Why hoteliers need an OTA run by hoteliers

Consider this: A hotel search engine focusing specifically on discovering the most appropriate accommodation for the customer. Built by those with first-hand experience, who have the knowledge required to deliver the most relevant results. Easy to use, engaging and, most importantly, effective, a Hotelier’s Online Travel Agent (HOTA) that sets itself apart from the OTA market leaders.

NB: This is a viewpoint by Evan Davies, co-founder of thebookingfactory.com

Every hotelier has considered the idea of a Hoteliers OTA ( or HOTA), and the likes of RoomKey have put it into play. However, many will agree that all attempts have fallen short in one way or another.

Why have previous attempts failed?

It’s relatively easy to see why HOTAs have flopped. If you want to be the HOTA, you need to be cheap for the hotel in regards to fees and commissions. Really cheap. Unfortunately, this means that your marketing budget will be very low and there’s no competing with the big boys (Priceline, Expedia) as they’ll always smash your marketing spend 100:1.

If you can match room prices to the main players, then great. But if you don’t offer your customers another incentive, what’s the point? What will they gain from booking with you rather than booking.com? You’ll typically argue that the HOTA offers a more informed result – after all, it’s been built by hoteliers themselves. Is this incentive enough? Potentially, but you’ll need to catch your customers first.

Now, when it comes to harnessing your customers’ interest, there are plenty of ways for you to stand out from the crowd. Particularly in a digital landscape. Unfortunately, marketing your brand comes with its own problem: your price point might potentially drive plenty of conversions, but when turnover flounders in the first phase, you’ll have little budget for marketing activity. And the early days is when it really counts.

Finally, when it comes to launching the HOTA, it doesn’t take a genius to figure out that the startup will only list a handful of properties. In contrast, the larger OTAs offer almost every hotel under the sun. It’s pretty tricky to compete with someone who tops your listings twenty thousand times over.

Great, so it’s impossible… Or is it?

For the Hoteliers Online Travel Agency to work successfully, it needs to counteract the problems raised by limited spend, uncompetitive pricing, expensive marketing and a restricted portfolio. So how can this be achieved?

1.    Let’s first think about cost. OTAs generally use a 15-25% commission model, but obviously this won’t work for us. Instead, we should alter the cost structure to a transaction fee – approximately one to two dollars per booking.

2.    Next, we need to reconsider pricing. The only way we can play effectively against the competition is to top them, and that’s by making sure our price is at least 10% cheaper.

3.    The successful HOTA needs to connect directly to all the popular channel managers. There’ll be no need for an extranet, apart from uploading images into the profile.

4.    Finally, we need to acquire traffic. Ideally for free, but at the very least, on the cheap!

The plan

Our first three points are attainable with great management, incredible salesmanship and a touch of technical know-how. But when it comes to a cheap or free traffic source, we hit a barrier. So how can we combat this, and ensure that our HOTA doesn’t flop like its predecessors?

One thing that previous HOTAs overlooked was the power of the hotels. Right here is where customers can be reached… it’s really quite obvious.

As such, we need to go directly to the hotels, leveraging them to display point of sale and marketing material, both in-house and on their websites. This presence both on and offline will ensure a wide range of customers can be reached, boosting brand awareness and driving traffic.

But why would a hotel freely market an online travel agent, you may ask? Surely that’s counterproductive? Well, with the great discount that’s also on offer, customers will in time start moving across to the hotel’s own site, or of course the Hoteliers Online Travel Agent. It’s a win-win for the hotels and customers, and they’re unlikely to begrudge the transaction fee.

NB: This is a viewpoint by Evan Davies, co-founder of thebookingfactory.com

NB2 Image by Shutterstock.

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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 those of the author. and do not necessarily reflect those of the author's employer, or tnooz and its partners.





