How Marriott’s Partnership With TripAdvisor May Deliver Them Higher Ratings (And Profit)

The announcement last week that TripAdvisor had signed a deal for direct bookings with the Marriott chain was very interesting to me.  I openly wondered if this was TripAdvisor selling out, though there was evidence that they’ve already allotted for plenty of opportunities for hotels to appear above reviews when searching for hotels on their site.

Marriott's Partnership With TripAdvisor

HuffPo has a very observant piece on how this will likely spike Marriott’s rankings on TripAdvisor.  The brass tacks are that the partnership, similar to one with Best Western, should lead to many more reviews and a higher percentage of good reviews:

But Marriott’s participation in the partnership should bring more bookings to the hotel, which will likely result in more reviews. As TripAdvisor points out on their site, a study conducted by researchers at Cornell University showed that more reviews mean more positive reviews. Combined with the recency of the posts, TripAdvisor says that these factors would result in “properties [showing] up higher in TripAdvisor search results.”

Even though this is not TripAdvisor’s first hotel partnership, there are parts of the deal that make us question the reviewing process. For example, when Best Western began a partnership with TripAdvisor (albeit a broader kind of partnership), Best Western saw 76 percent more reviews on the site. And as stated above, more reviews translates to more positive reviews — and higher placement on TripAdvisor.

TripAdvisor has an annoying feature called “Just For You” that was ranking properties for me “according to my preferences” even though I had entered none.  When that feature was enabled, some Best Western properties score highly, ones with lots of reviews, as much as 100% more than properties ranked higher.  When I just filter by ranking, other Best Western properties with a lower total of reviews appear in the top 50 or 60 in cities like New York and Chicago.

I’m not a Best Western customer so I may not have the proper frame of mind about the properties in question, but the rankings sure seem higher than I would expect.  Given that Marriott is likely to draw more bookings than Marriott on average due to the size of their loyalty program and the passion of their members, I could see the “Marriott skew” being as significant or more so.

But, that may not even be the biggest reason for Marriott to have done the deal.  Rather, it may simply be the icing on the cake.  There are rumors in the industry that the commission structure for this deal (what Marriott pays TripAdvisor for a booking) is in the 7-8% range.  If true, that would be considerably lower than other contracts between the major hotel chains and OTAs like Expedia.  It would also mean leverage for Marriott when re-negotiating future OTA contracts.  For quite some time, the OTAs have extracted more commission than the hotel chains care for.

Airlines like American Airlines and, most recently, Lufthansa, have challenged the global booking platforms for what they believe are high fees.  Now, Marriott may be doing the same with the OTAs, planning to use the TripAdvisor deal as an integral piece.

I’m generally in favor of the business case for hotels controlling their inventory.  The OTAs serve a purpose for garden variety travelers who want to compare pricing easily in one place.  But, savvy business travelers don’t book through those sites because they want elite benefits from the chains, something the chains on whole don’t offer for OTA bookings.

Expedia and Orbitz both reported losses in the 1st quarter of this year.  Expedia specifically saw increases in room nights booked, which likely means they’re seeing a lot less per booking (though it’s possible some of it could be drag from other business units).  There are only so many hugely profitable customers left for the OTAs.  Margins are likely to keep getting smaller.  It’s unclear if the other hotel chains will charge down the same road as Marriott or wait and see what develops, but there’s definitely change afoot.

The post How Marriott’s Partnership With TripAdvisor May Deliver Them Higher Ratings (And Profit) was published first on Pizza In Motion.

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