Exclusive Insight: Why hotels lost ground online

Yesterday, you probably saw that hotels are getting hit pretty hard by online travel agencies, as customers have been hunting for deals aggressively. The latest data from PhoCusWright puts branded hotel websites at 54 percent of the online channel, down from 59 percent two years ago. And a few weeks ago, we took a look at the competition between online travel agent and airline brands as we head into a travel market recovery.

Well, it looks like hotels are going to stage a similar comeback as the economy improves.

I reached out to Douglas Quinby, Senior Director, Research, at PhoCusWright yesterday to find out a bit more about the supplier/online travel agent dynamic in the hotel space.

Quinby wrote to me by email, “The interesting thing about this shift away from branded hotel websites to OTAs over the course of the recession – and this has happened with airline sites too – is not that hotel brands are not important, but that those travelers who care most about hotel brands, the frequent leisure and business travelers and true brand loyalists, were the ones that pulled back the most.”Essentially, hotels’ best customers started to stray, as cost became increasingly important given prevailing economic conditions. It isn’t surprising, of course: when you have fewer dollars, each comes with greater gravity.

Quinby continued, “When money is tight, price becomes more important, and the OTAs have deftly outflanked the recession by focusing on that infrequent leisure travel and what they care about most: deals!”

As business travelers come back into the market, it seems, the share of total travel spending going to the suppliers will again increase, as corporate travel budgets get a little looser and those making the buying decisions get a bit more freedom again. Quinby notes that this goes for frequent leisure travelers as well, with both categories leading to “improving performance in supplier websites.”

There’s no doubt that online travel agencies will need to increase their brand investments to compete effectively with hotel suppliers in 2011. Let the games begin!

So, how do you book hotels: with a branded hotel website or an online travel agent? Leave a comment to let us know!