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Isn’t it time the OTAs fix their Member Rates?

01/24/2021| 9:15:24 PM|

It causes a huge disadvantage for independent hotels trying to generate more “book direct” business, since they usually do not have the lowest rate available on their own direct channels.

It started in February 2016, when Hilton made a big splash by announcing that Hilton Honors™ membership was more than just earning points and free nights. Membership in the loyalty program also meant benefits that applied to travelers from day one, such as free Wi-Fi and a newly created discounted rate that only members could obtain, saving anywhere from 2% to 5% off the lowest publicly available rate.

Other major brands quickly followed, with Marriott and Hyatt announcing their version of member rates in April, and Choice Hotels in July that same year. The discounts may have varied by brand, but the intent was the same.

The chains created discounted Member Rates to:

* increase loyalty

* encourage repeat business

* increase direct bookings

* improve profitability

* lower costs of distribution and guest acquisition

We now have a situation where the playing field is essentially level again. Brands offer Member Rates, and the OTAs often match those rates. But what if your hotel is not branded? Independent hotels, which generally rely much more on the OTAs than branded hotels, have been caught in this Member Rate tug of war.

Independent properties already have lower margins than their branded counterparts, which is understandable, given they don’t have the scale that brands have. Independent hotels generally “pay” anywhere from 5% to 8% more in margins for stand-alone (non-packaged) rates.

But if they agree to participate with Expedia’s Member Rate or Booking.com’s Genius programs, it will cost them an additional 10% or more. Long-term, these added margins end up being very costly for independent properties. Granted, we know that members of these OTA programs tend to choose hotels that offer a discounted Member Rate, everything else being equal. But wouldn’t it be nice if independent hotels had more say in the amount of the discount?

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TAGS: Expedia | Booking | member rate | independent hotel
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