Are Hotels Too Dependent on Online Travel Agencies?
Doing business with OTAs (online travel agencies) has become a necessary evil in today’s travel industry landscape. What does this mean for hoteliers and how can hotels adapt?
In Europe and America three OTAs control the market. They control a quarter of overnight bookings and the share looks to continue growing. The monopoly or fragile oligopoly in the travel industry has shifted the balance of power away from hotels in particular independent hotels. This unfair dominance is becoming a disaster waiting to happen in the travel industry with profit draining commissions stopping hotels from investing. We know that investment in better hotels leads to happier guests and better long term prospects. The average commissions range between 18% and 25% which cuts deep into profit and lowers the likelihood of investment. Usually there is no negotiation on commissions creating more inequality in the industry.
Moreover, there is no room to showcase hotels offers. OTAs are more interested in who’s price is the cheapest and fail to offer users the opportunity to consider other factors. Hotels risk losing their unique selling points as these features aren’t rewarded through OTAs. If you’re not willing to drop your prices you’re at a disadvantage. OTAs now control accommodation providers backing many hoteliers into an uncomfortable and small corner. The British Hospitality Association is calling for an enquiry into OTAs through the Competitions and Markets Authority as OTAs are clearly limiting the hotel booking market.
How can hotels adapt or even better strengthen their position in the online bookings industry?
It seems a daunting task to think about how businesses can lessen their dependence on OTAs given how rapid their growth has been. However, accommodation providers shouldn’t lose sight of their strengths. Customers can get the best deals directly with better perks. The benefits of booking direct are not advertised enough, but they should be with both happy guests and businesses being the outcome. Now the question is how to get this message out to the world. The first thing is that hotels need their own strong distribution channels. Managing a functional and well designed website with a well-integrated booking engine doesn’t need to be difficult and often works out cheaper than paying out OTA commissions. More still it brings back control to the accommodation providers. The next step is a modern and well-crafted marketing campaign that showcases the wonderful facilities, offers and selling points of hotels directing people back to the hotel website.
We started solving this challenge by offering a fully integrated system, Brilliant Rate, which gives control back to the hoteliers and helps them win direct bookings over OTA’s by channel prioritisation.