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Online Travel Agencies Go on $ummer $pending $pree

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Credit: Emma Verdet

As peak summer travel season gets underway, booking sites are fueling an ad boom that shows no sign of slowing. They are battling each other and traditional hotel brands like Marriott and Hilton for pieces of the more than $67.2 billion online U.S. hotel and lodging market -- and they are winning:

Agencies now control more than half of online hotel bookings.

Hotels are fighting back, but their adversaries have a unique advantage: They can plow huge amounts of their revenue back into ad spending because they don't have the burden of caring for properties. Online travel agencies are "basically marketing companies," said Douglas Quinby, senior VP-research at Phocuswright, a travel and hospitality research firm. "It's about data and technology, and they are just getting better and better at it."

Expedia, whose brands include Trivago, Orbitz, Hotels.com and Hotwire, grew its overall U.S. ad spending by 16.6% last year to $1.6 billion, becoming the nation's 25th-largest advertiser, ahead of ad powers like Unilever, McDonald's and PepsiCo, according to Ad Age's 200 Leading National Advertisers 2017 report. Priceline Group also cracked the top 100. Now ranked 96, it boosted spending 10.3% to $461 million to promote brands that include Kayak and fast-rising Booking.com, whose new "Nothing Is More Important" campaign touts hassle-free planning.

Though the sector has brands aplenty, each also offers something slightly different. Trivago searches prices but doesn't provide booking, for example, while Hotwire sells unsold inventory at bargain prices. That allows for more experimentation with marketing tactics, noted Quinby.

And while ad effectiveness has been questioned in some categories, online travel marketers are as bullish as ever. Consider Trivago, which in 2016 shoveled an astounding 82.7% of its worldwide revenue into advertising, according to a financial filing. "We believe that increasing brand awareness creates self-reinforcing value by resulting in a greater number of visits to our platform," the filing said.

Others have new stories to get out. TripAdvisor, the 17-year-old site best known for user reviews, is spending more on marketing to tout newer services such as price comparisons and instant booking. "We are a brand people love, but for one thing," said Neela Pal, VP-brand marketing. "We have reviews, but you can do price comparisons to help you get the lowest prices. We're the place to come when you're ready to book."

As with most big shifts, millennials are partly behind this one. Of consumers ages 18 to 34, 52% book via online travel agency sites like Booking.com or comparison sites like Kayak or Trivago, 18% book directly with hotel sites and just 14% call hotels, according to Phocuswright. Roughly 39% of older consumers use the online booking brands, it said.

Those shifting preferences have helped online travel agencies seize control of 52% of the $67.2 billion online hotel bookings market, compared with 48% for hotel-branded sites, according to Phocuswright.

Their ads also effectively generate conversation. Online travel agency sites scored higher in "offline brand sharing," reflecting face-to-face conversations about brands' marketing or advertising, than categories including media, beauty, automotive and retail, tracked by marketing analytics company Engagement Labs. "It's a testament that their marketing is culturally relevant and they are earning their way into people's word-of-mouth conversations," Engagement Labs CEO Ed Keller said. Hotel brands, in contrast, earn fewer conversations and rank near the middle of all categories for in-person sharing, Engagement Labs found.

Travel sites are making their mark with campaigns like that of TripAdvisor, which is putting its owl mascot to work in a $70 million TV push. HotelTonight is hitting New York City hard with an outdoor campaign that targets locals, including those who need a room for an impromptu tryst. And Trivago ads are so omnipresent that the company created a stir online when it replaced its spokesman with Australian actress Gabrielle Miller. She began popping up in U.S. ads this year after appearing for the brand in other markets since late 2015. She's been "flooded with marriage proposals since her ad first went to air," the Daily Mail reported. "Trivago guy" Tim Williams prompted similar curiosities and widespread media coverage, including when AskMen.com called him as "so creepy, it's kind of hot."

He'll return to Trivago ads this summer.

To compete with Trivago and others in the U.S., Amsterdam-based Booking.com has been pumping up marketing here. The brand commands the majority of parent Priceline's $3.8 billion worldwide ad spending and is one of the largest advertisers on Google, which has a dedicated Booking.com team, according to Pepijn Rijvers, Booking.com's chief marketing officer. Though the brand worked with Wieden & Kennedy to develop its "Booking.yeah" tagline four years ago, it's tapped Deutsch and Joan on more recent TV campaigns.

"We are still fairly new to the U.S. and relatively unknown compared to many of the others," said Rijvers. Booking.com is planning more varied marketing soon, such as stunt-driven activations, sponsorships and deals with influencers.

Hotels are trying to claw back consumers with their own campaigns. They have to pay commissions as high as 30% on guests that book via travel sites, so they are urging people to book directly.

Marriott International, for instance, hiked ad spending 20.1% last year to $435 million, according to the Ad Age LNA report. (That includes Starwood Hotels & Resorts Worldwide, which Marriott bought in September.) Last year, it began offering lower rates to loyalty program members who book on Marriott.com.

The company wants to "dispel the myth that other travel websites offer better rates for our hotels," Global Chief Marketing Officer Karin Timpone said when the program began. And Hilton Worldwide Holdings boosted its ad spending last year by 5.4% to $410.7 million, according to the LNA report. Marketing included a campaign -- the chain's largest in its nearly 100-year history—called "Stop Clicking Around" that urged viewers to book directly through Hilton's branded websites and become Hilton Honors members to receive rewards.

"The message to consumers is simple: There is a lot of value to be had if you are part of the program and booking directly is the simplest way to take advantage of that value," said Hilton Chief Marketing Officer Geraldine Calpin. The campaign won 4.5 million direct bookings and
9 million new members, she said.

But the gambit has risks. "It's a smart move in terms of driving sign-ups among that millennial travel base. But at the same time, now every brand is doing it and it fundamentally devalues the role of the loyalty program," Quinby said. "You are building loyalty purely based on price."