Hotels Spent $100 Million Fighting OTAs. Did It Actually Work?

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Hotels spent the last decade trying to convince travelers to book directly.

Hilton’s “Stop Clicking Around” campaign became one of the most recognizable direct-booking efforts in travel history, helping launch an industry-wide push to reduce dependence on online travel agencies. But ten years later, OTA market share has barely moved.

In this episode of the Skift Travel Podcast, Seth Borko and Sean O’Neill unpack what hotels actually gained from the direct-booking movement, why loyalty programs became the real strategic weapon, and what CitizenM’s partnership with Marriott reveals about the economics of modern hotel distribution.

They also break down the biggest takeaways from Skift’s Data + AI Summit, where travel leaders shifted the conversation away from AI experimentation and toward execution, operational readiness, and ROI. From Air Canada’s efforts to make every customer interaction visible to AI systems to growing concerns around trust, cost, and organizational change, the industry is entering a new phase of adoption.

Watch This Episode

Hello, and welcome back to the Skift Travel Podcast, where your number of the week is 10. 10 years, as in a decade. It’s been a decade since Hilton launched its Stop Clicking Around marketing campaign.

This was perhaps the very first modern hotel direct booking campaign. Hilton wanted its guests not to book through third parties, not to book through agents, to book through their site directly.

And I am joined by a very special guest host, Sean O’Neill, who has just written a feature story on the 10-year anniversary of this seminal marketing campaign. Sean, welcome to The Skift Travel Podcast. How are you doing?

Very good, thanks.

How are you?

I’m great. I’m struggling with the intro. My regular co-host, Sarah Coppadez, regular listeners will know, is out today.

So I’m giving you the lead. Whenever you hear me give you the number of the week, you know that actually behind the scenes, I’ve recorded this multiple times. But we’re really glad to have you, Sean.

And you’ve just come off a very busy week, as have I, right? We’re both at the Data and AI Summit.

That’s right. It was really a lot of fun. The room was buzzing.

So I want to talk about Hotel Direct Bookings.

I want to talk about OGA Bookings. I want to talk about marketing, I want to talk about all this stuff. I want to talk about the Data and AI Summit first.

So how many sessions did you have on stage, Sean?

I had four.

Four? Yeah. Well, that was, God be the most, out of anyone, right?

No, no, I think it was tied with you and Sarah.

Well, I had less than four.

I had three sessions, so I can assure you that you had more than me. I think, Sean, you were kind of the star of the show there. So we just hosted our annual Data and AI Summit in New York City.

It’s the third annual year that we’ve been doing this Data and AI Summit. And this year was all about operationalizing. Enough of the woo-woo, high-level stuff, it was all about operational.

What did you think? Do you think we, do we get a lot of operational insights, or do you think that there’s still more to go before AI is fully operationalized in travel and hospitality, Sean?

I think we got a lot of insights. I think a lot of people came into the room thinking that as long as they had put their data in the cloud and had some open AIs, they were ready to just rock and roll with AI.

And I think one of the recurring themes from top to bottom throughout the day was that you need to create sort of, there’s a second level in there, and you have to create what they call an inventing architecture.

There’s different things that happen to your customers throughout the process of all of your interactions with them that don’t always get surfaced up in a way that is actionable by your computers.

At the end of the day, our CEO, Rafa Ali, interviewed Richard Mewes, Richard Valter of Mewes. Sorry.

I like Richard Mewes. I think he would like that too, quite honestly.

It’s practically his last name now. And at a key point there was that the AI can’t see something that your hotel systems can’t see. And right now, a lot of things are happening in the back end.

And this is true for airlines. We had a very eye-opening conversation that I heard on stage was Frass Al Osmond from Air Canada, Chief Digital Officer there.

And he was saying like they’re trying to create this eventing architecture where every step that happens to a passenger from the moment they click to buy a ticket all the way through when their bags get loaded, up until they’re departing the gate of

their final destination needs to be surfaced in the IT system. And that is a major threshold that still needs to be crossed by so many suppliers.

Yeah, I think that there is a lot of AI work to be done. That was one of my takeaways is just that we went from AI being this like big hypothetical, and then everyone’s built pilots, and now even people have stuff in production and at scale.

3:57

AI Operational Hurdles

But they’re not quite seeing the returns yet, was sort of what I heard. And we are, I think, even outside of travel here in that narrative shift a little bit. I think, who was it?

The Chief Financial Officer at Uber said, we keep blowing through our AI budget. At some point, we’re going to have to ask, what are we doing?

I think that was one of the conversations, maybe subtext was, we’ve gone out of the theory, we’ve gone into practice, we’ve learned how to pilot this thing, we’re starting to deploy these things now.

And now the issues we’re running into are far more operational. They’re far more ROI driven, they’re far more results driven. And so now it’s not like, how do I build this thing?

