Big Interview: Booking.com confident it is on trend and set for further growth

By Travolution
By Travolution
May 30, 2014 03:11 PM GMT

Lee Hayhurst spoke to the two men at the helm of Booking.com at its first bloggers summit held at the online travel giant’s Amsterdam headquarters

Online hotel retail giant Booking.com is confident the key consumer trends are all moving in its favour despite talk of a return to the package holiday in the UK.

Darren Huston, chief executive of the powerhouse behind Priceline’s remarkable rise to prominence, sees ever more transparency and consumer control emerging in travel.

And he claims that for hoteliers Booking.com is the cheapest platform out there, with commission between 12% and 15%, and generally towards the lower end of that scale.

Huston claimed this was far more attractive than OTA rivals – he named Expedia which he said charge 20% – and operators like Tui and Thomas Cook which “can demand 30%, plus discounts”.

“We think we are the least expensive way for properties to generate retail demand. Generally speaking no other online travel agency in the world could sustain 12%.

“Obviously everyone [hoteliers/suppliers] would love to pay less; they would also love to get all their business direct.

“But with us they do not pay anything until they get a guest reservation and they also only pay us after the guest has stayed.”

Much of the talk in the UK during the downturn has been about a return to the package holiday as consumers seek the refuge and protection of trusted brands.

Official industry data from GfK Ascent has appeared to back this up, but the analyst’s figures are thought to be skewed by the big two and under-represent pure play online firms.

For Huston, if there has been a return to the package it is a temporary blip as increasingly web savvy consumers migrate in larger numbers online and demand more flexibility.

“Everything should lead to greater transparency and more consumer control,” he said.

“There are times when package travel has a place, but generally people are becoming more courageous with travel.

“At a general level you have all the trends working in our direction. The first is the rise of the internet, and the UK is a very advanced internet economy.

“People are wanting and are willing to do things on devices of all sorts. The second trend is increasing comfort in doing things in a ‘Do It Yourself’ fashion.

“People are looking through the package market and realising that the deals are not that great and if you put it together on your own you get more freedom.

“The other trend is the rise of the low-cost carriers. They drive the unbundling of the package and the UK is like ground zero for low-cost carriers.

“Generally on the internet these sort of bundles slowly start to break apart and get disintermediated as people get smarter.”

Unsurprisingly, therefore, Booking.com has strategic partnerships with both easyJet and Ryanair and continues to exploit its considerable commercial clout in online marketing.

But it is also aware of its own key failing, which is that still too few consumers in the UK are aware of the brand, so that explains the debut on UK television this year.

Paul Hennessey, Booking.com’s chief marketing officer, said: “At the immediate launch much of the UK was under water, but we are off to a very pleasant start.

“We believe that our message is resonating in the UK the way that we had hoped. So far, so good.

“It’s only been a couple of months and brands are built over years but we are very encouraged with the results so far.”

The overriding message of the brand campaign is that the lead person who books that perfect hotel on Booking.com gets huge kudos from their fellow travellers.

And Huston believes Booking.com’s range of product, commitment to customer service, user-friendly booking engine and, increasingly, its own customer reviews give it its edge.

He likens the behaviour of the modern web customer for travel to motorists and how they increasingly are shopping for cars.

Huston said in the past the consumer would trawl around multiple dealerships assessing numerous brands, but now they may go to just two.

Here they will tell the retailer what they want and expect the vehicle to be specced to their individual requirements.

And it is giving the customer what they want - like the option of fully flexible deals, or cheaper offers with upfront non-refundable payments – that Booking.com is focused on.

“What’s great about our site is it offers cancellable product. So people can lock the pieces [of the trip] down. The easier and simpler that can be done the more people will.

“Our non-refundable deals have always been a small proportion of our business, although it is growing a bit. We try to be absolutely explicit when you buy this - it is bought.”

Booking.com prides itself on offering the lowest prices on the internet.

However, parity pricing agreements between the majors OTAs and hoteliers have been one area regulators in Europe have picked up on to investigate.

Huston said it supported a settlement from the Office of Fair Trading in January under which deeper discounting beyond published rates could be offered by OTAs to closed user groups.

“Hotels should be able to have control over their headline rates,” Huston said. “But hotels and OTAs should be allowed to sell their discount rates to closed user groups.

“We work with hotels to collect closed user group rates for our guests so if you sign in to Booking.com you will see a lot of rates that you won’t on meta sites.

“This is the hotel providing the discount - we are not providing it, so they can protect their headline rates.

“There is the broader discussion around price parity. But this is not our construction, it’s existed forever and we think parity is good for consumers.

“We work night and day to make sure the prices our customers see are the best on the internet. We are always one of the lowest, there’s nothing wrong with that.

“We think parity offers good consumer value and if it goes away we think it will be a very confusing world.”

In terms of the prospect of greater regulation of online travel in general, Huston added: “Regulation should reflect the changing nature of the world.

“Any regulation that tries to protect the old is working against the tide of customer behaviour.”

Areas hotels need to a grip of, according to Huston, are how their wholesale rates end up being widely distributed and their presence on increasingly powerful metasearch sites.

Meta is an interesting area for Booking since parent company Priceline bought Kayak for a whopping $1.8 million in November 2012.

Huston said ‘human integration’ of the two firms has gone well, although they remain managed separately. However, he believes the jury remains out on metasearch.

“We have always managed our brand very independently, and entrepreneurially led, although we share best practice. By and large that’s the case today

“Kayak has picked up on what it feels like to be part of a winning team and what it’s like to be global.

“We keep a Chinese wall between the parts of the group. We did not force any integration because in some ways it violates the nature of what a meta site should be.”

Huston added: “Meta has grown as a share of the travel sector but it’s still pretty small.

“What I do not like is often the pricing the consumer sees is not real. That’s a problem we in the group have, TripAdvisor has and Google has.

“The idea of price comparison is quite powerful but on the consumer experience there is much work to do still.”Hennessey added: “It commoditised brands. There is a lot more to various brands beyond what the actual price is.

“The winners in the space will ultimately expose brand attributes so consumers can make a really informed choice.”

Booking has seen a remarkable rise over the last decade – Priceline’s head of worldwide strategy has admitted most people thought it had gone bust in the early 2000s.

But Huston said its global reach, while a major advantage, does not mean that it doesn’t understand the value of working on a local level too.

A localisation team ensure sites in each of its markets are tailored to local tastes – a bigger challenge in some markets like Japan, India and China, than the UK, Huston said.

“Being global comes with huge advantages in the amount of data and the ability to invest in the consumer experience.

“Travel is inherently a very non-local product. We have recognised the advantages of being global without whitewashing the local differences.”

As well as driving up awareness in mature markets like the UK, Booking.com is confident this approach will see it turning ever more regions of the globe blue.

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