Mr. Linehan

Sales & Marketing

It's Time to Re-imagine the OTA / Hotel Relationship

By Bill Linehan, Executive Vice President, Chief Marketing Officer, Red Lion Hotels Corporation

The Marketplace is Changing and OTAs are Growing

The hospitality marketplace is changing. We all have heard about the hotel brand consolidation, from Marriott and Starwood to RLH Corporation's very own acquisition of Vantage Hospitality's brands last fall. But it is not just hotel brands consolidating, so are Online Travel Agent (OTA) marketplaces.

The average consumer visits 140 different travel sites during the purchase journey, with 30% of these sites being OTAs; Expedia and Priceline Group now control over 70% of the OTA market; Expedia's sites, which include Hotels.com, Travelocity, Orbitz and Hotwire, among others, attract 94 million unique visitors per month; more online travel bookers visit OTAs than brand.com sites the week before and the week of their booking; OTAs are the most influential online resource in bookers' destination decisions; American leisure travelers visit OTA sites more than brand.com when researching on personal computers, smartphones and tablets; the facts go on and on.

The OTAs are using different channels to target various buyer personas across virtually every segment and demographic. This means hotel companies need to focus even more on delivering the total guest experience and leverage marketplace opportunities to connect with consumers like never before. Websites and mobile apps should create an optimal shopping experience that instills confidence in the consumer. And we must continue to achieve best-in-class omni-channel marketing while focusing more on how and what we communicate to build consumer-brand relationships, rather than simply focus on the transaction.

Omni-Channel Marketing

So, what exactly is omni-channel marketing? The term refers to a significant shift: marketers now need to provide a seamless experience, regardless of channel or device. Consumers can engage with a company in a physical store, online, via their phones or tablets, through a catalog, or through social media. Each piece of the consumer's experience should be consistent and complementary, and, when properly deployed, the approach can drive sales, create brand equity and achieve best-in-class margins.

Different channels market and price themselves differently, as rate parity in some ways is becoming a thing of the past. To combat this shift, we should capitalize on expanded channels for expanded reach, while engaging in one-to-one marketing and personalized offers.

The Expedia Partnership

For example, RLH Corporation launched a first-of-its-kind partnership with Expedia last summer, offering Hello Rewards members exclusive rates on Expedia.com and Hotels.com (U.S.) and providing direct member sign-up for Hello Rewards from these sites. (Hello Rewards is the RLH Corporation loyalty program that was founded on recognition rather than points. Members enjoy: the ability to earn free stays, express check-in and check-out, late check-out and room upgrades when available, and exclusive offers.)

As part of the program, Expedia shoppers are required to join Hello Rewards to receive the rate. Because these shoppers are required to join, RLH Corporation receives pertinent guest information like their email address, which is unprecedented in the OTA/hotel relationship. As a result, RLH Corporation can communicate with guests booking through Expedia prior to their stay.

This approach is extremely respectful of the guest, their preferences and the channel they chose to make their booking. Travelers rely on the OTAs and we do not want to penalize the guests for doing what they already do. Think about it; why punish a guest because he or she booked on Expedia when in fact they chose our hotel? It costs us nothing to be on the site; we only pay when there is a transaction, so our strategy is to pick up the ball after the transaction occurs, after we have received the email address from Expedia.

This starts with RLH Corporation's own confirmation and pre-arrival email right after booking and three days before arrival. We let them know how to contact the hotel, check in, and we get them all signed up, so they can immediately begin earning their perks. This relationship can continue after check-out, offering opportunities to learn more about their preferences and travel plans.

In turn, RLH Corporation views OTAs, such as Expedia, as partners and makes sure to leverage their marketing and innovation investments to drive both customer acquisition and future loyalty. Also, who has a greater ubiquity of inventory than the OTAs, so why not market within that marketplace and utilize that as part of our marketing strategy? RLH Corporation took this unconventional approach because we realized that we were not going to outspend the OTA channels from a marketing standpoint. Instead, we decided to leverage that marketing to our benefit.

