Is there a major reshuffle in hotel rankings as OTA giants revamp their advertising strategies?

01

Recently, several hotel owners reported to Travel Daily that some leading OTAs are re - researching the advertising investment model. In the future, hotels are likely to rely more on the exposure and ranking display brought by advertising investment.

This means that a revolution in the traffic rules of the hotel industry is quietly kicking off.

So, the author couldn't wait to have a detailed talk with one of the owners, Mr. R. From him, I learned that this matter is indeed true, and the difference between the old and new models is huge.

"In the past, price difference control was the lifeline of OTA platforms and had a great impact on hotel rankings. For example, if the price of your hotel on other platforms is lower than that on the leading OTA, you will probably be ranked very low."

"However, if it focuses on the advertising investment model, the impact of price difference on hotel rankings will be greatly weakened. Because the OTA's ranking rules and the advertising spaces for investment are independent of each other, but the latter can significantly affect the former. So as long as you pay for advertising investment, you can directly get a front - row display position."

Fearing that I might not understand, Mr. R gave an example.

A hotel was originally ranked low, say 50th, and its selling price was relatively high. If they bought a front - row position, say the 5th, on the leading OTA for a month, even if they stopped investing later, it wouldn't immediately fall back to its original position, but would stabilize around the 20th place.

"That is to say, advertising investment can directly increase the natural traffic of hotels. Long - term advertising investment will have a positive effect on the ranking weight of natural traffic, and then bring continuous traffic and orders to hotels. During the May Day holiday, we obtained the advertising investment data of a group of merchants on their platform, which can prove this effect."

"At that time, the sales of branded hotels that participated in advertising investment increased by 50%, while those that didn't increased by 20%; the sales of non - branded hotels that invested in advertising increased by more than 20%, while those that didn't basically remained the same. So we infer that advertising investment is becoming the fastest and most direct way for hotels to get orders."

"In fact, other OTAs and content platforms are promoting advertising investment to varying degrees. Otherwise, it would be difficult for high - star hotels to be willing to cooperate with them. For example, a content platform concentrated its traffic on short - videos this year, hoping to return to the logic of paying for traffic through good content."

It can be seen that the distribution channels of hotels may already be secretly competing, thinking about how to get rid of the pure low - price route. After all, when high - star hotels condescend to lower prices, they attract price - sensitive customers, which won't last long.

02

Subsequently, in the communication with another owner, Mr. K, the author also learned that the leading OTA's revival of the advertising investment model is not accidental, but the result of the joint promotion of three factors.

First, at the policy level. "Currently, the state clearly does not allow platforms to enforce the same price. If anyone does so, they are likely to be collectively complained by merchants, and in serious cases, they may be severely punished by the authorities. This can be seen from the recent official rectification of the recommendation algorithms of major platforms."

Second, at the platform level. "In the past, the behavior of OTAs conducting price - difference promotions through various marketing activities is no longer effective. The main reason is that when everyone participates, it's as if no one participates, and in the end, it still comes down to price competition."

"In contrast, bidding for advertising investment belongs to the e - commerce model, which is a reasonable business behavior and is not within the scope of regulatory rules. At the same time, it can strengthen the cooperation stickiness between the platform and branded hotels, so it naturally becomes the first choice for transformation."

Third, at the industry level. "As we all know, the hotel industry has long been trapped in a vicious cycle of low - price involution. A large number of merchants lower prices without a bottom line to compete for rankings, which has seriously damaged the hotel's price system, profits, and brand value."

"For example, in order to attract customers, a hotel discounted its room rate from 500 yuan to 350 yuan. Although the short - term sales volume increased, it eroded profits in the long run and lowered the brand's tone."

"As far as I know, the ADR of a hotel during the summer vacation dropped sharply from 1,000 yuan to 450 yuan in three years. On the contrary, if you spend the 150 - yuan discount on advertising investment, you can target high - net - worth customers who are willing to accept the original price. Isn't that better?"

Regarding the relationship between merchants and the platform before and after advertising investment, Mr. K described it like this:

"In the past, the platform forced hotels into low - price involution, and merchants were in a weak position. Focusing on the advertising investment model can not only help merchants maintain the price bottom line, but also have a more obvious revenue - increasing effect for the platform than marketing activities and price - adjustment behaviors." 

It is worth mentioning that Mr. A, an experienced person in the hotel industry, also agrees with Mr. K's view.

In his opinion, if the leading OTA adopts the advertising investment model, merchants will definitely welcome it, which is also a positive measure against involution. If they can also launch tools like AI advertising investment assistants, it will better meet the needs of hotels.

In addition, Ms. J, who runs a single - hotel, also supports this model. She told the author that hotels like hers always have a budget for advertising investment, and it's normal to spend 5,000 - 10,000 yuan a month.

