|Priceline's Acquisition of Buuteeq: Why Hotels Must Own Their Digital Assets.|
By Vikram Singh
Wednesday, 2nd July 2014
The hotel marketing and distribution world was recently shaken when Priceline Group (aka, The #1 Lodging Online Travel Agency in the World) acquired Buuteeq for an undisclosed sum;
This officially makes them the first OTA to directly enter the B2B hotel marketing services sector.
Can you hear me now?
For over nine years, in every one of my lectures, workshops, consultations – just about every interaction with hoteliers – I have tried to stress the importance of owning your digital assets (your domain, website, analytics, etc). I have evangelized WordPress to the hotel sector for quite some time now. I could not have more strongly urged hotels to own their own website, their single most profitable marketing and revenue channel.
If you haven’t been listening, this acquisition should be a huge wake-up call. Ownership of your digital assets is more important than ever before in the history of the lodging business. Who provides your technology and in what format really matters. In this case, if your hotel is using a website made by Buuteeq, your site is now essentially a subsidiary of one of the biggest OTAs in the world.
If you find your hotel in this situation, you’re not alone. The majority of hotels worldwide are renting their digital assets, and this is hurting their long term direct revenue potential. Every time a hotel goes through a change in vendors, ownership or management, they are practically starting from scratch with a brand new website, marketing campaign, etc.
In fact, in my experience, many hotels make their digital asset purchasing decisions on the basis of the lowest possible cost, likeability of sales people and existing relationships, with little regard for long-term profitability.
Stop Renting Your Most Profitable Channel
Owning and managing a lodging business worth millions of dollars and then renting its website from a vendor is a bad idea that has become very popular with hoteliers. I have never passed up an opportunity to try to steer hotels away from proprietary content management systems (CMS). It’s fine to hire someone to do your online marketing, as long as they build upon a platform that you control. This ensures continuity in your online marketing efforts.
Each of the leading hotel marketing agencies has its own “special” system that is billed as being “much safer and magically superior” to open source platforms like WordPress. These agencies boast of having hundreds or thousands of hotel clients; the size and ubiquitousness of these agencies is exactly what makes them feel like safe choices when they are being hired by hotel marketing departments. But it’s the agency who gets security from this setup: hotel websites built on their proprietary platforms make it difficult for those clients to leave.
The Art of Misdirection
Last year, I wrote a popular article about why hotels should ignore the hyperbole of software vendors and hotel marketing agencies, and should embrace WordPress when selecting a content management system for their websites. I was specifically addressing a ridiculous article that Buuteeq’s SEO manager had written about WordPress being a bad choice for hotels. His agenda was clear: spread misinformation about the open source systems hotels were starting to ask their sales teams about.
How bloody ironic it is that less than a year later, Priceline has acquired Buuteeq along with the content management system that now powers hundreds (thousands?) of hotel and B&B websites. You cannot buy this kind of irony with bags of cash, even Priceline’s cash. Buuteeq obviously had a goal: to steer hotels and other lodging clients into their proprietary system in the hopes of gaining enough volume to cash out. Mission accomplished.
Hotel owners and marketers who made the choice to forfeit the ownership of their most profitable channel are the ones who lose in this deal. Today their website is owned by a company with market capitalization of 63.17B. (Yes, that is billions).
The Truth About Your Agency’s Website CMS
There are a quite a few mega hotel marketing agencies in the US and Europe that boast of having thousands of hotel clients. They all have one thing in common: hundreds upon hundreds of hotel clients sitting on a clunky, proprietary CMS platform that is years behind WordPress (and they know it). Here are the three real reasons custom CMS platforms exist in the hotel marketing industry, despite what your sales rep might tell you:
1. Sales: They help the agencies make a phony but appealing sales pitch. Fake awards are won, security touted, new versions released with much fanfare; even CMS systems with “secret SEO sauces” are peddled. Salespeople know that hotels will not be asking them digital asset ownership questions; they will keep making sales as long as customers are willing to be dazzled by superlatives and a low price. So the reviews and awards keep getting shinier, and the prices keep getting lower. The systems, however, aren’t getting any better. (Psst: WordPress gets better all the time. That’s the beauty of open source technology.)
2. Efficiency: A proprietary website platform creates massive efficiencies in website hosting, production and management. This is the reason you can get a website for as low as $100. Overworked, underpaid project managers use the CMS to manage hundreds of websites. You too will have access to change your content and photos, but only the limited access that is built into the system. Please don’t think you will ever own your website. You are just renting, as they intended you to do. You don’t have ownership or control.