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  1. Hedwig Wassing

    I witnessed the birth of booking.com as VP sales & marketing of one of their early clients/partners in the mid-nineties. At that time the hoteliers had the option of bundling forces to answer the rising “threat” with a HOTA initiative. Just like Dutch hoteliers joined forces and gave birth to Golden Tulip when the US hotel brands crossed the Atlantic. We did not manage to agree on a common strategy as short term goals and opportunism dominated the opinions in those days. I have not seen that change much. I share Robert’s view on these matters.
    For a HOTA to compete with the current OTA’s they would need to act like one and have the funding to do so. Reaching global audiences and generating traffic to websites/portals is an expensive, highly specialized game as is creating great user experiences for ever more demanding customers.
    Be happy with booking.com and work out win-win collaboration in a constantly changing competitive world. They may in the end prove to be the HOTA you are dreaming of.

  2. Glenn Gruber

    I was going to comment, but Robert and Holger already made my points. This is a fool’s errand.

  3. Michael Lux

    It wont work. The big 5 portals wont accept a XML / Channelmanager integration to a competitor portal.
    It is not written in the 10 commandments to provide HOTA with such an interface. Therefore hoteliers wont maintain this HOTA portal like others. We had that already in Germany. Good idea, nice try… forget it 😉

    • Evan Davies

      The Hota would get it’s inventory from Channel Managers just as any other OTA. I don’t see a problem with that?

  4. Holger Sigmund

    Two questions:
    – Don’t you think that a 10% discount on rates plus a 1-2 USD transaction fee mor many hotels would mean quite the same distribution costs that they already pay for booking.com?
    – How should a portal survive having to finance all the system requirements (usability, search filters, servers, SEO), man power (IT, sales, customer support) plus cost of marketing (mainly SEM but also TV-Spots liek Expedia and booking.com?)
    I really cannot understand this discussion about HOTAs as the OTAs do quite a good job. Better use them for being visible and searchable and as a hotel concentrate in caring for your guests, deliver a perfect experience and convince guests to book direct next time?

    • Evan Davies

      It’s not your concern how the HOTA would make money on the few dollars per booking, all hoteliers need to do is support it by giving a preferential rate (because of low commission) but to answer your question if you imagine that eventually a few million booking a day could easily be possible then there is plenty of room for profits and extra upsells and partnerships. Yes the actual rate that the hotel will receive Net Net will be the same as a booking from the OTA but the customer will have saved 10% on their booking.

  5. Rahied

    Well the reason it didnt work is that the hotels dont have the guts to move their room inventory to a new platform. If all hotels move to a hota instead of ota you will see it will work. If you need milk and you cant get in one store you go to another one where there is. Online it works like this as well. Eventually the customer will find you.

    • Peter O'Connor

      The problem is not supply (as you and several people point out, hoteliers need additional distribution channels) – it’s the cost of generating demand. Today this effectively means search (Booking.com) or brand (Expedia). You can have the best selection of properties in the world to sell, and if noone knows they exist no one can buy them!

  6. Skye

    Peter & Robert raise very valid points, and Roomkey is proof that simply throwing money at the problem isn’t a solution. There ARE huge challenges to competing in this market, but that said there is a growing need/desire in the industry for alternatives, and doing nothing won’t make change happen.
    At BookBedder we are attacking the customer acquisition problem by aggregating clientele among independent hotels worldwide. We leverage the existing client base of each hotel to generate traffic for the collective whole, and then uniquely share the commissions generated with the originating hotel.
    Ambitious? The goal isn’t to dethrone the existing OTAs, but instead provide a credible alternative for independent hotels where they play an active role in their online distribution.
    Our hoteliers recognize it’s no use complaining about the problem: if they want to ensure their future they need to be part of the solution. https://join.bookbedder.com/en/

    • Peter O'Connor

      Just remember that Roomkey.com tried to leverage the existing traffic and customer base of several of the world’s leading hotel CHAINS, and basically failed. From Roomkey to AndBook to Travelweb, we have repeatedly seen that hoteliers simply cannot work together towards a common, collectively beneficial, goal!

      • Skye

        Your cynicism is well-placed Peter, but hope springs eternal. 😉

        So, hoteliers, ready to prove the nay-sayers wrong?

