Hotels vs Online Travel Agencies
"They Are Telling Me How Much I Can Charge My Guest"
By Darren Panto Business Development Director, iRiS Software Systems | January 24, 2016
The subject of this article is the most common complaint I've been hearing for the last few months, from hoteliers who are unhappy about their number one supplier: the OTA (Online Travel Agency). As an enterprise platform developer to the hospitality industry, we are in the privileged position of hearing the most up-to-date requirements of hotels and their guests from a technology and guest facing point of view. We are also amongst the first to hear their complaints and issues and this includes the current dominance of the hotel booking market by the OTAs such as Priceline and Expedia.
According to Google's research, one in three leisure travelers and one in two business travelers select an OTA for its superior site tools and options(1). Why is this a problem you would wonder, when so little effort as a route to market is required from the hotelier's side? In this short piece, I aim to examine briefly some of the key issues, efforts, concerns and indeed possible solutions arising from the current market conditions, the dominance of the OTAs and whether it is too late for the hotels to respond – and how they can do so if not.
Currently, OTAs spend a huge amount of Pounds, Euros and Dollars on search engines such as Google. By huge, I refer to billions not just a few million. Clearly, this is working and in the UK, it is pretty rare that whatever hotel you search for, you won't find Booking.com appearing at the top. If they are not, there's a good chance it is because they don't want to be.
So even if they are at the top, why is it that customers or potential customers make their bookings through them? There are many schools of thought but the impression that they are receiving the best price through price guarantees is clearly the major one. But speaking to the hoteliers themselves, I've discovered that the user interface of these sites is also crucial. The whole journey is so simple and people have become used to it. This means that by not changing the look and feel of these sites and apps too often, it instills trust and usability. Then there is the offering of book now and pay later, upgrades and being able to see a good description of the hotels on offer as well as viewing ability on any device and simple ease of use. But there's also a trust factor ensuring that the room really is available and price parity is assured. Customers are faced with innovative ideas such as sneak previews to what other customers have just booked, how many, what they are looking at, feedback and maybe even loyalty schemes. Even though an OTA does not actually own a single bed.
On the down side, OTAs apparently make many of their bookings very late, release customer details even later and then provide as little detail as possible including no contact details (especially email addresses), and all this for extremely high commission levels. I have heard levels of 10-25% being regularly quoted but I dare say there are variations out there. Then, at a recent conference in London about hotel distribution, I heard that some hoteliers have even signed in their contract with the OTA that the hotel will, under no circumstance, actually contact the customer during or after their stay to obtain their contact details or for any other reason. As a former tour operator of 25 years, I was shocked to hear this and astounded that hoteliers have agreed to it.
Some hoteliers are embracing the wave of enthusiasm from this reliable source of filling bed nights. Indeed, one hotelier told me this week that their chain of hotels (under 50 hotels spread across Asia) sees OTAs as replacing the bulk of their tour operator bookings from around the world. I asked why this was a good thing and the response was "they provide good numbers, pay on time and we don't have to provide credit. I can't compete with them so I don't try."