Now it’s not even, how do I scale this thing? Like, how do I actually operate this thing? What are my customers actually using it for?

What are my staff actually using it for? How is it different or really not even different? Does difference on the same thing better than what I was doing before?

And I think that’s the stage of the conversation that it does feel like we’re starting to get to. You mentioned your conversation with Faraz. I had a conversation with Vipul Hengge, who’s the Interim Chief Technology Officer at boken.com.

It was such a good conversation.

I’ve learned so much in that, yeah.

Thank you. Well, he said, the people is the hardest part.

He basically said like he’s having, he didn’t say like this many words, but it sounded like he’s breaking up a lot more fistfights between engineers and product managers these days because everyone is trying to ship codes so fast.

He would never use the word fistfight. Obviously, they’ve got an HR department. But that’s what it sounded like is that there’s these organizational tensions that are being surfaced.

And he also said he had this line, said, the hardest part isn’t the tech. He actually said, the tech is the easy part. He said the hardest part is the user experience.

So whether that’s an internal tool or an external tool.

I think that’s true and that echoes with something that I heard like John Sturino who leads about 800 engineers at Amex GBT. He said to me off stage that his vision is that 90% of strategy is execution.

And that in the AI case, if you think back to Friendster versus Facebook, we all know Facebook today, but Friendster for a little while, it had essentially the same idea. It had the same central strategy. It had the basic core tech.

But it was so much about the ground game and all those individual decisions on everything from the org chart to how you prioritize your customers.

And so a lot of people I think came in to the Data and AI and they were thinking, well, which model do I choose? Should I use more than one model? And that’s kind of the wrong question.

That’s sort of like a lot of the technology, as you were saying, is going to be table stakes. And a lot of it is about your ground game, but also where you strategically put the AI.

And I think one thing that appeared to be a mistake that I was hearing from some people, they were reflecting at the end of the day in conversations at the end of the summit, was that they felt like, well, maybe where we’re focusing our efforts is

wrong. Like putting these apps in ChatGBT, maybe that is just putting us competing with the perplexities and other high-end travel inspiration platforms that are out there.

It would be better for us to be focusing on the work where we have strength, whether it’s in places that are gonna be revenue generating, where we’re making the most advantage of the data that we have ourselves.

I think you and I have both been through a couple of tech cycles and a lot of things that are important cool features in the beginning just become table stakes at the end and I think we’re gonna be seeing that happen in this same AI cycle.

Yeah.

I think one of the things that just consistently people get wrong about travel is because everyone is a traveler, and because everyone enjoys travel, generally speaking, not everyone, they all think it’s like, everyone thinks it’s like easy and

simple and they just, they overlook the infrastructure, they overlook the complexity, they overlook the supply and so to your point, I think exactly right, which is like Friendster and Facebook, it’s the same exact business model like, oh, how hard

is it really to run a hotel? I mean, I get it. Like you want fresh linens and you want to have a beautiful beach and it’s like, oh, how hard is it?

On paper, travel is an industry where it’s easy to make a slide deck and hard to implement the slide deck. I love that.

I want a t-shirt with that, Seth.

Yeah. The gap between the ground game and the slide deck game is maybe bigger in travel than almost any other sector, right? Whereas I feel like, I mean, that’s it.

And Richard Muse, Richard Valter, it’s a compliment, Richard. People will joke and they’ll be like, Tim Apple for Tim Cook, they’ll call it Tim Cook, Tim Apple. It’s a compliment.

But Richard, I really like Richard Valter. I mean, I genuinely do. I like Muse, but I think he’s a genuinely smart, strong founder and he was the closing session.

And he was talking all about thinking like a hotelier, right? And he even, he said, Roth was interviewing him, asked about like what’s going on with all these tech companies and he said, look, no one deserves to get customers forever.

You’re going to have to earn it and it’s going to come through energy. And he just kept going back to think like a hotelier. He’s just like, you know, these systems or these tools or these tech, no hotelier in there, no hotelier thinks that way.

Anyone who gets into the hotel business does not get into it because they like accounting or they like CRM or they like any of these things, right?

They’re all thinking like, you know, he has this great analytics like I kind of like, he’s like, why do you even call it check-in? Like just welcome. It should be a welcome.

Why do we call it this? Well, you know, so I think he was like a hotelier wants to welcome a guest. They want to attract a guest.

They want to welcome a guest. They want to retain. They want to have the people come to their property.

They want to have them stay with them. That’s how a hotelier actually thinks.

I think those points were also echoed by Adam Harris, which you had a conversation with on stage earlier in the day. And my paraphrase of one of his messages would be, all the acronym soup is going to go away. PMS, CRS, all of this.