  7. Radka

    Hi Evan, thanks for the article. I´m a hotelier in Prague with a big focus on direct bookings. Some time ago I have also contemplated the idea of a booking portal that would promote direct hotel offers. From my experience how you drive direct bookings – by offering customers a value – freebies, extra services and other benefits that come only with a direct booking. That is what OTAs are not able to offer and that should be promoted including exclusive packages offered only on hotel websites. I do not think it is possible to offer a lower rate – especially Booking.com is now greatly focused on rate parity with hotel websites and they really go after it, so displaying lower rates would definitely cause problems to hotels. Lower rates or promo codes would have to be displayed only after some kind of customer log-in – like secret deal on Booking.com. The support would also have to come from hotel booking engine providers – actually they could provide the api connection of inventory and rates like it is done with metasearch. All in all, I believe there is a way but not an easy one 🙂

    • Evan Davies

      Your right it won’t be easy and I hope any startup that wants to go into this will have plenty of funding to begin with. The rate parity is not an issue as it is an OTA and booking.com have updated their parity contract to allow cheaper prices for OTA’s.

  8. Fred Bean

    C’mon man.

  9. Peter O'Connor

    NOTE: Posted not to offend, but in the interests of stimulating healthy debate! 😉

    Sorry Evan but I think you need a shock to the system to help you wake up from your over-idealistic world.

    As Roomkey.com discovered very rapidly, the key to success in e-commerce is traffic.

    And there is only one word to describe how to drive traffic, and that is EXPENSIVELY. Paid search, SEO, email marketing, display or social media, all of it costs vast amounts of money to get business to a website.

    Converting it requires comprehensive product selection, advanced technology and extensive expertise – again all very expensive to compile.

    OTAs charge high commissions as they have high costs. Yes they make profits (or at least some of them, but have you seen the ones that have gone out of business like Travelocity, Octopustravel, etc).

    Distributing hotels is a high cost, highly competitive and risky business. If you don’t understand the rule son the game, stay out of it before you get your fingers badly burned!

  10. RobertKCole

    I hate to serve as the voice of reason regarding such a noble cause, but let’s be serious here…

    The single point that makes this concept an immediate candidate for the Deadpool is #4: “Finally, we need to acquire traffic. Ideally for free, but at the very least, on the cheap!”

    This is exactly why hoteliers have not built an OTA. They can accumulate supply, but run into problems aggregating demand for multi-brand platforms.

    Any digital business that lacks a business strategy to acquire traffic is doomed for failure. Attracting consumer demand needs to be the top priority. The Field of Dreams, “If we build it, they will come” only works in the movies.

    Even if the site would offer 10% discounts, could they guarantee it? Would the site require a most-favored nations clause to ensure its price advantage over competitive sites? Recent judgements indicate most European courts would not allow that. Plus, it can be argued that offering a 10% discount on room revenue is substantially worse than paying TripAdvisor 12% for Instant Booking or Booking.com’s Booking Suite 10% on all transactions. Reducing a retail price will also negatively impact corporate and group commitments, in addition to OTA deals, degrading the overall profitability of the hotel.

    A revenue model that earns only $2.00 per booking is frankly insufficient. How many bookings does one require to support staff, technology, development, operations and marketing, let alone a reasonable return to investors? And what burn rate, for how many months will need to be endured until the entity becomes cash flow positive? This is a deal killer as well.

    Where does the investment come from to create the technology platform? Even a minimum viable product needs a solid demand-side guest experience; an efficient supply-side user interface to control rates, inventory & descriptive content; rudimentary transaction processing; PMS/CRS integration; plus customer care and reporting capablities. If it is a booking platform, then conversion is king – it better be accurate, fast & reliable.

    Is the product only for stand alone bookings? At retail prices? Managing packages and discounted rates adds complexity. How does it tie into revenue management strategies & platforms? That part can get ugly if rates and inventories are not optimized. Any API’s to link demand or supply sources? Will it support air, car, train or cruise booking? The more narrow the functionality, the smaller the market, and potentially, the easier to replicate.

    Thus is not the sort of venture that sees oversubscribed investment rounds.

    In short, the business does not generate meaningful revenues unless operating at scale – hindering investment. The net impact on hotel distribution costs, while marginal on a unit basis, may be negated by a lack of reach or sales volume.

