HTI Column: Hotels and OTAs – What’s the ‘Deal’?

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Online Travel Agents are continuing their profound effect on the global hotel industry.

OTAs are those third party booking sites such as Expedia, Travelstart and Booking.com which offer both leisure and business travellers an easy-to-search database of travel providers. They offer the opportunity to secure travel arrangements directly from their sites and to ‘bundle’ deals.

Looking back, the emergence of OTAs in the mid 90s appeared to herald a ‘win-win’ for various tourism and hospitality players. OTAs that purchased bulk amounts of rooms or bought up excess inventory helped hotels during off-peak times.

These digital ‘agents’ gained from re-selling the rooms at a profit in exchange for their online services, whilst hotels received revenue on rooms they might not have sold otherwise. Although hotels paid commissions on bookings, they received value from OTAs’ digital advertising platforms, which typically gained the top slots in online search engines.

With many visitors entering the supplier’s website after visiting a booking site, this was especially worthwhile, particularly at the low level of commissions (usually 5 – 10%) that were the norm back then.

In recent years, however, the relationship between OTAs and hotels has become more tenuous. In some instances, commissions have increased dramatically, reaching between 15-30% for larger hotel chains and sometimes higher for smaller players. In some instances too, direct hotel bookings have taken a hit – ultimately leading to decreased profitability.

I believe that, in a highly demanding hospitality field, both hotels and OTAs should maintain and nurture their relationships with each other. This is because, despite the rivalry, the two will continue to remain dependent on each other for the foreseeable future and the success or failure of each lies in the quality of services they both offer.

Quite simply, OTAs are often the entry pass hotels need to get into the market, find their customers and prove their worth. What’s more, Millennials are drawn to OTAs for their ability to book memorable experiences at a great value. On the flipside, the challenge for many OTA’s in some African countries, is often the perception that many online businesses are not legitimate; perhaps because they have been a victim of fraud. Some people still feel insecure transacting online and opt to pay cash or through other familiar means.

For hotels in Africa there is also still great value to be found in using traditional offline marketing channels, building direct relationships with corporate clients, working with tour operators to push holiday and business packages, advertising in trade journals and attending trade shows.

The main lesson is this: remain relevant, provide relevant services and adapt these to each market! In the hotel business, trust is important. So, while the concept of online travel is increasingly being embraced, hotels primary online and marketing messaging should always remind prospective guests that booking direct is safe play, and that they have a 100% commitment to customer service if something does go wrong. Indeed, with an estimated 52% of OTA visitors clicking on the hotel website to receive more information on the hotel and what it offers, hotels must use this opportunity to convert some of this traffic into direct bookings.

Brands have also vertically integrated by buying OTA’s (i.e. Accor’s acquisition of Fast Booking) and striking deals; a deal between Marriott and Expedia Group, concluded toward end 2019, now makes the OTA the exclusive global optimised distributor of Marriott’s wholesale rates, availability and content to a network of global travel providers.

Also, by integrating reviews and user-generated content directly on their websites, hotels can increase the chances of visitors securing bookings directly. This is important when one considers that, according to TripAdvisor, 96% of their users consider reading reviews important and 83% usually reference reviews before making their booking.

Ultimately, this is a marriage of convenience. OTAs have a tremendous grasp of what’s coming down the pipe in terms of social media marketing, channel management and use of the internet. The majority of hotels also still need the massive reach and advertising budgets of OTAs to help attract as many guests as possible, while OTAs need hotels to actually provide varied and attractive options to their website visitors.