Like as you’re saying, a hotelier didn’t go into it, you know, for that kind of perspective. They’re into it for the hospitality and the capability of these tools.

The Venn diagram is increasingly overlapping, which is going to change like how a lot of hotels approach their tech and try to make it very user-centric for guests.

You know, we heard from Marriott and IHG’s way of talking about, you know, the idea is to have that tablet so to get the people who are performing hospitality are looking up at providing hospitality, not spending their entire time with their head

Yeah, I mean, Colin Coleman of Marriott, who I interviewed as well, also said something very similar, and I think they’ve said it in the past.

And I think they’re obviously right, and it’s the right way to go. There’s also the reality of like, come on, really?

I mean, like, I think you want to go watch like whatever, like any of these old hotels, even before there was, even when there was giant walls with keys, and you had to store your key at the cubby hole, there were bad front desk checking experiences.

I mean, there’s a part of me that’s sceptical. There is some element of, well, yeah, anyways. I think the other idea that surfaced a lot for me, well, let me ask you this before I just start talking.

What would you say was like the dominant anxiety in their room? Sean, what do you think? What was people afraid of?

I think, well, I think for software providers, there is a fear that suppliers, meaning hotels, airlines, cruises, are going to start developing their own point solutions, that there’s going to be a lot of pressure on software providers when Air

Canada said to his team before, they would always buy every piece of technology they need because it’s just too much hassle to try to consider the upkeep over time. Now, if they can be done within a few weeks, they have their own team do it.

I think if you are a point solution provider, meaning my specialty is helping you upgrade customers in that last 24 minutes of arrival, I think there’s a tremendous pressure on you now because a lot of suppliers think, why don’t we just build this in

house? The giant companies increasingly want to be the everything platforms, I think was something that we heard a lot from some of the podcast.

We heard a lot of everything platforms for sure. I guess my devil is advocate for that and I did debate Adam, and obviously the room was full of AI. This is my chance without anyone to come back at me to really defend myself.

But in the room was full of a lot of very obviously AI optimists. But I think that, I mean, look, just a single, what is it? X post or tweet.

But I saw a post just the other day. I was like, yeah, AI is cool. You can code your own tools.

You can do all this stuff. Everyone’s vibe code and all this stuff. Then they realize they have to maintain it.

And it’s like, yeah, the fun part of software design is always the building cool shit. The boring part of software design is we’ve got five ticket requests, and this edge case broke this thing.

And by the way, this customer wants a custom integration and yada. And those problems, AI doesn’t solve those problems. So there is the skeptic of me.

That’s like everyone’s like, because I did this presentation. We did this Skift research, this pre-read, and we created a presentation. We did five tensions.

And we said these are the five big challenges with AI. I don’t actually have them up in my notes. If I can remember with my hat, it was pilots versus production.

So like tests and stuff versus scale and stuff, speed versus trust. So moving fast and breaking things versus moving less fast, but not breaking things. It was restructuring versus readiness, which is like getting your workforce ready.

It was build versus buy, and it was control versus visibility. So like the invisible in these systems versus quantitizing your own product. I had someone come up to me like, build versus buy, that’s such a lame one.

That’s like business school. And it’s like, I think it’s real.

I think it’s very real.

Everyone is like, we can build in-house now. And it’s like, yeah, but can you maintain in-house? Can you scale in-house?

What happens? I don’t know. I don’t know that point solutions are dead because part of what you’re paying for, yes, a point solution can be like, oh, part of what you’re paying for is the convenience of just shutting that part of your brain off.

Right? And so I don’t know. So just my two cents there.

I think we as an industry struggle so much with tech debt. And then in the last five years, we’ve managed to offload so much of that tech debt to cloud providers finally.

And now, are we about to create a huge amount of vibe-coded AI sloth tech debt for the next 10 years that we’re going to have to deal with? Because some guy or girl work in the front desk, vibe-coded this check-in tool or what?

You know, like, I don’t know. So I would just call that out there. I don’t know.

Not to recap the event, I am a bit of an optimist in that.

I think vibe-coding is sort of like an outdated term for it. Now, that was my mega trend for last year, and it turned out to be really on point. But the assisted coding, as they call it now.

Yeah, I’m proud of that one. The assisted coding, I think it is very, very impressive. And I think a lot of what these third-party providers, software providers were doing, where they were arbitraging the complexity.

And I think that that arbitrage is slowly going to go away. It’s not going to go away overnight.

The technical debt, I’m less concerned about the technical debt than I am for the broader change management of the organization, because you can start generating a lot of software, but then is all the rest of your organization ready to handle it?

You know, AMEX GBT was talking about, they have two sets of customers. They have the business travel customer, but they also have the travel management companies, and they have the suppliers.

Not all of them are ready to handle this volume of change that is coming at them and wanting it to be coordinated, and they may have different interests in how it is.

