Booking’s algorithm is changing — how should hoteliers adapt?

Recently Booking.com was designated as the only OTA who is also a “gatekeeper” in the eyes of the EU’s Digital Markets Act. This means the hospitality giant will have to comply with quite a few new obligations to continue operating in the EU. Booking are smart, and they’re not going to let a designation CEO Glenn Fogel calls “dumb” keep them from maintaining their dominant position in the EU hospitality landscape. But there will be some significant changes to the way Booking works, and they’ve already started to roll them out.

Historically, Booking.com operated a price parity clause with hotels, ensuring that the rates available on the OTA’s platform were the same as those available direct. However, Booking’s new designation as a gatekeeper meant that this clause had to be removed. The EU’s aim was for this removal to foster fair competition and give consumers more choices when they book accommodation. But how’s that playing out in the real world so far? Francesco Canzoniere, hospitality expert and founder of Digizando, recently wrote a detailed piece for HospitalityNet outlining Booking’s current method of encouraging hotels to comply on parity - and it’s not what you might expect.

After the deprecation of the Price Parity Clause, hotels can no longer be punished directly for not being in price parity with Booking. But anyone familiar with Booking.com knows that the OTA powerhouse is smarter- and more prepared- than to allow a legislative change to derail its dominance in the hotel booking landscape. Booking.com has been working for a long time to develop its alternative way to ensure compliance from hoteliers — a strategy called algorithmic persuasion.

Key Components of Booking’s Algorithmic Persuasion Strategy

According to Francesco, Booking's Algorithmic Persuasion strategy can be broken down into 3 core components: 

• Rewarding collaborators: Rather than punishing hotels who don’t maintain price parity with Booking, this algorithm rewards hoteliers who do, providing them with better quality visibility in the platform.
• Voluntary participation: Maintaining price parity is completely voluntary, but better parity can lead to better performance.
• Impoverished visibility: Instead of directly reducing the visibility of hotels (by not showing them in as many searches), Booking minimizes potential lost bookings by impoverishing visibility instead. This means that the hotel might be shown in a worse position, or a less popular category.

Why does Booking feel justified in encouraging compliance from hotels?

In Booking’s eyes, they’ve invested a lot to create an effective booking platform, and to drive high volumes of traffic to that platform. When hotels are present on Booking, but have better prices onsite to encourage direct bookings, the OTA sees it as freeloading. In his blog, Francesco highlights a common situation called the “billboard effect”, where guests use Booking to search and to discover a hotel but then book direct. In these situations, hotels benefit from all of Bookings investments in tech and branding, without paying them for the privilege. Algorithmic persuasion, and other Booking tactics, are often targeted towards minimizing this “billboard” phenomenon.

What can hoteliers do to avoid harming their relationship with Booking, while still growing their direct booking strategy?

• Add non-financial value to direct bookings: Leveraging add-ons like free breakfast or spa access can be a way to encourage direct bookings, without undercutting Booking or other OTAs on price.
• Employ precision discounting: Triptease data shows that only a tiny undercut is needed to encourage direct bookings. By using a tool like Triptease Price Match, you can avoid applying a discount onsite when you’re in parity, and only do so when you’re being undercut by OTAs - avoiding larger parity issues in the eyes of Booking.
• Reduce reliance on OTAs: While Booking can be a valuable discovery tool, investing in other online advertising channels— and increasing investment in branding — can make it so that you don’t have to rely so much on Booking for guests still in the research stage.
• Create your own “billboard effect”: You may not have Booking’s multi-billion-dollar advertising budget, but you do have local knowledge and a much better understanding of your USPs. Shout about the things that make you stand out to create an organic buzz - employing tools like SEO and social media to do so.
• Invest in your guest booking experience: One of the reasons that guests book through OTAs is their seamless and familiar booking flow. Take a good look at your website, and think about if there are any key changes you could make to delight guests that little bit more.
• Develop a data-first marketing strategy: By using your unique booking data to power all of your marketing channels, you can make sure you’re capturing the right customers at the right time — a kind of sophistication that used to be reserved for big OTAs, but is now accessible to independent hotels through tools like the Triptease Data Marketing Platform.

Not sure where to start with all of the above? Triptease’s direct booking experts can help with all this, and lots more, for all types of hotels.

For more information on the DMA, Booking.com, and how this is all affecting hotels today, check out our on-demand webinar. You’ll learn about how these regulations are already changing the EU booking landscape, and what you can do to make the most of these changes.

Access the on-demand webinar