The Future of Intermediaries and the Consequential Ripple Effect

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1 The Future of Intermediaries and the Consequential Ripple Effect Presented by: Max Starkov President and CEO HeBS Digital Offices in: New York City, Las Vegas, Europe

2 First, Hospitality & OTAs in Numbers

3 Hospitality and OTAs in Numbers 25% Of hotel roomnights booked via intermediaries (1995)

4 Hospitality and OTAs in Numbers 43% Of hotel roomnights booked online in Q2 2014

5 Hospitality and OTAs in Numbers 35% Of major brand hotels online roomnights booked by OTAs in Q2 2014

6 Hospitality and OTAs in Numbers 70% Of independent hotels online roomnights booked by OTAs in Q2 2014

7 Over-dependency is an industry issue Independent hotels are overly dependent on OTAs Major Hotel Brands Room Nights Independent Hotels Room Nights 34.8% 65.2% Brand.com OTAs 30% Hotel Website OTAs 70% True Cost of OTA distribution: $2.5 billion in merchant commissions (STR)

8 Case Study: The Cost of OTA Distribution 150- room Independent Hotel in NYC $250 ADR Occupancy 80% 13,184 roomnights booked via the OTAs (70% of online) $3.296 million OTA room revenue $824,000 in OTA commissions/year (25%) room Branded Hotel in NYC $1.648 million OTA room revenue (35% of online) $247,200 in OTA Commissions/year (15%)

9 The Rules of Engagement Are Changing

10 Rules of Engagement Are Changing Travel demand is UP Corporate Groups are TRAVELING Hoteliers are becoming SMARTER Direct online channel is a PRIORITY OTA Commissions are going DOWN 3

11 What does the future hold for the OTAs? OTAs will be around in the long term ONLY IF they: Can provide unique value proposition to both consumers and hoteliers. Can provide value ad to hoteliers, not just distribution. Can work with hotels to resolve/help with their business needs. Seasonality, Occupancy Needs, etc. Are extremely efficient and innovative. Are truly global. 3

12 Hotelier s Action Plan

13 Important Stats 3 Search & Display Together increase purchase intent 43% 2 24 Days Average length in days before purchase Touch points The average traveler researches 21.6 websites before making a booking. 9

14 Hotelier s Action Plan Invest in the Direct Online Channel Website Responsive/AdapVve Design, CMS SEO+SEM Online Media & RetargeVng Dynamic Rate MarkeVng MarkeVng Social Media MulV- Channel MarkeVng Requires: Minimum 4%-6% of room revenue should be invested In digital technology+marketing 19

15 Shift from Desktop to Mobile & Tablet In the first half of 2014, mobile + tablet generated: 42% 38% 16% Of website visitors 17% in Q Of page views 15% in Q Of trackable bookings 6.2% in Q What does this mean? Competitor Name: XX Pages Hoteliers need to boost presence on three screens (desktop, mobile, tablet) Year-over-year web analytics are meaningless Must install call analytics: majority of mobile bookings come via the voice channel Case Study: 44% of digital marketing revenue comes via the voice channel 4

16 Devices: Traffic And Bookings Q Visits Bookings Mobile 27% Mobile 5% Tablet 11% Desktop 58% Tablet 15% HeBS Digital s Hotels Portfolio Desktop 84% Fact: Tablets generate 224% more room nights and 283% more revenue than pure mobile devices 5

17 #3: Search Engines are Still King 50% Of direct online revenue results from the search engines. 11

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19 Dynamic Rate Marketing (DRM) Hotel Advertising Hasn t Changed Much in 100 Years! 17

20 Dynamic Rate Marketing (DRM) Direct Response advervsing format, featuring real- Vme hotel inventory availability and pricing, inserted dynamically in various advervsing campaigns: From banners to meta search to and Google AdWords. 18

21 DRM Value Proposition To Travel Consumers: Satisfies Travelers demand for instant and precise Information Closes the Loop in Hotel Stay Research and Planning To Hoteliers: Boost Conversion Rates Increase Direct Online Bookings at reasonable ROIs 20

22 Meta Search: TripAdvisor & Google HPA Shifting Share from the OTAs TripAdvisor Metasearch Portfolio Return: 716% ROAS or 7 to 1 Google HPA Portfolio Return: 644% ROAS or 6 to 1 22

23 DRM: Travel Ad Network How does it work? A traveler researches a hotel in a specific destination or books an airline ticket. The Ad Network uses first party data from airlines and travel planning resources (OTA, Loyalty Programs, Delta, United, etc.) to target the traveler. The DRM ad is served for a hotel in that destination, featuring the rates and availability for the dates the user has selected to travel. 43

24 DRM: Banner Advertising 45

25 DRM: Banner Advertising Will this move display further up in planning journey? 23

26 DRM: GDN Retargeting 40

27 DRM: Google AdWords 47

28 DRM: Complex Technology Needed 25

29 uestions?

30 Case Study for Florida Keys Property: 44% of online marketing revenue through voice channel. Full Year 2013 Total Revenue Online Revenue Offline Revenue Online % Offline % $115, $31, $84, % 73% Social Media $27, $2, $25, % 91% SEM / Paid Search $1,969, $1,196, $772, % 39% Direct to Website (SEO) $1,747, $1,016, $731, % 42% Trip Advisor Business Listing $429, $281, $147, % 34% Online Media / Display $161, $64, $97, % 60% Local Listings $6, $6, $ % 0% Limited Time Offer $38, $27,379 $10, % 28% All Marketing $4,690, $2,626, $2,063, % 44% 6

31 The Digital Marketing Budget

32 Breaking Down the 2015 Budget 53 Here is a quick snapshot on how hoteliers allocate the digital marketing budgets