And so I’m much, where I feel the real fault line is not going to be technical debt, this is, I know less than you about it, but this is just my hunch.

But I do think it’s the change management, and that is going to be the holding back point, and also tokenomics, the cost of so much of this is going to…

The cost of this stuff is going to go up. It’s going to go up. So I have two things I want to respond to, and I’m not trying to do like a debate here on this podcast.

We have more to talk about, but your point about saying it’s an arbitrage between, what was the arbitrage again?

Complexity, essentially.

See, you could call it a complexity arbitrage. I might call it focus, because that’s also what Vipple said on my session when I interviewed him. I asked something about AI, I said, how is booking so dominant for so long?

He said, it’s just focus. And I think that that’s a big thing that people overlook, is it’s so easy to find the faults of the system as it exists today. Why is the tech so bad?

Why is the franchise thing so complicated? Why is the owner so complicated? What’s with all these pips?

Why is the loyalty things? But we also forget, it lets people focus, like division of labor, like you don’t need to worry about technology. Focus on what you’re doing.

You don’t need to worry about finance in a building. Let an owner focus on that. You don’t need to worry about running a loyalty program.

Let a marketing specialist focus on that. Like we call it arbitrage, but I think there’s the devil’s advocate is that it’s focus and bringing all this tech in house can distract. And this is where that change management piece comes into it too.

Because if you’re spending all your time focusing, if you lose your focus, you restructure your entire organization, you bring out all this tech.

Well, guess what?

Like there’s someone out there who’s just focused on selling flights, selling hotels, selling cars, selling cruises, whatever. The customer doesn’t care about your complexity. They care about the experience.

I think that change management piece is just super, super important and that ties into the cost. Because right now, the stuff is cheap. It’s not going to be cheap necessarily forever.

So I would flag that as very much a risk and a tension. And I did these five tensions. The number one, I asked the audience to vote on what they thought was the most important tension.

And by an inch, but they voted speed versus trust. I think that is what I would say is like what the concern was. People are worried they’re going to get left behind.

They feel the pressure to do something, to move fast. And yet, they also feel the pressure to truly deliver on this experience.

I think there are a lot of people and a lot of brands and organizations that are currently being torn between move fast, adopt this AI, but also don’t endanger our hunch.

Many of these brands have these storied heritages, even the non-consumer ones, even the Amadeuses of the world, which are our first commercial databases, and Sabres nowadays, where 70 years of back-end reliability, or Ritz-Carlton and getting back to

Cesar Ritz. They have real reputations to uphold, whether it’s infrastructure reputations or consumer brand reputations, and that’s scary. I think that’s a real challenge.

Those very persuasive points, I agree with you.

Well, look, let me segue here, because you were talking about cost, and I think this is the big thing.

So much of AI has become focused on cost, and again, I really like Richard Felter, I really like this session, and he had this great point where he said, you’re all too focused on, he didn’t say it like this, I’m paraphrasing, I’m synthesizing one

bit of it. What I heard was he was basically saying, you’re too focused on costs, and he’s talking in his own book, he just launched a new revenue, but he says, why can’t technology help you drive revenue?

And guilty pleasure of mine is I’ll sometimes watch these personal finance shows, where like Dave Ramsey, whatever you call it. And they always say, well, at a certain point, you can’t cut anymore, at a certain point, get a job that pays more.

And I feel like that’s sort of what Richard was saying a little bit with me, what he was trying to say is, his muse technology would do is, at some point, there’s only going to be so much you can cut, at some point, you got to sell better and

generate more revenue. Which is my long-winded, kind of clumsy segway into talking about distribution and talking about revenue, because this is exactly what the value add of a real great hotel brand should be.

That if you take a generic, commoditized box with 100 rooms in it, and those rooms sell for 100 bucks, you should be able to put those same boxes in a platform called Hilton or Marriott, or Hyatt, and those boxes should sell for $120.

This is the beauty of brand and a distribution of all these things. For a long time, but making it actually work is complicated.

Sean, you just wrote this great feature story on the Stop Clicking Around campaign from Hilton, which was, like I said at the intro on the teaser, arguably the first modern hotel direct book and ad campaign.

21:37

Hilton Direct Booking

Talk us through it. What was the significance of that? Talk us through it.

Take us back to 2016, a dark era, a dark age long, long ago, where it’s before Stop Clicking Around. Yeah.

In 2016, Hilton did the first thing, something they had never done before, which was have a completely unified marketing message on all of its channels with one voice, with a very memorable TV ad.

That was the most highest response rate in their surveys of any of the ads that they had ever shown up to that point, called Stop Clicking Around.

The bigger context here is that Marriott Hilton and the other hotel groups spent the decades since then and hundreds of millions of dollars trying to convince people to book directly. My question was, how did that work out?

