The OTA and Hotel Relationship - Then and Now

By Mustafa Menekse Area Director of Sales, Sage Hospitality | June 25, 2017

Though it seems that online travel agencies have been a part of the hotel booking landscape for eons, the reality is that just 25 years ago, brick and mortar travel agencies were the norm. Travelers would visit an agency for trip planning advice, printed brochures, and to speak with actual travel agents to assist in booking airfare, hotel accommodations and rental cars. Travel agencies had the knowledge and information about the destination and, of course, the tools and connections to book hotels and flights to begin with. The support these agencies provided put traveler’s minds at ease, especially for international trips. This was the foundation of why OTAs are in existence.

As the internet began to gain traction with mainstream consumers, online travel agencies were a natural progression in the hospitality booking experience. Microsoft launched Expedia in 1996 as the tech giant’s entry into this new digital marketplace, while Priceline allowed travelers to “name your price” soon after. Dozens of online travel agencies were launched in the 2000’s, followed by mass consolidation in the 2010’s. Throughout the years, the relationship between hoteliers and OTAs has been a wildly dynamic dichotomous case study.

The Early Years

In the early days of online booking, hotel brands minimized the potential negative impact of OTAs. In fact, many hoteliers, new to the tech landscape, saw online booking agencies as an incremental revenue stream. Early adopters found that by paying higher margins to OTAs than to traditional agencies, the mass exposure of the internet increased the booking funnel and consumer reach of their hotel or brand. The relationship between the OTA and hotel during this time was bifurcated between adopters and skeptics.

Hotels that saw value in this new booking channel were extremely flexible and accommodating to the online agencies, bending over backward to create a competitive advantage in their respective marketplace. The OTAs were also accommodating, providing featured placement and page rank among other perks to these hotel partners.

Hotels that did not see value in third party booking agencies were skeptical and dismissive of the online agencies. E-commerce was still in its infancy and both consumers and hoteliers saw online selling as a niche market at the time. Hotels’ own websites were clunky, static and slow. Direct bookings on the hotels’ vanity sites were slow to gain traction and sophisticated digital analytics were nearly non-existent at the time.

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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.