Fighting OTAs just makes your hotel less competitive

This is a viewpoint from John Jones, managing director of Welcome Systems.

I’m still surprised to find large parts of the hospitality sector who continue to stick out their bottom lip, stamp their feet and sulk their way through OTA relationships, while thinking nothing of continuing to buy their own airline tickets, hire cars or insurance using online consolidators.

‘Direct is best,’ ‘101 ways to avoid paying OTAs,’ and even ‘How to Win the OTA War’ are just a few of the headlines and industry advice columns I’ve witnessed with incredulity over the past several months.

Despite plenty of evidence to the contrary, there appears to be a deep-seated resistance to the simple fact that hotel booking engines, while vitally important, are now secondary to OTAs.

There, I’ve said it. Although this will be painful for many to read, it should be of little surprise when you consider the habits of the millennial generation.

Millennials like OTAs — but so do other demographics

According to data from Expedia, millennials tend to be less brand loyal than their parents and appear to be drawn to the simplicity and choice offered by OTAs. In other words, they’re far more likely to book a hotel room via an OTA, which is important as they’re the biggest generation in existence.

However, it’s not all about the millennial generation. Our own statistics also reflect the habits, needs and wants of the modern day traveller.

During 2017, the Welcome Anywhere property management system processed £74m of hotel reservations. More than 50% of these bookings came from Booking.com, while the number of direct bookings decreased by almost £2m in value.

These figures may be alarming to some, but to us they offer a key insight into how the modern hospitality industry and its guests genuinely operate.

Hotels that cling to outdated rhetoric are effectively saying that they don’t want to provide what their prospective guests want. This is astonishing and no more out of step with the times than saying ‘sorry but we don’t take contactless payments.’

And then there’s the whole ‘cost of acquisition’ issue, which is easier to summarise than some might believe. The OTAs are the actual cost of acquisition these days. Period.

While the cost of using OTAs is often quoted as a negative, the cost of not using them gets little airtime. It’s absolutely possible for a hotel to market its rooms without OTAs, by taking a few small steps. These include:

  • Investing in effective digital platforms for e-shots, graphic design and social media output
  • The purchase of royalty-free images
  • Producing professionally designed leaflets and mailing them out
  • Effective use of a decent CRM system to monitor results
  • A full SEO campaign and expenditure on Google Adwords
  • Use of a local ad agency
  • Someone to do all of the above.

Quite a large list, isn’t it?

OTAs don’t just take a booking and top slice it. Most actually also provide extra tools, some chargeable, some not, to help hoteliers. These can include rate intelligence and management modules, yield management and comprehensive reporting. Additionally, the guest gets a booking experience tailored to them thanks to clever use of language support, currency conversion and Points of Interest.

How can hotels seek to obtain loyal customers by seemingly doing everything right with their property (the decor, facilities, F&B operation, friendly team, etc), yet fundamentally be at war with those same customers?

Are hotels at war with their guests?

By turning their noses up at OTAs, some hoteliers seem to be effectively at war with modern guests and their booking preferences.

Over the years, guests’ expectations have changed and the hotel industry has responded admirably. In-room tea and coffee facilities, modern comfort cooling, mood lighting, phone charging, USB sockets and mirror TVs, free wifi, locally sourced artisan bread, and fairtrade cotton duvet covers – it’s all been done. Naturally, this has come at a cost — but as hoteliers we provided these services because the guests wanted them.

Given that we’ve responded to guest preferences within the hotel experience, why the outcry over another key service which guests want: the ability to book by OTA?

Some hotel software providers are looking increasingly behind the times, thanks to their anti-OTA rhetoric, and are either inadvertently or blatantly ignoring the facts. I think it’s time that hotels and property management system vendors buried the hatchet with OTAs. Providing guests with what they expect costs money, but the cost of denial could be far higher. It’s about meeting the guest where they are, allowing them to book how they want, and then delivering them a memorable experience once they’re on property. It’s that memorable experience that keeps them coming back — no matter where they book.

Related reading:

Expedia sets sights on legacy tech with ambitious ‘travel platform’ for hotels

Why OTA commissions are actually a steal of a deal

Is there a thawing in the hotel and OTA relationship?

Opinions and views expressed by all guest contributors do not necessarily reflect those of tnooz, its writers, or its partners.

Photo by Brooke Lark on Unsplash.

