The Role of OTAs in Revenue Management: The Only Constant is Change

By Christian Koestler President & CEO, Lixto, Inc. | October 16, 2011

The practice and profession of revenue management in the hotel industry is a relatively new phenomenon. While the first hotels probably began catering to the pleasure traveler during the Roman Empire – and records show the first inn in the United States opened the year Jamestown was founded – it was not until the 1980s that hotels, hotel schools and academic institutions started to seriously examine and quantify the field of yield and revenue management.

Not until even more recently have hotels begun to implement formal revenue management policies, programs and systems. Fueled by technology, the field is now a true science. Increasingly powerful computer systems can handle many tasks essential for revenue management. The growth and proliferation of the Internet has changed core communications for travelers and hotels alike.

Amid these developments, the online travel agency (OTA) has arisen, changing the rules of revenue management – and the professionals who practice it – on an almost-continuous basis.

Leveling the Playing Field

OTAs have, at their base, added another layer of complexity into the mix of sales channels in the hotel industry. In a positive sense, hotels of all sizes can leverage OTAs to increase and enhance marketing efforts and sales revenues. For hotels without a strong brand presence and technology tools, OTAs – even with their sometimes-onerous commission structure – can level the playing field, and often make the difference between success and failure, surviving and thriving.

At the same time, OTAs constitute only one distribution channel. Hotels realize that they cannot depend solely, or even primarily, on OTAs. They need to find ways to be their own primary booking channels. Today, in the United States, about 45 percent of booking revenues derive from hotels’ own websites. As advanced price intelligence systems help hotels assure their own rate parity strategy, the trend – and that percent – will continue to edge upward.

Coming up in January 2018...

Mobile Technology: Relentless Innovation

Technology has become a crucial component in attracting and retaining hotel guests, and the need to enhance a guest’s technology experience is driving a relentless pace of innovation. To meet and exceed guest expectations, 54% of hotels will spend more on technology in 2018, and mobile solutions in particular will top the list of capital investments. Many hotels are integrating mobile booking, mobile keys, mobile payments and mobile check-in into their operations. Other hotels are emphasizing the in-room experience, boosting bandwidth and upgrading flat screen TVs to more easily interface with guest mobile devices. And though not yet mainstream, there are many exciting technology developments on the near horizon. The Internet of Things (loT) is taking form in some places, and can be found in guest room control systems, voice activation systems, and in wearable sensors that can be used for access and payment options. Virtual reality headsets are available at some hotels so guests can enjoy virtual trips to exotic locations or if off-property, preview conference facilities and guest rooms. How long will it be before a hotel employs a fleet of robots for room service, or utilizes a hologram as a concierge, or installs gesture-controlled walls that feature interactive digital displays? Some hotels are already using augmented reality for translation services, or interactive wall maps, or even virtual décor. This pace of innovation is challenging property owners and brands to stay on top of the latest technology trends while still addressing current projects. The January Hotel Business Review will explore what some hotels are doing to maximize their opportunities in the mobile technology space.