travel or trip occasions” this may be true for Hilton because a big hotel chain clearly has little in common with a bedroom in a home. Airbnb feels far closer to the independent small businesses that are our customers.  We also know that many of our independent customers already use Airbnb as a channel for low cost bookings so they can be an ally for everyone.

In summary, it seems that there is a surprising amount in common between Hilton and independent accommodation owners. A closer look does reveal that the same issues are faced by everyone irrespective of size along with a hope for more competition in the online travel agent space.

Previous related blogs on direct bookings

This entry was posted in bookings, marketing, online, OTAs, sales, technology, tips and tagged , , , , , . Bookmark the permalink.

6 Responses to 3 Things to learn from Hilton CEO

  1. Hello gentlemen… Very professional and gracious on your part at FREETOBOOK to advise us and others of the competition out there and the fact that you your company is consistently finding ways to help us manager are establishments better for our guests. Best regards, Tony Spagnolo, owner-chef & managing host: REPOS & MANNA B&B, Montreal Quebec Canada.

  2. Mmm…… I agree that we may have a lot in common up to a point BUT I suspect that if someone in Hilton found a highly profitable format for self catering accommodation, they would trample independent operators to death without so much as a backward glance.

    However, as it stands I guess there is some sense in “my enemy’s enemy is my friend”.

    The OTAs are hyper ruthless particularly Booking.com but the flip side though is that they are generating us a lot of business. Our challenge is to gather as much data as we can from guests (all the things that they and the others don’t want us to have- like telephone numbers, email addresses, addresses etc) and then work that information really hard in e newsletters etc to get those guests to come back bypassing the OTA they originally booked through.

    It’s a slog and at best we are currently likely only ever to mitigate the dominant part they now play in our business BUT every commission free booking is a victory. The little tips and suggestions we get from these blogs are really helpful and we have made use of the Book Direct logos from a week or so ago.

    What is worrying is the total lack of accountability of these organizations and the fact that no-one seems willing or able to tackle them. All the terms are totally slanted in their favour and individual businesses are really powerless. As Nassetta says only increased competition holds out hope. So, it will be good when Free to Book’s connection with Hotel Bonanza is ready. (When will that be??) It may well be a log shot but as they say in the movies, “It might just work.”

  3. Charlotte says:

    It’s good that some of the bigger guns are now speaking out and changing their cancellation policies. I have been associated with the OTA’s and from the outset the cancellation rate was always 20 % +. I finally had enough of that 3 years ago and now have very strict cancellation and booking policies in place and I stick to them. Has it affected my bookings, I would say not to any great degree and any such loss is offset against the gain from secure bookings which ensures high occupancy levels. The trick is set your policies and stick to them i.e. non refundable deposits at time of booking. The more accommodation providers who do this and react to the aggressive tactics of the OTA’s the less impact these organisations may have and might then re-think how they conduct their activities. At the end of the day accommodation providers are no different to Airlines – i.e. the guests – book the flight, pay for it, miss it – loose it. Hard skinned it may be but that reflects on the society we live in today and also the very important fact – it’s our livliehood.
    Airbnb are indeed different however, they too are progressing at such a rate and currently do not have the personnel or systems in place to professionally deal with the volume or different levels of accommodation providers they are now enlisting.
    What the OTA’s cannot compete with is the level of professionalism, competence and product knowledge that respected organisations like Hilton have due to the enormous amount of investment they make in staff training etc. This in turn will always make them stand out from the ‘Barra Boys’ aka OTA’S. there is no doubt that the OTA’S have been instrumental in bringing the market place within reach of smaller operators like myself but instead of being satisfied to being the link between bookers and providers which is how they started out they are now dictating to how a business functions which is not right nor is it right to actively, encourage guests to cancel and re-book elsewhere.
    I have not considered making my cancellation policy different for direct bookings but I will give the matter more thought as you say every day is a learning day.

  4. We have been monitoring more closely lately our rate of cancellations (especially the ones who cancel within 24 hours) and are keen to either review the cancellation time or simply do as one of our colleagues does and charge a non refundable deposit upon booking with an agent. Feedback welcome.

  5. GERARDUS MOL says:

    I find Freetibook the best option for online booking. The OTA’s charge heavily and curb direct contact with your guests. Besides booking.com and airbnb (never got a booking, only enquiries) I work also with TripAdvisor which shows our telephone number and website on our page on their portal for which I pay an annual “listing” subscrption of €400. In the beginning they showed our website room rates, but since they became an OTA themselves they never guide guests first to our website but show prices from booking.com or expedia, etc. So,I have decided to quit my listing subscription with them and use the € 400 for other promotional platforms like Facebook, Google Adds or LinkedIn on which guests will land directley on my website with Freetobook booking facility.

Leave a Reply

Your email address will not be published. Required fields are marked *