"Advertising investment can help us segment customer groups, such as business travelers, couples, and family tourists... It can also distinguish customers' booking times, such as long - term bookings, same - day bookings, and weekend bookings... Targeting these keywords for advertising investment will have a much better customer - acquisition effect."

"The logic of ranking in the advertising investment business district is also very simple. In the same business district and at the same time, the higher the bid you offer for the click position, the higher your ranking will be. If no other merchants bid, you can get a very high - ranking position at a very low price."

It seems that compared with price cuts and promotions, the advertising investment model is actually a win - win choice for the platform and merchants.

Moreover, for mid - to high - end hotels that want to build a brand and don't want to damage their room rates, choosing an OTA platform that supports advertising investment is obviously a wise move. I believe no one will refuse more traffic and exposure.

03

But the deeper question is, if the advertising investment model is so good, why didn't domestic OTAs develop this model earlier?

The key point is that in the past decade or so, the competition among OTAs has mainly focused on "price wars", directly ignoring advertising investment. To this day, all OTAs have path dependence, and no one dares to give up the strategy of "striving for the lowest price in the whole network" first, resulting in the emergence of "price - adjusting AI" and the like.

However, the strong supervision of relevant national departments has finally changed this situation: if the involution of pure "price competitiveness" no longer works or the cost is too high, then it's easy to understand why the leading OTA wants to reorganize the advertising investment model - this may be a "divide - and - rule" choice.

How to understand this? First of all, for small and medium - sized hotels or low - end hotels that are unable to invest in advertising and don't understand operations, they will probably have to give up the leading OTA and turn to other platforms.

In this regard, Mr. K said without hesitation: "Indeed, they either can't afford it or can't play it, and finally have to go to other platforms to continue the price competition."

Further speculation: if low - end hotels all go to other OTAs, price - sensitive users will also follow, then other OTAs will be completely defined as low - end platforms. And mid - to high - end hotels will be more reluctant to cooperate with such platforms in order to protect their room rate system, and will stay with the leading OTA.

"This is very interesting." Mr. A thought carefully, "The key question is, is the leading OTA more afraid of losing price - sensitive users, or are other OTAs more afraid of losing the high - star market?"

"If other platforms adhere to the low - price model, they may never have the opportunity to compete for high - star hotels; if they follow the advertising investment model, everyone will be happy, and the room rates in the entire hotel industry will no longer be involved in endless competition like now."

So, when will this advertising investment model be promoted?

The author contacted the person in charge of maintaining the hotel rating rules of the leading OTA, and the answer was that the platform's current ranking rules have not changed. This also confirms what Mr. R said before, that the advertising investment model and the OTA's existing ranking rules are independent of each other.

Interestingly, the person in charge said that the OTA platform has never ranked hotels according to price. The so - called rule that the lower the price, the higher the ranking has always been a misunderstanding. Then he forwarded a rule description for hotel ranking reference to the author.

After careful study, it was found that there are many assessment dimensions in this ranking rule, and each dimension has some influencing factors. There are bonus items and penalty items, and many of them are given different weights, which are used together to calculate the final score of the hotel and then affect the ranking.

Among them, there are the factors of room rate competitiveness, review competitiveness, and marketing activity competitiveness that hotels care about most, but the weight of each of them is not high. What causes merchants to think that the price factor has the greatest impact on the ranking?

Based on the calculation process of the score, the author dares to guess: First, adjusting the room rate, getting good reviews, and conducting promotions are three operational actions that have very intuitive effects on hotels, and price adjustment is the most frequent one.

Second, the penalty factors are not given weights. Without a series of comprehensive calculations of weight factors, the score will definitely be higher than the weight factors. So a single penalty may require more basic scores to make up for it. For example, getting more good reviews is a way to increase the basic score.

Continuing to speculate, if the leading OTA really implements the advertising investment model in the future, it can naturally have an effect on these weight factors, increase their absolute values, and thus improve the comprehensive score of the hotel.

After all, the essence of using advertising investment to raise the hotel ranking is the same as that of price adjustment, promotion, and getting good reviews in terms of operation logic, but the nature of the effect display is completely different.

In short, the advertising investment model is not as simple as one platform changing the rules. It concerns the entire OTA ecosystem and whether the traffic logic of the entire hotel industry needs to be reconstructed.

"The best result is to form a new pattern. Hotel merchants no longer compete on who is cheaper, but on who has better service or who is more willing to pay for the OTA's traffic. This will make things simpler for both sides."

"Although the current situation is still unclear, it is certain that the low - price model and the advertising investment model cannot coexist on one OTA platform naturally - OTAs either transform together or polarize." Mr. A said frankly.

This article is from the WeChat official account "Travel Daily", author: Li Zhanpu. Republished by 36Kr with permission.