It was not the way that I thought it would work out. Out of every hotel room booked in the US through a major chain, the slice that went through OTAs like Expedia did not shrink. It actually grew a little bit.

In 2019, it was 20 percent. Last year, it was 21 percent. That is a survey based on 50,000 hotels using a very statistically solid methodology behind it.

Marrying other large hotel groups, they lost share. What I learned in this reporting process was that’s the wrong scorecard. What’s more important is the margin.

Going back to what you said earlier, it’s about two things. It’s about making sure that you increase your net revenue and also reducing the cost of acquiring customers.

So you’re getting higher spending customers or convincing that customers to spend more, and you’re getting them through in a method that is a lower cost way of getting bookings. And so on those scores, the hotel groups have done much better.

They’ve gotten better at when they do get customers direct to get them to book repeatedly, to join the loyalty programs, to use their co-branded credit cards, which generate a lot of fees. They get them to spend more.

And so the story has been that as the hotel groups have not been successful in getting room share away from the online travel agencies, they haven’t kicked the middleman out of the system yet, that they have gotten much better.

They’ve made their distribution a much more profitable system.

Okay, so let’s, a lot to unpack there. That’s a great, that’s a great thesis. And I want to dig into all of this.

So I think people forget, I would start to start at the back to the beginning. People forget, it’s easy to forget how new these loyalty programs are. Loyalty program as an idea is not new.

Of course, they’ve been around for a while. But the two largest hotel loyalty plans are by numbers, give or take, Marriott and Hilton. And they’re neck and neck, and the, is it the 200 millions now, I believe?

Yep.

Mid 200 millions.

And everyone else is sort of, is big but not in the 200 million ballpark. Marriott Bonvoy only launched as a unified brand in what? 2018, 2019?

2019.

Yeah.

2019, I think, yeah. So they acquired, Marriott acquired Starwood in 2013. They ran two parallel loyalty plans.

They merged them. People hated it. They rebrand and they did this whole systems integration rebrand, and that became Bonvoy in 2019 officially.

Hilton started pushing Hilton Honors and stopped clicking around as this piece commemorates in 2016.

So I think people take for granted, loyalty is not new, but loyalty at this scale, with this specific purpose of, what should we call it, an integrated direct marketing, direct channel strategy is really what it is. There’s an ecosystem.

There’s a strategy in place. We’re measuring lifetime value. We’re acquiring customers.

We’re putting them in our channels. We’re cross selling them. We’re up selling them.

We’re revenue managing them. All those things, instead of just like a punch card, buy nine, get one free or whatever, like really thinking of it as a holistic, integrated value ad.

Yeah, and it builds on something, a thought that you’ve had in the past, which is that a lot of the direct booking thing was a catalyst for a change in how the hotel groups did marketing and thought about marketing, because a lot of it was brand

segmentation. You would create a Weston and you imagined a certain kind of customer profile was going to come into that, and then you’d create this other brand, like Citizen M over you might buy or create a Moxie.

And that was how they approached marketing.

And now with Bonvoy, the CEO, Tony Capuano, says it is in many ways the most valuable brand that they have in their portfolio because that is the connective tissue, and which is a point that you’ve made a few times with Skift Research.

Yeah.

26:48

Loyalty Brand Power

And I think the shift to these, our loyalty brand is a first among equals brand. Our loyalty brand is its own brand. Actually, it sits beyond and above the actual property level brands, and it’s the most important brand of them all.

I think it’s a fundamental shift in the DNA of a lot of these hotel companies. And that shift, by the way, speaking of AI, was necessary because of the internet, because of e-commerce, right?

Because in order to compete successfully on the web, you had to have a landing page, you had to have direct traffic, you had to get people to go to your web page, you had to type into Google search.

There were these things called, now all of a sudden, these things called online travel agencies, which for some reason, hotel years we’re now paying you a franchise fee and paying a commission to the OTAs.

How are we going to get people out of the claws of the evil OTAs? I think that the old franchise model was truly about, in my opinion, I’m exaggerating a little bit here, but truly about entrepreneurship.

You would hand over the keys to a local entrepreneur and they would run it. Now these franchises are so much more centrally managed.

I think that’s also what in my mind, what the Stop Clicking Around campaign commemorates is a decade of centrally managed franchise operations as opposed to like, yeah, the guy in the West Coast can do whatever he wants and the girl in the Southeast

They did away.

They found it very hard to compete in the modern era.

If you think about, I don’t know, I’m thinking these old fast food joints like McDonald’s has a centralized everything, right? I think that’s really interesting.

Now, I would have thought taking it all in a house, making it all centrally managed would drive significant direct book and share. That’s not what happened though.

