Are Hotels Hostage to Online Travel Agencies?

I often meet frustration from hoteliers complaining that they find themselves hostage and overly reliant on Online Travel Agencies (OTAs) for their bookings.

For many hotels, OTAs today represent well over 60% of their bookings, with some even reaching 90% and more. When one considers that within this group of OTAs there is one brand that typically, at least for hotels in Malta, represents close to half the hotel’s business on its own, the idiom from the early eighteen century of putting all your eggs in one basket, comes to mind

Not unlike the reasons why people today opt in favour of online shopping for most goods because of its comfort, wider choice, and cheaper prices, OTAs have taken over the travel market by offering a wide choice, ease of price comparison, the comfort of home shopping, customer-friendly flexible booking conditions, and cheaper rates. A study by Oxford Economics revealed that, “Hotel room rates are, on average, 7.8% lower than would otherwise be the case in the EU due to the presence of OTAs”.

Although hotels are having to contend with maybe lower net rates, and high commissions, they still embrace the distribution possibilities offered by OTAs as this gives them a reach into a global market that they would never have been able to acquire on their own or through traditional distribution.

OTAs offer marketing possibilities that no hotel, no matter its marketing budget, can ever hope to achieve directly. When working through OTAs no real efforts are needed to sell the hotel’s inventory as technology today ensures that all the property’s rooms are on sale at rates that the hotel can adjust to optimise revenue from time to time.

However, it is not a win-win for hotels, as many hoteliers are quick to explain. Many hoteliers I meet explain that they have gone into a sense of acceptance and dependence to the steady stream of business from OTAs and they have, in the process, lost their sharpness in marketing and sales.

In many cases some hotels have allowed one single OTA to become over dominant. And this here is the first mistake. In any business no single client or source of business should be allowed to become too big as there are always dire consequences to this.

My belief is that the only way to achieve maximum benefit and reach out to more guests is to have the hotel listed with multiple OTAs that meet the criteria of your business model and can communicate the characteristics of your property. The hotel’s presence in more OTAs leads to more exposure and visibility, more market reach, more reviews, better rankings, better choice of guests and ultimately more bookings.

My warning is that relying solely on one OTA and allowing your property to become overly dependent on that single channel is a self-inflicted wound that is directly brought about by lack of initiative to spread the distribution, made possibly worse by a policy of rate disparity favouring one OTA with better rates, better conditions, and easier availability.

Being overly dependent on business from OTAs has the consequence of the hotel isolating itself from other channels of distribution and losing its marketing prowess. In the process the hotel also becomes a homogenous product on the OTA sites and in many cases, price becomes the single most important determinant to sell. Is that how we want to sell our hotel rooms?

I always insist that a hotel needs to steer away from practices that make it a price taker and simply accepting a price in the market even in a situation that the rate makes no commercial sense. We need to embrace practices that ensure that as a hotel we always remain a price maker. We need to ensure that we revenue manage our rates and embrace direct booking opportunities that allow the hotel to partake in the customer journey already at the booking stage, as this gives us an opportunity to be able to upsell prior to the guest arriving at the hotel.

While I am in no way advocating that a hotel can go the way alone without the support of OTAs. However, there is life - and many clients - beyond what an OTA can give and a balance has to be struck.

The most attractive channels for sales are your own direct booking platforms and your website. This is the cheapest cost of sale to a hotel, and it also allows engagement with the guest throughout the whole customer journey. I cannot emphasize enough that this is the best way for the hotel to upsell and in the process to increase its revenue, and to positively influence the guest experience already from pre-booking stage.

The critical issue here is to give guests a reason to book direct. The simple secret to get direct bookings is to at least mirror the conditions offered by OTAs and then create your own incentives. The booking conditions and rates offered by an OTA can never be superior or more flexible than the conditions you promote on your website. If anything, they need to be better and more attractive and if there’s a tangible benefit to booking directly there is every reason that the guest will book direct. Offering some perks will normally go a long way to getting a direct booking and these benefits do not need to cost you anything close to the high commissions you would have otherwise been charged by the OTA.

Offering incentives can also mean leveraging some of your hotel’s attractions over the competition. OTAs are great at selling homogenous hotel rooms, but they can’t compete when it comes to local expertise. OTAs are excellent mass global sellers, while as a local hotel you should take the initiative to show the consumer your local knowledge of the destination through customized content on the website and your social media communication.

This goes a long way toward establishing trust and, ultimately, booking confidence. It is important to remember that when you as a hotel take control of the booking process and engage with the prospective guest, you are selling the experience and not just the room. It is a typical practice that many guests would have become aware of your hotel through an OTA but then they will check your own hotel website to see if they can get the same deal, or maybe a better deal too: this is when and where you can win business by making it easier and more attractive to book direct.

Once a strong relationship is established with the guest, it is imperative that the hotel delivers on its promise to give the best possible guest experience. This will create loyalty and in the process one can turn the guest into a repeat visitor, or even a promoter for the hotel, recommending the property to colleagues, co-workers, friends, and relatives, back home. Many hotels make it a point to offer the better rooms to guests who book direct: and why not, after all in many cases the net revenue is better too.

I accept that traditional channels of distribution through tour operators and travel agencies, may not be the important sources of business they were a decade ago, but they are still valid distribution channels that are too frequently ignored. Yes, today few hotels can rely solely on organised travel providers but establishing trust and a rapport with Destination Management Companies (DMCs) can generate special interest group business and regular ad hoc individual business that complements the bookings that come through other sources. And never forget the corporate travel sector. Many hotels shy away from this as they do not have meeting facilities, not understanding that many corporate travellers just require a room or a bed – they are like your other guests, only their purpose of visit to Malta is different.

Going about increasing and boosting other channels of distribution and business is not a battle with OTAs. It would always be foolish in fact to fight Goliath. But trying to improve your distribution and finding platforms where you can engage with guests is in the interest of your hotel, while ensuring the preservation and promotion of the individualistic character of your property.