Mr. Koestler

Revenue Management

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

By Christian Koestler, President & CEO, Lixto, Inc.

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.

This does not mean that OTAs no longer occupy a critical spot in the revenue management mix. It does mean that their role is changing in some key ways, and that the future will likely bring changes the industry cannot yet imagine.

Dynamic Pricing

Dynamic pricing, which is based on response to market fluctuations or data gathered from hoteliers’ guest databases, allows OTAs to adjust rates to correspond to a customer’s willingness to pay. OTAs are already starting to work more closely with hotel chains to provide them with individual pricing support. At the same time, however, many hotels would prefer to move away from OTAs, taking initiative to drive more traffic to their own websites, avoid OTA fees, and add more to their own margins.

The reality is that the market provides room for both OTAs and the individual hotel/hotel chain’s marketing. Understanding that OTAs will provide information based on their own needs, larger chains can use advanced revenue management and price intelligence systems to derive their own demographics. Smaller hotels may need to rely more on OTAs for this service for now. In the near future, more cost-effective revenue management and price intelligence systems for individual properties and smaller chains will be coming available, further equalizing the relationships with OTAs.

Marketing and Communications

The demographics data that OTAs now can provide from consumer bookings can change the way hotels market and communicate with their guests and prospects. For the revenue manager, this creates both an opportunity and a challenge to create a new paradigm of communications.

Managers now can create individualized promotions, packages or specials for individual travelers, based on their needs, interests, time and frequency of stays. Creating such individualized communications is an art in and of itself, requiring more time, talent and/or resources, and often, automated programs. In some ways, the OTA creates more costs for a hotel between commission and the requirements resulting from individualized information. Yet in the big picture, the OTAs still provide what most revenue managers need to stay competitive.

Rate Parity

One of the most important – and controversial – areas in which OTAs are affecting revenue management is in rate parity. For an OTA to remain competitive, it must retain the ability to negotiate best rates with providers, and ensure “best price” guarantees across the web. Since OTAs are dependent on their providers for the most competitive prices, lack of solid information is a real threat to the OTA’s long-term business.

As a result, OTAs themselves rely on advanced revenue management and price intelligence systems to monitor thousands of properties, rates, reviews and rankings online. OTAs can see exactly what properties are offering what rates. By systematically catching each rate parity violation, an OTA can actually help hoteliers manage their rates more conscientiously – and lessen or eliminate risk of losing preferred status, which eliminates the risk of losing substantial revenue. For one European-based OTA, for example, time savings and productivity gains have resulted in savings of 12-15 percent in total operating costs each year.


There’s no question that mobile devices, apps and usage are here to stay when it comes to booking travel. They are changing the field of revenue management dramatically for OTAs and hotels. Industry statistics portray a clear picture.

Late last year, Google released data showing that year-on-year, mobile searches for hotels had risen by 7,000 percent(1). Specifically, searches for travel-related terms have risen by a factor of 12. Hotel-specific terms are up 30 times(2). Another industry leader, Priceline, sees similar trends in mobile device use. The company has reported that more than 80 percent of its mobile app customers booked hotel rooms within one day of arrival, compared with 45 percent name-your-own-price customers online. Almost 60 percent of customers on Priceline's mobile app were within 20 miles of a hotel at the time of booking; 35 percent were within one mile(3).

What do these figures mean for the field of revenue management? They show that consumers using mobile apps are booking hotels differently than those doing so from a desktop. Prospective guests often are searching OTAs and booking places to stay within a day of arrival at their destinations, or even once they’ve reached their destination area. Revenue managers will increasingly find that individualized communications and dynamic pricing integrate closely with these trends. They will need to find unique, value-packed ways to get the attention of prospective guests through their own websites as well as compete strongly on OTA sites.

Individual hotels are seeing similar trends. Choice Hotels International Inc., which operates through franchisees more than 10 brands and 6,000 hotels across the globe, says its mobile sales reach well into the seven figures each month, and account for more than 1 percent of all online sales. Mobile revenue is up 250 percent year over year, reservations are up 205 percent, mobile page views 130 percent, and mobile conversion 106 percent. Mobile traffic to the site has grown an average of 190 percent each month since the company introduced its mobile site in 2008(4).

Besides a booming mobile business, the mobility trend means that hotels and chains that want to compete in the mobile world will need to invest in custom mobile apps. Asking a consumer to view a website designed for a PC on a mobile device will not work. To go mobile with travel booking, consumers need very easy-to-use, fast apps designed specifically for their devices. Fortunately, development of these apps is coming down in price with good options available even for individual properties. With the ability to work with their own content management systems, revenue managers can create, edit and publish their own content, posting special offers and news updates as often as they wish.

The Future of OTAs in Revenue Management

In a field fraught with change since its inception, trying to predict the future is difficult at best. But there are some things we do know:

  • Proliferation of sales channels: Additional sales channels will emerge through new OTAs as well as social media outlets, mobile apps and other methods. Revenue management professionals, and systems, will need to be flexible and scalable enough to handle the increasing numbers and types of sales channels, and learn to use OTAs as one element in their revenue mix – vs. rely solely on them.

  • The mobile world: The mobile world is fast emerging as a major channel of choice for consumers to make reservations and conduct travel business. Strong (and ultimately, the surviving) OTAs will be investing heavily into dedicated apps for mobile transactions while still maintaining capability to handle traditional online bookings. Revenue management systems will need to be able to handle traditional online information as well as pull data from mobile sources.

  • Dynamic pricing: The work that OTAs are doing now in the area of dynamic pricing will ripple outward to smaller chains and individual properties. New price intelligence systems will be coming on the market for the small and independent hotels and chains, making it possible for these properties to compete even more strongly with larger counterparts, and have the means to create even more tailored guest programs.

