How will AI solutions allow hotels to shift bookings away from the OTAs onto the direct channel?
12 experts shared their view
Year to date, 2023 has seen a gamut of innovative solutions for hotels built upon generative artificial intelligence learning models, foremost among them being ChatGPT. The promise of these technologies is immense, ranging from back-of-house operational efficiencies to heightened service, new experiential offerings and precision guest segmentation.
In the near-term, the most applicable of all these is perhaps the chatbot which can help to boost the user experience on a hotel's brand.com by offering an easy way for customers to learn whatever they want about a property or, with the appropriate integrations, complete transactions including room reservations and package purchases.
Concurrent to hotel organizations' investigations and deployment of AI solutions, both Booking Holdings and Expedia are testing and implementing ChatGPT-based travel planning toolkits with the goal of reinforcing the value of staying within their own platforms versus letting travelers go elsewhere to book.
This suggests a race to the finish line. Who will eventually win? That is, can hotels actually shift bookings from the OTAs onto their direct channels by using AI to improve both the website user experience as well as the onsite experience? Such a channel shift would be immensely valuable, helping companies increase net revenues by reducing the commissions paid to third parties on each customer acquisition.
Then if this is possible, how can hotels do this and what areas should they focus their AI efforts on? Or, conversely, is it all for naught, and the OTAs should forever be seen as an insurmountable 'necessary evil' for our businesses?
AI can certainly do a lot of things and holds great promises at various levels in business and tourism. But let's not kid ourselves - OTAs are way ahead of the game not only in providing great platforms to book on - UX, imagery, etc. More importantly, both Booking and Expedia have heavily invested in their loyalty programs, making it that much more appealing to keep shopping and booking within their respective platforms.
AI solutions will play an important role in automating processes, thus reducing costs and perhaps even helping with labor shortages, allowing staff to be reallocated where they can add more value. AI can also help with marketing, making PPC campaigns more effective, getting a better understanding for keywords or generating creative ideas for social media posts, newsletters and blog articles.
But steering away business from OTAs? Not likely, in my opinion.
I spoke at a conference in Norway last week and had the privilege of attending a keynote by Terry Jones. He said something that really resonated with me: "AI is the new UI."
In traditional UI, the focus is primarily on how users interact with a system. However, with the advancement of AI, technology interaction is evolving. AI systems understand user behavior, preferences, and intent; they can analyze vast amounts of data and provide hyper-personalized 1-to-1 recommendations.
AI is taking on a more central role in user interactions, making them more intuitive, personalized, and efficient, thanks to virtual travel assistants or predictive recommendation systems (I've published a full piece on the topic here).
We tend to reduce GPT tools to simple text-to-text, but it's more than that; it's text-to-X. Given an input, these systems can produce different outputs, and chatbots are just the tip of the iceberg.
Now, can AI increase direct revenue? Yes.
Will it? Probably not... Adam already mentions several companies implementing GPT into their business: Booking.com, Duve, Expedia, GuideGeek, Kayak, Magpie, MyRealTrip, MyTrip.AI, Navan, OpenTable, Plan.AI, Roam Around, Trip.com, Vacay, Wingie Enuygun...I don't see many brand.com on this list.
Do you?
Ever the optimist, I believe that travelers are becoming increasingly aware of the benefits of booking direct, be that securing a better room, having access to more onsite rewards or accruing points within a loyalty program. Guests want to book direct, if only hotels would give them a user experience that's as seamless and convenient as what the OTAs offer.
To this end, the installation of chatbots, conversational AI, machine learning from the multitude of first-party data and other tools will work to hotels' advantage, but only if brands continually refine the depth and sophistication of the AI to the point where guests need not go anywhere else to have all their requests fulfilled within a single screen.
There is no 'set it and forget it' here; inquiries must be tested and retested, with more and more integrations developed as time passes. Superior convenience means a user needn't look anywhere else to get exactly what they want, while at the same time various tracking methods can be deployed to serve up hyperpersonizated offers that are irreplicable outside of the direct channel.
The ability to source detailed information based upon complex questions is an extremely powerful tool. The time saving possibilities from the travel research perspective are tremendous.
With the addition of an 'AI' engine to any travel site of note, the branding and marketing capability will still outplay any significance of what is fast becoming a new 'feature' of a website. In short, everyone will have one and the one they have will be exclusive to their own (and perhaps partners) content.
At the end of the day noone is planning on pulling down the fences to their customer and content.
Related article by Mark Fancourt
Chatbots can be a useful way of increasing conversion on brand.com websites, but unfortunately don't help to address the core issue of visibility.
Hotels already have a braod range of simpler, cheaper and maybe even more effective actions they could take to improve the content (information and functionality) of their websites, which would have knock-on effects in terms of quality scores and improve their search visibility.
So rather than focusing on the latest (unproven) shinny thing, hotels should focus first on getting the basics right before trying to implement the bleeding edge of technology!
If OTAs improve their guest service via ChatGPT-based services, this will reinforce the stickiness of their websites to convert hotel bookings vs guests booking directly. During the pandemic, a lot of OTAs were exposed for not having call center services to answer questions about the hotels booked by their customers and this resulted in some shift in bookings direct to hotels, who are in the best position to field questions from their guests. ChatGPT-based guest services will help to level the playing field regarding guest enquries about hotel services.