Well, partly one reason is that they’ve gone international, and where the growth is for so many of these major hotel groups is to go overseas.

And when you’re opening up and you’re adding a new Moxie or Weston Hotel or Hampton Inn in Saigon, you face a wall of independence, you face a lot of Chinese and Indian players there.

So you are much more likely to have your customers look first to online travel agencies that have been already playing the flag way long ago in those markets. And so it’s much harder for the hotel groups to go there.

And that was the number one driver why OTA room share globally has not shifted much away from the OTAs is because the hotel groups are increasingly playing on the turf of where the OTAs are strongest.

So what’s happening is the big hotel brands, so we’re tired of pain, we want more direct bookings. They built this direct booking engines, they built in the US and then they went global.

Yeah, they did. But they successfully claimed opportunities of scale. So Marriott commissions that may have been 13 percent 15 years ago are now maybe as low as 10 percent now.

And the share of distribution in a Marriott, the official flagship Marriott brand in the US, is about six to seven percent of their booking room nights are coming through OTA. So much lower than the headline 20 percent number.

So it is very much the hotel groups have made great progress in the US and they’re hoping to export that globally.

So I think you put this great case study in your feature about CitizenM, and it is really like what an economist would refer to as a natural experiment. It’s a brand.

Yes, I love this.

It’s a standalone brand with brand recognition, but yet it’s fully independent. It’s not part of one of these loyalty plans.

So what do you do when you take a pseudo-independent, pseudo-small brand with no loyalty affiliation that does a lot of its distribution through online travel agencies, has tried to do some direct itself, but not at scale with a loyalty program.

When you take that and you plug it into the largest loyalty plan in the world, which was Marriott Bonfoy.

What we know already, we have a bit of a spoiler, we know that at the global top level, that channel share, Hilton and Marriott have built these behemoths, and yet nothing has changed.

We know the overall share of channel share hasn’t shifted, and yet what happened when CitizenM plugged into Marriott Bonfoy?

This was a real mental unlock for me when Leonard told me this, the head of CitizenM, Leonard DeJong.

If you think about profit as like adjusted EBITDA on a run rate basis for this year, they really only plugged into the system between October and December fully across all of their more than 30 hotels.

And so they’re seeing a third of the adjusted EBITDA gain that they’re getting. They’re getting a gain and that gain is coming from lower commissions.

Because they had been independent, they were paying these high rates to the booking.coms of the world. Now they get the ride on the Marriott rate, which is lower, so that’s one benefit.

But number two, which is really important, was getting those loyalty customers, those Bonfoy customers in. And that has been another third of their adjusted EBITDA. And mainly, it was helping them fill in midweek nights with road warriors.

Leonard would say that he would be sitting at the hotel bar talking to other travelers when he was out on the road years ago. And he would tell them about this great hotel.

I happen to run a hotel at the Citizen M, and they would say, oh, is it part of Bonfoy? And then he’d say no, but it has all these great features. And they’re like, oh, if it’s not in Bonfoy, I’m not going there.

I want to collect my points. And so he’s gotten 40 percent of Citizen M’s new customers now are all Bonfoy members. And that adds something he refers to as a rate compression.

Not only is he getting the benefit of these additional Bonfoy customers, but then that because that’s filling up the rooms, that helps him push up the pricing for everyone else who was already his existing customers.

And then another third is like synergies of he no longer has to pay externally for a revenue management system. Now he can use the one that he gets from Merit.

So it really, I think it generated a sense, not only it showed the value of the economics for someone like an independent citizen of whether it was like being on the outside versus coming on the inside, but it also shows you other independent

portfolios, why you should join Merit. It helps build the momentum of the Goliath.

Well, I was kind of joking, it was a bad segue, but I think it’s actually a good segue because it goes back to this AI conversation we’re having where it’s like, is it going to come from cost or is it going to come from revenue?

And it probably needs to come from both, right? So on the one hand, all right, they get some vendor efficiencies, fine, fine. They jump from the nobody rate to the Marriott rate to the somebody rate.

So that now they have the preferred commission rate. That’s just that’s straight mathematical savings for every hundred dollars you get in, you were paying 20 bucks, now you’re paying 10 bucks. That’s straight mathematical.

And then the third one, I think most interesting is there’s revenue uplift, which is now there’s a new market, there’s a new customer base.

It actually doesn’t matter if they come to you direct or not, they’re coming to you and that’s boosting your occupancy. I think I won’t put words in, I don’t know their financials.

But I also think one of the interesting things that’s worth talking about is it also, it puts them outside the rat race a little bit.

If you feel confident that you’re going to, I mean, what are the numbers for these, either one, Hilton, Married, whoever, usually 60, 70, 80 percent of room nights can come from loyalty members, depending on the market, depending on the time of year,

Married, it’s 75 percent in the US, two-thirds worldwide are.