In fact, when you look at the generational shift that is occurring right now, millennials have a higher propensity to use online channels on their mobile and Expedia's online mobile growth is exponential. They also prefer transparency and believe that these larger sites are more trustworthy than brand.com sites because the larger sites are showing multiple, competing rates - and they are outspending baby boomers on travel. Instead of telling the consumer how to behave, we are thankful for their business and we are present where they're shopping. So if they are shopping on Expedia, we want to be top of mind. How they wish to book is their decision. It's our decision to be there or not.

Accordingly, the Expedia partnership was timed with our company's new ability to personalize marketing automation with more one-to-one messaging and relationship building with Hello Rewards members. RLH Corporation is reaching consumers at all touch points throughout their purchasing cycle, and we're adapting and optimizing our ads' placement, look and offer by channel - whether they find us via the internet, mobile, on social media, in print, etc.

The agreement allowed RLH Corporation to expand in-channel reach and impressions to the largest traveler marketplaces in North America, giving us scale and one more way to increase visibility. We added media placements on Expedia that link consumers to our brand.com; added more branding and merchandising to listings, in turn offering a more competitive advantage; Expedia added more media to promote Hello Rewards; we activated involvement in other Expedia products such as Orbitz for Business and Egencia, among many others; and renegotiated our margins with Expedia channels.

This partnership makes sense for us because our overall consumer target is less of the elite status traveler and more of the long tail traveler, which is actually bigger. Those are also the travelers who are shopping on Expedia. Consumers are becoming less and less devoted to specific brands and more and more devoted to fulfilling their purpose. It is not about hoarding points anymore. It is about the instant gratification that fulfills the purpose of that particular trip.

And RLH Corporation has seen success with the approach. We work to build loyalty over time and use the guest experience as leverage to entice guests to book direct. Customer feedback has been positive - RLH Corporation guests are able to participate in the benefits of Expedia's loyalty program, as well as Hello Rewards. It is a huge differentiator of RLH Corporation from other hotel brands.

In addition, since the program began, our natural placement with Expedia has improved over 10 positions per hotel and, based on the number of hotels in our system, we have better placement than other hotels that do not have the same level of partnership with these channels. That exposure will increase further as more consumers become acquainted with Hello Rewards' offerings on the two sites, and as we integrate the legacy Vantage Hospitality properties into the guest recognition program.

The RLH Corporation Approach to OTAs Works

It is imperative that we all continue to work with OTAs, and the RLH Corporation strategic approach is quite unique. As opposed to many mainstream hotel brands, our strategy is more contrarian, meaning we have chosen to respect the OTAs as a viable marketplace where we aim to capture and convert booking opportunities. This does not mean that we don't recognize cost of sales differences between direct and third party channels. In fact, we will always promote direct bookings, which is, of course, an important component of this strategic approach.

However, we also believe that customer acquisition and conversions are also paramount to our success. For these reasons, our approach to OTAs is a customer acquisition strategy where you should fish where the fish are to capture, convert and retain new ongoing relationships with consumers. At the same time, we are utilizing our revenue management systems to manage our rates and availability across channels and we are utilizing various marketing tactics throughout these channels and relationship continuum.

If it were not for online travel agent sites such as Expedia, we would not be getting the customers in the volume we do. As we see it, if we wanted to keep growing, we needed to align with a super successful company. Expedia is a household name in the U.S. and Canada, where nearly all our customers are, and it is growing in double digits. This arrangement is in the best interests of both parties and we look forward to expanding the program in the coming years.

Bill Linehan joined RLH Corporation in February 2014 as Executive Vice President and Chief Marketing Officer. He leads a national award-winning marketing team, which assisted RLHC's launch of an upscale brand, Hotel RL, and the re-launch branding for Red Lion Hotels, Red Lion Inn & Suites, GuestHouse International and Settle Inn. In 2015 RLHC introduced Hello Rewards, a guest recognition program that is more relevant to changing consumer dynamics. Hello Rewards grew by 50 percent in 2016, driving RevPar growth for RLH Corporation properties. Mr. Linehan also released RevPak, a guest delivery program of leading technologies and integrations that optimizes revenues through CRM strategies, MA, and digital marketing techniques. Mr. Linehan can be contacted at 509-777-6393 or bill.linehan@redlion.com Please visit www.redlion.com for more information. Extended Bio...

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