InterContinental Hotels Group (IHG) has just officially joined its fellow hotel competitors in the direct booking wars against the online travel agencies.
On May 3, the company announced the global roll out of an exclusive IHG Rewards Club member rate for booking direct, similar to what Marriott, Hilton, and Hyatt have recently announced for their own respective loyalty members.
The new members-only direct booking rate, called Your Rate by IHG Rewards Club, launches in May in Europe and the Americas, and will be promoted as part of major brand campaigns in both regions. IHG didn’t elaborate on what form the campaigns would take but said the rates would be integrated into major campaigns spread out across its brands, which include InterContinental, Hotel Indigo, and Crowne Plaza, among others.
Later this year, the rates will extend to properties in Asia, the Middle East, Africa, and China, and will be “tailored” to specific regions and markets, the company said in a statement.
To book these member-exclusive rates, IHG Rewards Club members can book direct on IHG-branded sites, the IHG app, or by calling IHG’s global call centres. IHG also said the rates may be booked by “select travel partners on behalf of any IHG Rewards Club Member through eligible channels.” When asked to clarify who those travel partners would be, IHG’s Heather Balsley, senior vice president of Americas brands and marketing, did not elaborate, but said, “IHG greatly values our travel agency relationships.”
The Bigger Picture – Taking Back Market Share
Many industry watchers see these latest moves by IHG, Marriott, Hilton, and Hyatt as direct moves to take back market share from online travel agencies, specifically, which often take commission rates ranging from 10 to 30 percent. Hotels have long had a love-hate relationship with the online travel agencies (OTAs) because although they help hotel fill up rooms, they can also eat into a hotel’s revenues.
In the past year, a number of hotel brands, IHG included, have tried to chip away at commissions paid to OTAs like Expedia and Booking.com, as well as relative newcomers, such as TripAdvisor’s Instant Booking feature. IHG, along with Hilton, has held out on partnering with TripAdvisor on its Instant Booking feature, for example.
When asked if these new rates would have a negative impact on IHG’s relationships with online travel agencies, Balsley said, “Online travel agencies are an important sales channel for our hotels. We continuously look at ways to encourage incremental business from our OTA partners. Your Rate is available to a specific group, or ‘closed user group’, i.e. IHG Rewards Club members, which offers better rates than what is available to the general public and is in line with our contractual obligations with OTAs.”
That closed user group of IHG Rewards Club members, as it stands today, is estimated to encompass 92 million members worldwide. By comparison, IHG’s competitors have somewhat smaller numbers for their programs: Marriott has approximately 55 million members, while Hilton has about 50 million and Hyatt has about 20 million.
Given that scope, and the fact that IHG’s portfolio is very international in its range of properties, it’s clear that the exclusive rates for IHG Rewards Club members, as they roll out worldwide, could potentially have a much more global impact than even those members-only rates launched by Marriott, Hilton, and Hyatt.
Direct Booking Has a Proven Track Record for IHG
IHG has been testing these rates for quite some time, and the decision to launch the rates on a global basis was driven by extensive testing that took place throughout 2015 in both Europe and the Americas.
“Our intention has always been to expand and accelerate member-only pricing when the timing was right,” Balsley said. “Based on the positive results of our pilots, and extensive research that told us what members want from a loyalty program — namely the feeling that they belong to a special club with exclusive benefits, we believe the right time to launch Your Rate is now.”
Balsley said that when the company launched a trial of the members-only rates for its Holiday Inn Express properties in the U.K., it saw a 20-percent shift in bookings from online travel agencies to direct channels, thanks to targeted and clear direct communications about the “clear price benefit.” The pilot also more than doubled online loyalty enrolments for the IHG Rewards Club, and improved the hotel’s revenue performance.