Yeah.

So by brand, it will vary by flag, by market, by business, whatever. But if you can rest easy knowing that you’re going to get six out of 10 rooms filled every night no matter what, you can price those remaining four rooms much more aggressively.

Whereas if you’re starting from zero, you’re like, oh, I got to be a little careful. I think that was one of the other lessons.

And this goes back since other stuff is the brands, when they started managing them as marketing companies, is they got much more disciplined on pricing.

I think that’s another piece of it too, is that there is no one, when you feel confident that you’re going to have loyalty members showing up midweek, and that, by the way, maybe they’ll go to the courtyard and marry instead of the Citizen M, but

they’re not going to go to this random independent. You can price much more aggressively. And I think that has that confidence, right? Like people are scared to raise rates.

It’s true.

It’s true. And I think another connection with the AI conversation is that one of the hardest reporting challenges of this was getting consistent actual data to measure year over year across companies.

And but because OTA Hotel, because it’s been static fight, it hasn’t been that important to have that number. Hotel is very good at tracking pipeline development growth. Net rooms under development is something that everyone tracks every quarter.

They all announce it in a consistent way.

My forecast is that investment analysts are going to want a number like that for distribution in the coming years because of AI, because there’s going to be a lot of bumpiness to third-party distribution if people are starting to come in through the

chat GPTs and perplexities of the world, or if they’re coming through the Citibanks and chase travels as channels, or if they’re coming through Facebook and TikTok as social media increasingly starts having becoming a channel for taking bookings. So

I think third-party distribution as it’s configured in a bunch of ways, is going to become more important as everyone tries to figure out what’s happening next. I think whatever hotel company reveals a consistent statistic on this, is going to be

Well, I do wonder, and I’m trying here, I’ll be transparent when I’m trying to thread our two topics back together.

But I do wonder how all of this changes as AI comes in, because you just gave this, if you were put, what are the benefits of joining a brand? You gave it a third, a third, a third, right?

We call it about, there’s three things that really are great about joining a brand. One is the vendor and the technology, two is the discounted commission rates, and three is the direct members. Okay.

The third piece, which is the technology, is what we were just talking about with AI. Like, why do I need a large, big brand to tell me what vendor? Like, if all these companies are going to this seamless vendor world, that’s changing.

And, you know, distribution rate, lower distribution rates is always great. But I also wonder about competition from, well, hold on a second. Do you actually need to, you do pay for a brand.

Do you actually need to pay for all three of those things, or do you actually only need to pay for one or two of those things?

And as distribution shifts, like, I guess what I’m really saying is I think that there are some soft brand models out there and there are some also some, what we might call like technological alliances, where you see a portfolio of hotel management

companies all agree to work with the same vendors. So we saw 2016 was the great year of stop flicking around, where we saw the market get centralized.

I think we are starting to see an unbundling of that, where some of you get three things, but you might actually the distribution might come from somewhere else pretty soon. The technology might come from somewhere else.

These federated models of not full franchise fees, but you get a loyalty plan, or not full franchise fees, but you get a tech vendor negotiator rate, not full franchise fees, but you get a channel management, those things with AI, they feel

increasingly possible. Would you agree with that?

I agree. You’re much more able as a customer to find a brand that resonates with you without having to use the signposting that a Marriott International would through its brands.

You’re not piggybacking off of the work that they’ve already done in signposting. Weston means X, Moxie means Y. You’re able to find this much more organically, and I think that’s true in fashion, it’s true in fragrances.

I think the potential is going to really hit the travel sector, including hospitality.

So what do you think the next 10 years, this is 10 years of brand loyalty, what do you think the next 10 years of branded hotel loyalty holds for us?

39:28

Future Hotel Loyalty

I’m very intrigued by the picture that you paint, and I think there’s going to be more global competition.

I think there are times we only talk about the Western major hotel groups, and I think some of the Xinjiang and Hworlds that are using technology, they are exploring different approaches to technology, and social media use that are going to just

create new versions of live shopping, and how people go about choosing hotels. So I do think it’s going to become a wild world of experimentation, and certain business models will see success in the market, because maybe I’m able to have lower costs

for this kind of lifestyle property with this kind of Gen Z market, but then for the standard business traveler having the big behemoth program, that’s going to be the one that works. So there’s going to be a really interesting shakeout and a lot of

Yeah, I think for me, the big word is going to be trust.

Maybe alongside trust curation, right? That is in a sense what Bonvoy and Marriott or Hilton honors. I feel bad.

This was a 10-year piece on Hilton, and we talked about Marriott too much. I’m sorry, Chris and Seda. I’m sorry.

Let’s talk about Hilton. Hilton stands for trust, right? It stands for, I know what I’m going to get.

I’ve said this before. I don’t know what’s going to happen.