The goal of OTA's has always been a one stop shop. Whatever ChatGPT-based travel planning toolkits they will have access to - Brand.com will also have, so the question is as it always has been, how to get Brand.com to stand out and entice guests enough to book directly. AI can have its shining moment here as well.
AI, particularly tools like BARD, can be an incredible asset for optimizing your keyword research. These tools can analyze vast amounts of data, including search trends, user behavior, and competitor strategies, to identify high-potential keywords. Additionally, AI tools can also analyze brand sentiment, monitor online mentions, and provide insights into customer perceptions. By targeting brand keywords effectively, marketers can ensure that hotel websites appear prominently in search results.
Using AI to make analysis and content creation more efficient is just one way to help improve Brand.com and start to shift bookings. The OTA's have always had the ability to move quickly, adopt new ideas, and pivot to changing consumer preferences, simply because they have the budget and resources. AI starts to level that playing field to help hotels adapt, test, and evolve, but only if these tools are given the right guidance!
Related article by Tina Markowitz
Generative AI technologies like ChatGPT are already democratizing the travel and hospitality industry, similar to what the the Internet, social media and mobile technology did.
Here the question is: who can and will take advantage of this democratization? The answer is simple: Only industry players who can invest in talent and technology. Guess who these are at the end of the day? The independent hotelier? The small tour operator? The traditional ravel agency? The vacation rental host? Nah, only the big kahunas like OTAs, specialized OTAs like Airbnb and Viator, and major hotel chains, cruise lines, airlines and car rental companies.
In hospitality, except for the major hotel chains, hotels do not have the financial, technology and talent resources to select, train, implement and maintain generative AI bots like ChatGPT on their own. The AI-powered hotel-specific chatbots like Asksuite and Quicktext are perfect for hotel websites of independents, midsize and smaller hotel brands, boutique and luxury brands. But what good can a chatbot do on a prehistoric, mobile-unfriendly property website, deprived of SEO and adequate digital marketing support and practically invisible to the traveling public?
I am afraid, the ultimate winners of generative AI will be, once again, the OTAs
Undoubtedly, AI will change a hotel's booking process. AI helps hotels address guest needs and create appealing offers directly on their website. For example, AI analytics help hoteliers make tailored suggestions for guests, enhancing the booking experience. Pricing algorithms can optimise rates in real time, so guests do not have to visit OTAs to compare pricing. This also allows hotels to attract price-sensitive guests, catering to a broader audience. Website chatbot integration smoothens this experience with swift answers to inquiries by potential guests.
Further, hotels can use behavioural analysis to track website visitor preferences and offer customised packages. Along with predictive analytics, hoteliers can stay ready for shifting demand patterns.
All these facilities can make a hotel independent of OTAs. Yet, the question remains: can hotels entirely displace OTAs, with the latter having established themselves as powerful distribution channels? It may be more beneficial for hotels to view OTAs less as competition and more as partners. Indeed, there are matters such as the commission fees to consider, which small hoteliers may struggle with. But with OTAs, there also comes the exposure that modern brands need.
AI can help hotels get more bookings directly from customers, instead of through online travel agencies. AI can be used to personalize the guest experience, provide real-time customer service, and offer guests upgrades and additional services. In the long run, AI is likely to change the way guests interact with information and experiences, potentially leading to the emergence of new marketing and distribution channels. However, hoteliers must invest in AI technology and train their staff to use it effectively or risk losing share to OTAs and intermediaries… again.
Let's admit it and face it. OTAs have an advantage over hotels in planning trips because they can better consolidate a traveler's "total" travel experience. AI can help hotels improve travelers' overall experience of their hotel stays, but that's probably about it. If hotels also aim to use AI to manage travelers' experiences on airlines, rental cars, local events, cruise lines, etc., they are taking the risk of losing their brand identities. Most of all, hotels will not have the talent, money, or time to manage travelers' total experience. However, OTAs do not have any of those concerns.
I recommend that hotels use AI to fine-tune travelers' overall stay experiences, from making reservations to following up after a stay. CRM should be a big focus, especially in promoting loyalty behaviors. It is also worthwhile for hotel chains to test a new feature on their website or mobile app --- to provide recommendations for travelers who are flexible and want "hopping" within a tourist destination or on a trip with multiple destinations.
OTAs will indeed be an 'insurmountable necessary' evil for hotel business, just as are other third party channels. There is, and will always be, a need to utilise nondirect sales channels to secure bookings and grow brand. However, on the direct channel AI will deliver seamless and personalised booking experiences and optimise pricing.
Consumers are looking for intuitive booking experiences, AI can bolster the direct booking funnel to provide OTA-like experiences. Hotels not only need to capture bookings but prevent loss to other channels. Not evey AI tool is going to be suitable for every business. OTAs have such a vast array of product, AI will simplify the selection process, whereas portfolio brands can use AI to provide immersive brand experiences where OTAs cannot.
AI offers the most benefits within pricing and demand management, using data to predict and respond to each and every guest in realtime to present relevant porducts and packages and upsell in a personalised way.
Right now, hotels need to focus on the basics amongst all the noise of AI - use AI where it enhances customer experience, but don't lose sight of delivering great service and price in a way that offers good value.
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