3. Pain: The CMS delivers a potent kiss of death when a customer decides to leave. You think you have paid for a website, but without the content management system it’s worthless. When you leave, you take only the contents of your former website with you (usually in a Word document that is emailed to you). The platform – the framework that holds the whole thing together – doesn’t belong to you. Sometimes even the photos don’t belong to you; certainly not the SEO ( Search Engine Optimization) efforts you paid for over the years. Every time you switch, you leave it all behind. You start from the beginning and lose all momentum, so you can experience the pain of revenue loss as a penalty for leaving.
It’s an Epic Race Down to the Bottom
Forest Key, one of the founders of Buuteeq, said in an interview in 2011, and I quote: “Our biggest competition today is the legacy relationships that the hotels may have with a web design agency. These agencies tend to be very small, often individual proprietors, and provide custom design and development services to the hotel, usually charging $60-150 USD per hour.” He clearly identified the one thing that hits home with a lot of decision-makers in the hotel and lodging business: They view online marketing as an expense. Something that needs to be controlled and kept in check.
Many hotels and consultants happily jumped on the Buuteeq bandwagon due to their price point, with zero thought given to digital asset ownership. Since this interview three years ago, Buuteeq created an aggressive sales team and offered rock bottom prices that no agency could match. The result: Hotels were steered away from open source platforms they would have owned in favor of an inexpensive closed system they rented.
Even brands like Choice Hotels jumped on the Buuteeq bandwagon. Buuteeq custom-designed an integration to the Choice Hotels’s CRS (central reservation system) that they branded as “Digital Direct Program” which is now available to 5,000 Choice brand hotels. What can I say? It’s a classic story of “brand meets new low-cost vendor,no real questions asked, brand falls in love. the end”
Choice Hotel’s intention here was probably to help the hotel owners generate more direct revenue. Instead, their “Digital Direct Program” did not give any thought whatsoever to digital asset ownership. It’s classic sort term thinking that kicks in when hotel brands go technology shopping. Choice Hotels could have directly invested in open source for their franchisees, but it chose not to because the harder thing to do and the right thing to do are usually the same thing. Instead, now their franchisees can have a “website ready in less than a week” for $99/month, but the will never really own that website. Additionally, those hotels who opted into the program now have their most profitable channel (their websites +analytics +online marketing) owned by Priceline.com’s newly acquired subsidiary. Let’s not forget, Priceline already sells several of these very same hotel rooms on their own website, of course for a commission to the same owners.
So, we come to the real question. If hotel owners are getting (renting) their most profitable channel (their website) from Buuteeq for $100/month, which is basically the cost of one Starbucks latte a day…do you think they really care about or understand the value of direct revenue? The answer is no, just in case you are wondering.
Furthermore, how many hours do you think the agency spends on improving their clients’ $100 – $500 websites every month? (And how many hotel clients ask this question?)
I am a huge fan of efficiency and new technology, but it’s this race down to the bottom that bothers me. The acceptable level of spending on a hotel’s most profitable channel is getting lower every day, which, I might remind you, is the very opposite of what the OTA’s are doing themselves!
Remember this: It will always matter who maintains and owns your digital assets, no matter what sales people tell you. If you have any doubt, look at what their own company is doing, not what they’re saying.
Online marketing vendors have always been bought and sold. Buuteeq is one of the many hotel marketing vendors that have recently been acquired. Priceline, unlike most of the hotel brands, has always invested in the right digital assets and their results speak for themselves.
Hotels should take a cue and stop viewing their digital assets as rentable commodities. They must stop viewing their website and online marketing as expenses, and start recognizing that their digital assets and marketing are investments in their future.
Nothing will change unless hotels and brands embrace open source technology, own their digital assets, and stop outsourcing their strategic thinking to the lowest bidder. Vendors come and go; your online presence needs to be consistent and lasting.
Vikram Singh, co-founder, Madbooker
Vikram is an expert in hotel-specific technology and marketing, with a strong focus on booking engines, search engine marketing, and online distribution strategy. His latest venture, madbooker.com, focuses on the current ecommerce challenges facing the travel and hospitality industry today. His strategies have helped power some of the biggest and most successful hotel equity turnaround deals in the last decade. A thought leader in the hotel/tech realm, Vikram is a frequently requested speaker at industry conferences worldwide. Former hosts include the US Department of Commerce, Travel Distribution World Asia, Arabian Travel Market, and HSMAI. He is a perennial favorite of audience members everywhere because he emphasizes action-oriented strategies. Vikram also writes the popular hotel and travel marketing strategy blog: www.wordsofvikram.com