I would say all of those brands are like proxies for trust when you can’t be sure what it is you’re exactly going to get.

Exactly.

And in the AI world, we may be getting closer to really understanding what you actually get at that particular Hilton property. And that may change. It’s sort of like the TripAdvisor effect.

TripAdvisor used to be very important, and you would go to TripAdvisor to choose.

And now that you can go on to Google Maps or you can go on to Chetchiputty, and you just sort of get a generalized review of that particular property and that particular street corner that you’re looking at. That may be the direction of travel.

It’s unclear.

It’s a good point.

I think you were going in a different direction though, Seth.

No, no, no. I think that’s exactly what I was… Well, it’s a very good point.

I guess I’m skeptical. I guess I think it’s a good point. I’m a little bit skeptical of it, is my honest opinion.

I’m not trying to be the AI naysayer here. That’s what got me beat up on stage at the Data and AI Summit. But I think we can overestimate how quickly things are going to change.

The web came out earlier than 2001, but the real.com boom is 2001, and stop clicking around is 2016.

We can do a little bit of that math of like, you know, pets.com, everyone needs a website, was in 2001, and Hilton was like, you know what, we should have a dedicated campaign to really consolidate our e-commerce and drive direct traffic in 2016,

Bonvoy in 2019. I think that we can really, I don’t know, I think that the trust layer is going to matter a lot. The loyalty layer is the proxy for the trust layer, and it’s going to really, really matter. I’ll be very interested to see.

The hotel groups and the Disney resorts of the world are going to be, have the real potential to be the leaders here, because you are on that ship or you’re in that resort, you have your magic band following you around all the time, you would

essentially have an NPS score, customer satisfaction score. There’s so much data that is, like as they say, the inventing architecture that you can attract is going. I think the lessons that are learned there are really going to ripple out.

The cadence of things is fast. iPhone adoption was much lower than, say, now, the adoption of using LLM. We are on an accelerated course, but I do agree with you.

We may have gotten in over our skis about the pace of change.

I think to me, loyalty is so critical because it’s the way to opt. It’s the way out of the, not out of, but everyone’s worried about AI visibility right now.

The ultimate form of AI visibility is, book me a hotel in this brand new city I’ve never been to. Wait, by the way, it has to be Hilton. If you could, once the customer says that, you’re golden.

You just have to get them to say that. Maybe that needs to be the next campaign. It’s not stop clicking around, it’s go wherever you want.

Go to whatever chat, Claude, creator you want, but add with Hilton. I think that’s what we want to drive people to, or what I would want to drive people to. Just add, what’s the campaign?

Just add Hilton? I don’t know. What’s the right, something like that, right?

Don’t give away your eyes for free though in the podcast.

You should charge for it.

All right.

44:27

Weekly Winners Losers

Let’s start to wrap this one up. We like to do winners and losers every week, Sean. Do you have, I’ll ask you to play along, do you have any losers of this week?

Anyone that you felt like really just didn’t really, really kind of missed, missed, whiffed this week?

It’s such a, such a tough one. I do think many of the hotels that bet on FIFA bringing in large numbers of tourists for the World Cup, they let their optimism get away, get it, take it, I don’t know, trip them up.

But I still think it’s going to be a big event, and I think it’s going to be a bump over last year. It’s just not going to be as big a bump as a lot of people thought.

Yeah. It feels very last minute. It feels like it’s not quite there.

It’s been a difficulty. I think that’s a great loser. Would you like to do a winner?

We like to end with a winner of the week.

I’d like to do a winner. A name that almost never gets mentioned on the podcast, even though they have over a billion of revenue a year, that’s Amtrak.

I think this June and July can be good months for the Northeast because of the 250th anniversary and the World Cup and also all these new trains, that the next-gen train sets that have now gotten fully deployed, which allows them to put many more

high-paying passengers on each per square meter. So I think Amtrak paradoxically may have a good year this year when some people had been doubters.

They need a better name than trainsets. It makes them feel like toys.

It is so true. That’s the jargon. Yeah.

I have a winner of the week.

Please. New York Knicks. New York Knicks.

Which game?

How many games do you think is a go all the way to the last one?

Well, no, we got to clench this thing. We had a little bit of bad luck, a little bit of bad luck. There was maybe a little bit of a jinx at the last home game.

But I think I’m feeling good about playing at home. We record these a little bit earlier. So the home game is tonight as we record.

So we’ll see. And I’m hopeful that by the time this airs, we are right on the verge of clenching the whole thing. All right.

Well, Sean, thank you for coming on The Skift Travel Podcast. We love having you. We love learning about your features and data and AI.

It’s just great catching up with you. So good conversation.

Good catching up with you, Seth. Thanks for having me on.

We’ll see you next week, everyone.