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Viewpoints

About the Writer :: Viewpoints

A founding principle of tnooz was a diversity of viewpoints from across the spectrum. Viewpoints are articles by guest contributors from around the travel and hospitality industries. The views expressed are the views and opinions of the author and do not reflect or represent the views of his employer, tnooz, its writers, or partners.

 

Comments

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  1. Richard Vaughton

    Just diving back in as the discussions revolving around OTA’s are increasing and the more some of their activities are scrutinized the more we see all manner of malpractice. Two examples a) falsely raising prices and promoting it as a major saving when discounted: a guest is disappointed b) Adding extra margin/guest service fees when the accommodation is priced lower to make it competitive. The accommodation strategy is then hampered and guest pays too much.

     
  2. John Jones

    Would you like to be a guest in a podcast on this topic? We would love to take the debate up a gear. It is a hot subject and we would like to capture both sides of the debate. Do let me know.

     
  3. Tom

    I think it’s a good practice to analyze if the OTAs are good for the consumer i.e. are they driving down the supply pricing or in fact increasing pricing in the marketplace?

     
  4. Keith Slowey

    Well run hotels like most well run businesses will be trying to maximise profits. Giving all of their distribution to OTA’s is not an effective strategy to maximise profits. While I agree there is definitely a place / time for OTA’s I agree with hoteliers that the large OTA’s are taking too big a slice of the pie and are leveraging too much control over hoteliers. It’s time for the hoteliers to take back some of the control over their own businesses and maximise their bottom line.
    Ultimately it will end up with the paying guest who is paying a higher cost per room to offset the OTA commissions.

     
    • Dilek SEZER

      So true Keith; it is usually the guest who is ending up paying more to cover the costs.

       
  5. Dave Rubin

    Am I correct in understanding this article about OTA’s quotes data provided by an OTA as its first point of reference?

     
  6. Steve

    This is possibly the most foolhardy and uninformed article on this subject I have read in a long time, I have worked all sides of the table, OTA, Agency, Hotel, Media buyer and if your hotel does not invest heavily in direct marketing and customer acquisition and work to protect your brand assets, not only are you failing to generate adequate demand, but you are also leaving money on the table, giving control of your business to a third party and eroding your brand value. Sorry but this article is bs – OTA’s should help with distribution – they don’t drive demand they consolidate it and dilute it and every $$ direct is a 15-25% uplift on your bottom line as long as you control your cost of customer acquisition.

     
  7. Colin J Brownlee

    So, Mr Jones. Let me get this clear. You would have no problem if I with virtually unlimited funds and IT resources wanted to intercept your clients to my platform to resell to you, less 15-25% by using your trade name “Welcome Systems”.

    Then I am going to attempt to dictate how you will deal with the clients and run your business. If you don’t do we expect, no problem, I will sell your clients from “Welcome Systems.” to someone else.

     
  8. Dilek SEZER

    Spot on! As long as guests choose to use OTAs, hotels should not be fighting with them, but work with them, learn from them, benefit from all market inteligence they offer, meanwhile understand why guests prefer to use OTAs starting with taking a look at own platforms; if hotel’s own platform can’t offer the ease of use (and other benefits) as well as the OTAs, it’s time to invest on your platform, if you don’t have the mega budget OTAs have on digital development focus on your guests and listen to understand what they need and want once they are with you; more satisfied they are with their time with you, more loyal they will be and choose you whenever in the area.
    At the end, it is all about finding the right balance between all sources whether direct or indirect rather than been dependent on one source only, particularly if it’s not your own platform.

     
  9. Richard Vaughton

    As Suzana said its about dependency and guest ownership. Disintermediation and OTA remarketing only enhances the OTA brand and their opportunity to increase the commissions. From what we see, the guest is paying more and more, not the supplier anymore. This will surely see new tech provide a counterbalance to the increasingly heavy seesaw partner hotels and rentals now have. No supplier is going to object to a sensible fee and guest transparency. The irritation is not just about fees either from what we see it is the imbalance on perceived work differentials. OTA’s have a place but you have to suspect as inventlory grows and prices increase new opportunities arise.

     
  10. Suzana

    I agree. But the important thing is to maintain a balance between direct booking with OTAs. Hotels still need OTAs, anyhow too dependent is also unhealthy because it opens the possibility to be dictated by OTAs and it is not good for business in the long run.

     
 
 

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