  • Multi-channel support: Hotels and OTAs alike will need to support both mobile and traditional web channels. Guests today are becoming more accustomed to practicing the new “shopping art” of multi-channel booking. They may start the booking process at home on their personal computer, discuss options the next day with friends at work, and then finally book the hotel on a mobile device during the ride home. This requires that hotel chains and OTAs need to support each channel to ensure the exact same rates and booking processes across each – and ensure guest ability to access saved, not-yet-completed itinerary and price information on is/her device of choice.

Fulfilling the job of revenue manager has never been easy. As technology advances, more OTAs come on the market, and the sales distribution channel picture becomes increasingly more complex, this fact will not change. Revenue management will need to be at once more rigorous and more flexible, working in parallel with the changing nature of OTAs.



Christian Koestler is president and CEO of Lixto, Inc., a global leader in web data extraction and analysis for the hotel, retail and consumer products industries. He also holds the position of managing director for sales and marketing at Lixto Software GmbH, the company’s headquarters, in Vienna. Mr. Koestler brings a broad background in software technology to his work in the hotel industry. He previously served as vice president of manufacturing for Lixto Software GmbH in Vienna. He has held sales and sales management positions in Europe with Agile Software, Eigner Inc., and Siemens AG Austria. Mr. Koestler can be contacted at 408-952-9200 or [email protected] Extended Bio... retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by

Receive our daily newsletter with the latest breaking news and hotel management best practices.
Hotel Business Review on Facebook
General Search:

OCTOBER: Revenue Management: Optimizing Income Streams Across All Avenues

Klaus Kohlmayr

Technology is having a huge impact on how revenue managers generate and optimize revenues at hotels. At the same time, it’s clearer than ever that the “human touch” is indispensable: Without capable front desk, sales and revenue professionals at the helm, the possibility for generating meaningful ancillary revenue is limited. Equally, with an increasingly demanding and diverse generation of travelers coming to market, it’s critical to be able to match the right kinds of accommodations with the right guests. This article examines the intersection of technology and human interaction in ancillary revenue generation at hotels today – with an eye not only toward enhancing revenues, but building guest experience and satisfaction as well. It pays special attention to the role of upselling, as a central piece to this puzzle. READ MORE

Bill Linehan

Disrupters and brand loyalty are the jargon de jour among retail based industries. Even loyalty is making its metamorphosis into the more descriptive recognition. The jargon is evolving in an attempt to keep pace with its ever-changing environment as brands struggle to gain and retain the fleeting attention of consumers bombarded with messaging. Retail sales is more than the sum of its product. It is a masterful and complex interlinking of imagery and awareness that lead the consumer to purchase and advocate within their social circle. You are what you buy. The hotel industry is a retail based industry and savvy marketers are using retail based modeling to grow consumer’s share of wallet and brand loyalty. READ MORE

Jon  Higbie

Hotels are no strangers to Revenue Management (RM). They were among the first industries to embrace Revenue Management, albeit by focusing exclusively on yield management. Retailers took notice and decided they, too, should employ Revenue Management, but weren’t certain how to do it since they didn’t have perishable inventory like hotel rooms. Instead, retailers zeroed in on price elasticity, giving birth to price optimization. However this time it was hotels that took notice. By the early 2000s, they were swiftly adopting price optimization of room rates and again transforming their industry. While this strategy has paid handsome rewards, it’s time again for hotels to emulate retailers – and even consumer goods companies – if they want to conquer the next frontier of Revenue Management. READ MORE

Stefan Wolf

The act of providing accommodation to travelers has been around for a very long time. But whilst actively selling and marketing hotels and resorts have been going on for some time already, revenue management in that context started only recently. In addition to being a relatively new function in the industry, the scope of revenue management has changed and increased at an incredible speed. In the past, revenue management focused on optimizing RevPAR using the right time, with the right price, right product, for the right customer and with the right channel approach, in isolation of other functions. This is no longer sufficient today. READ MORE

Coming Up In The November Online Hotel Business Review

Feature Focus
Hotel Architecture and Design: Unique, Timeless and Memorable Design
With hotel refurbishments typically taking place every eight to ten years for the soft elements, and every fifteen to twenty years for public spaces and bathrooms, owners and investors rely on architects and designers to get things right. Their solutions must satisfy a targeted demographic, be aesthetically timeless and durable, and fulfill the market’s desire for unique and memorable design. From re-thinking guestroom configurations to constructing dramatic public spaces, an effort is being made to recast hotels as the highlight of any business trip or vacation. In that regard, many architects have chosen to make a striking first impression, with an emphasis on the hotel lobby. These areas are being designed as multi-use spaces to accommodate casual or formal talks, individual or group work, and zones for social activity. Creative space segmentation is required, along with furniture that provides comfort and functionality. More extravagant entrance features also include indoor waterfalls, large chandeliers and multi-media stations. The bathroom is also an area of interest for designers in recognition of guest desires to experience luxury beyond their everyday lives. Spa-like features such as en-suite bedrooms, waterfall showers, over-sized bathtubs, his & hers sinks, giant towels, plush robes, and deluxe beauty items provide the promise of indulgent luxury. Additionally, hotel restaurants can no longer afford to be mere providers of three meals a day and a buffet. Signature restaurants are being designed to offer a genuine "wow" factor to both guests and external patrons alike. Along with sustainability concerns and an increased emphasis on local sourcing, these are some of the subjects in the fields of hotel architecture and design that will be explored in the June issue of the Hotel Business Review.