    Without resources for legitimate tech build-out, supply onboarding or marketing, the business won’t scale

    The resulting high risk, low profit, marginal benefit enterprise structure provides the perfect example of why hoteliers may not be best suited to create an OTA – it’s a serious business requiring a serious business model and serious investment. What is described above is, unfortunately, not a serious business.

    That said, a major opportunity for disruption exists, but it will require a radical reimagining of the landscape – a shift change, not the incremental changes presented above. At least one solution may become available, but the question is if the industry truly desires radical reinvention… I’m not at liberty to elaborate further.

    Blowing up a legacy model is fine, but brings risk from unanticipated collateral damage. When the dust settles, very few instigators want to find themselves within the blast crater, after they thought they would only be casual observers when pulling the trigger.

    • Evan

      The business model is already very popular. Alibaba is one of the biggest companies in the world built from essentially a free marketplace for sellers and buyers. Yes for a HOTA to work we need all hotels to promote within their business and their website. You talk about marketing and distribution but this is mostly the propaganda spread by the monopolies themselves. Their PPC and Marketing is to serve them not the hotels in their inventory, unless you mean the brandjacking ppc campaigns that steal traffic from the hotel name?

  11. Laurent

    http://www.accordhotels.com is not into direct booking. They ask commissions on each booking

  12. Roulleau

    This is precisely the concept of opening our Accorhotels.com platform to a market place featuring a curated sélection of independent hotels

  13. Laurent

    we are currently working on a V3 to direct connect major booking engines and agregate the best tools via an API. Maybe we could meet ?

  14. Laurent

    http://www.fairbooking.com is an association managed and owned by hoteliers. Already 2400 hotels in more than 36 countries. 0% commission.

  15. Henry Harteveldt


  16. Laurent

    exactly the business model of http://www.fairbooking.com !

  17. richard Thomas

    100% agree Evan – working in the West Country in the UK – it could work a treat – as the geo and demo graphical areas are small and there is also a limited pool of accommodation especially at the top end

    • Evan Davies

      Thanks Richard, Yes Hotels don’t have anything they can recommend to their guests at the moment, when someone attacks this problem and launches a hoteliers OTA it will be a win-win for Guests and Hotels.

  18. William Beckler

    Sorry, I don’t see anything here that Roomkey wasn’t also proposing when it started. They also envisioned chains as helping to promote it.

    • Clinton Campbell

      Roomkey were looking for a commission of around 12-14%. Hotels don’t need more distribution channels at that level. Room key also relied on the larger chains contributing significant marketing spends that never materialised (as far as I could see).

  19. Dan Visser

    Great Idea and will support the project in principal. BUT why would hoteliers give HOTA (or any OTA) rates 10% cheaper when they are likely tied into rate parity clauses and these rates will be cheaper than brand.

    What hoteliers need is the ability to price their product as they see fit according to their own marketing and revenue strategy, it will then be up to OTAs to become part of that strategy rather than forcing brands to compete against them

  20. Clinton Campbell

    Evan has a good idea here, although I would suggest that a commission based model could also work. If hotels spent a good amount of time calculating what their cost of acquisition is on their own websites they would soon understand or accept that a small commission, around 6% could be cheaper than what they pay themselves.

    With the new parity conditions in place in many markets it would be easy to offer a better price to a “Hotel OTA” than they do to traditional OTA’s – but we should be cautious as this will have a direct impact on the production we get from them and the relationship in general.

    • laurent

      Very true Clinton.
      No one forces us hotelier to use OTA.
      Are we using our best knowhow trying to compete with on-line distribution experts ? I think our main job is in our hotels not on Internet.
      I always ask my colleagues who see OTAs as the devil, if they also see credit card companies the same way. Who is challenging their commissions?
      If most clients choose to use OTA as they do for credit cards, include the commission in your price and reward those booking directly.
      If some hoteliers feel like spending their energy and time on building up an HOTA, either they have too much time/money or wanna change jobs.
      My biggest pleasure is to welcome my guests in my property.


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