ROCKVILLE, MD—Kalibri Labs has revealed the results of a new study regarding hotel brands’ book-direct campaigns: according to the research, there’s been a consumer shift in favor of brand.com versus online travel agencies (OTAs), compared to historic growth trends, during the recent promotional campaigns. The study also revealed increased revenue for hotels during the campaign period examined in the study.
“This shift in consumer behavior is positive news for hotel brands across the country, supporting the efforts to increase use of the hotel industry’s direct channels over the past couple of years,” said Cindy Estis Green, CEO/co-founder of Kalibri Labs. “The results demonstrate that customer affinity to brand.com is increasing, and there is an accelerated growth in loyalty membership and revenue.”
The news is the result of a series of book-direct initiatives in 2016 from 10 hotel brands with customer loyalty membership programs, which enabled new and existing members to qualify for discounts on future and current travel. The Kalibri Labs study sample of 12,000 hotels and 52 million transactions over an eight-month period confirmed that channel shift occurred with more rapid growth in brand.com and slowed growth in the OTA channel during the period the campaigns were running.
The analysis demonstrated net positive outcomes in revenue for more than 80% of the hotels in the sample resulting from the loyalty membership campaign.
In addition to the consumer shift, there were three other takeaways from the research. First, net ADR of brand.com loyalty rates was higher than net ADR of OTA rates. When comparing average rates net of direct transaction costs, such as channel fees, commissions and loyalty costs, the brand.com rates that loyalty members booked were 8.6% higher than the net average rates of OTA transactions. As the rates are based on actual transactions, this includes all discounts related to the campaigns.
Second, results reflected net positive revenue outcomes. When actual 2016 results were compared to projected outcomes based on a statistical regression model, the results pointed to a net positive revenue outcome. While the model recognized potential rate trade down in 14-17% of brand.com room nights, the median net revenue benefit for 80% of the hotels in the sample was between $9,000-$33,000, per hotel when considering all discounts, trade downs, loyalty and commissions costs for the subset of the business that was targeted by these campaigns (retail transient).
Finally, the growth in loyalty contribution by participating hotel chains from 2015 to 2016 was consistent with reports of 30-40% growth in membership over the previous year; four to six out of every 10 room stays were driven by loyalty members for the upper-midscale, upscale and upper-upscale member groups. Hotel chains reported record numbers of campaign-related new members that came with similar recurrence patterns as their standard new member population.
The study examined stays from May to December 2016 when most hotel chains had book-direct campaigns in the marketplace. There were two components to the analysis. The first was a purely transactional view looking at performance, cost and potential trade-down. The second looked at the longer-term upside or “lifetime value” of incremental loyalty members and how many recurring guests would need to be added for hotels to compensate for any upfront costs.