Earlier this year, we published an article where we argued that in these difficult times, when travel supply outweighed travel demand by far, the online channel was the only growth channel in hospitality.¹

Indeed, in Q1 2009, Internet bookings for the top 30 hotel brands increased by 6.3% and reached 51.1% of the total brand CRS bookings, an industry first.

What was the situation in Q2 2009? Are there any changes in channel utilization, and the overall direction to which distribution is heading?

The latest eTRAK Q2 2009 report on hotel bookings by channel confirms yet again that today the online channel is the only growth channel in hospitality. Internet bookings for the top 30 hotel brands increased by a remarkable 7.2% in Q2 2009 vs. Q2 2008 (eTRAK), and now constitute over 54.8% of total brand CRS bookings.

The increase in Internet bookings comes at the expense of the GDS and Voice Channels, both of which have been in decline for many years now, and continued their downward slope in Q1 and Q2 of 2009.

Here are some of HeBS' findings based on the latest eTRAK benchmark report, surveys and industry data from PhoCusWright, ARC and HeBS' own research.

Hotel Bookings by Channel

GDS Channel Is in Steady Decline:

• GDS hotel bookings via the CRS of the top 30 hotel brands declined by 4.6% in Q2 2009 vs. Q2 2008, and constituted 22.7% of the total brand CRS bookings.
• In Q1 2009, this decline was 4.5% Q1 2009 vs. Q1 2008, which constituted 24.8% of total CRS booking in Q1 2009 (eTRAK).
• In retrospect, back in 2006, GDS CRS reservations constituted 31.3% of total CRS bookings for the top 30 brands. GDS share has decreased to 22.7% in Q2 2009.

The Voice Channel Contribution Is Decreasing:

• In Q2 2009, voice channel hotel bookings via the CRS of the top 30 hotel brands declined by 2.6% compared to Q2 2008, and amounted to 22.5% of total brand CRS bookings.
• In Q1 2009, voice channel bookings declined by 1.9% vs. Q1 2008, and constituted 24.1% of total CRS booking in Q1 2009 (eTRAK).
• The Voice Channel is in decline for 6th consecutive year (HeBS). Back in 2006, the voice reservations constituted 31.3% of total CRS bookings for the top 30 brands. Voice Reservation share has decreased to 24.1% in Q1 2009.

The Shift from Offline to Online Channel is Permanent:

• 54.8% of overall CRS bookings for the top 30 hotel brands come from the online channel, which is an increase of 7.2% Q2 2009 vs. Q2 2008 (eTRAK).
• In Q1 2009, the online channel contributed to 51.1% of total brand CRS bookings
• 45% of hotel bookings in 2009 will be via the Internet (direct + indirect online channels) (HeBS).

Direct vs. Indirect Online Channel Dynamics Follow the Economy:

Typical of economic times when travel supply outweighs demand, travelers are shopping around and hoteliers are more susceptible to discounting and working with the OTAs. Therefore we are witnessing a shift from the direct online to the indirect online channel in Q2 2009:

• In Q2 2009, 70.1% of the online bookings came from the direct online channel (i.e. the major hotel brands own websites), while 29.9% came from the indirect online channel (the Online Travel Agencies-OTAs) (eTRAK).
• In Q1 2009, 74% of the online bookings come from the direct online channel (i.e. the major hotel brands own websites), while 26% come from the indirect online channel (the Online Travel Agencies-OTAs) (eTRAK).
• There is a significant increase of OTA contribution, compared to Q2 2008, when only 25.4% of the online bookings came from the indirect online channel (OTAs).

The Bottom Line for Hoteliers:  Continue to Focus on the Direct Online Channel

The growth of the Internet channel for the top 30 hotel brands is not an isolated phenomenon. HeBS reports steady increases in direct online channel bookings across its hotel client portfolio.

Even in dire economic times like these, characterized by sharp declines in travel demand, a comprehensive ROI-centric Internet marketing strategy can help hoteliers continue to generate much needed incremental revenues and out-smart their competition.

Hoteliers need a robust Direct Online Channel Strategy, accompanied by adequate marketing funds to be able to take advantage of the steady growth in the Internet channel and shift from offline to online bookings in hospitality due to declining GDS and voice channels. Hoteliers must carefully employ ROI-centric initiatives, including website redesign, website optimization and SEO, paid search, email marketing, online display advertising and proven social media initiatives.

Even in this economy, you should not decrease or eliminate your hotel Internet marketing budget. The Internet, and especially the direct online channel, is the only growth channel for hoteliers and the only "light at the end of the tunnel" in this environment. Even in these difficult times we see "Return on ad spend" (ROAS) as high as 3500% from Internet marketing campaigns we run for our clients.

HeBS believes that online travel, and especially the direct online channel, provides hoteliers with the only viable option for any growth during this recession.

¹ Yet Another Confirmation on Why the Internet is the Only Growth Channel in Hospitality 2009-2010 - click to read

About the Authors and HeBS:

Max Starkov is Chief eBusiness Strategist at Hospitality eBusiness Strategies (HeBS). HeBS is an award-winning, full-service Internet marketing and Direct Online Channel Strategy firm, strictly dedicated to the hospitality and travel verticals. Having pioneered many of the "best practices" in hotel Internet marketing and direct online distribution, HeBS specializes in helping hoteliers profit from the direct online channel and transform their websites into the hotel's chief and most-effective distribution channel, establish interactive relationships with their customers, and significantly increase direct online bookings and ROIs. Visit us online at www.hospitalityebusiness.com .

A diverse client portfolio of over 500 top tier major hotel brands, luxury and boutique hotel brands, resorts and casinos, hotel management companies, franchisees, independents, and CVBs has sought and successfully taken advantage of HeBS' hospitality Internet marketing expertise. Contact HeBS consultants at (212)752-8186 or info@hospitalityebusiness.com.