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California Lodging
Industry Association

1017 L Street #527
Sacramento, CA 95814-3805

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Sleeping with the Enemy - By Jean Francois Mourier
brought to you by www.hotelresourcenow.com
Published on 10/30/12

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Like a lover scorned and dumped for a new mate, the hotel industry has long enjoyed reproaching its business partner - the OTA. In just the last 48 hours, I've read commentaries stating that OTAs are making hoteliers lazy, that they are deeply flawed, that they are this or that  nothing very positive.

And while many in the hotel industry criticize OTAs for interfering with and disrupting the hotel-customer relationship, calling it an "unhappy marriage," there's much reason to believe that this animosity can be lessened  without the need for a marriage counselor, costly divorce lawyer, or name calling.

Why Don't You Slip Into Something More Comfortable?
Over the years, OTAs have morphed into a fully interactive and engaging experience making consumers feel very comfortable with booking and transacting all their travel needs online. Linked via their laptops, smartphones and tablets, consumers have come to rely on multiple partners  OTAs - effectively window shopping for what they perceive to be are the best prices, best deals and best locations for their travel needs. Collectively, I cannot say the same for hotel websites.

It's true that within the last few years, sites like Expedia, Travelocity, Orbitz and Booking.com have risen to the top of the OTA pile: with all the talk about capturing the direct bookings market, one would think that OTAs were indeed a serious threat for hotels. Yet recent data from STR reveals that in 2010 only 10% of hotel stays were booked through OTAs, while their share in the revenue pie grew to just 7.4%, up from 1.3% 10 years earlier.

That is 10% folks, not 25% or 50%. Only 10%.

Changing the Bed Sheets, and Attitudes Towards OTAs
While embraced by consumers, hoteliers have been less welcoming. Some argue that OTAs bully hotels into joining their sites and "lose" millions of dollars in the process thanks to commissions - which can range anywhere from 10% to 30%. The OTAs cost the hotel industry some $2.5 billion in commissions during 2010, based on a survey from 24,500 properties. Not exactly chump change, but would the volume of bookings and occupancy levels of those properties have been the same without support from the OTAs?

It's unlikely.

While the relationship may be strained, the reality is that hoteliers have an opportunity to maximize their exposure on OTAs by changing their attitudes. Hotels should regard paying OTAs as a cost of doing business, as part of their online marketing budget and not some form of extortion. Perhaps the perception of OTAs should be shifted to that of consignment selling or having an army of commission-only salespeople who provide no-risk sales with free advertising and increased visibility, no upfront costs and payment only upon the successful completion of the sale.

I can't think of any industry where there is no investment in infrastructure or inventory, or POS support  except for the sale between a hotel and OTA. Can you?

Baby, We Need Each Other
On the flip side, OTAs need hotels to survive. That foundation suggests that the relationship between OTAs and hotels is becoming one of necessary partnership and not nagging pain. Then there's the still-healthy argument that OTAs do in fact aid hotels' bottom lines.

And there's the "billboard effect." OTA visits can ultimately drive consumers back toward direct brand hotel sites. And for all the talk of OTAs gobbling up the booking and revenue pie, over 85% of online bookings are still performed directly on hotel sites  not through OTAs.

The Magic Little Pill
While I don't have a prescription for "fixing" the hotel/OTA divide, perhaps a little self-searching is in order:

  • Is your hotel using all the OTAs - not just a few - as a platform or attracting new guests?
  • Are you certain you don't have "spare occupancy" that could be sold on multiple OTA sites? Be honest.
  • How effective is your pricing strategy? For hoteliers to truly get the most benefits of OTA partnerships, rate pricing is key. How often is the rate reviewed and updated? Does it truly reflect the latest data including comp, and historical pricing?
You've probably heard of the saying work smarter, not harder: Smart hoteliers do just that by putting the OTAs to work for them  and all of them, not just a handful. In this way, hotels can use OTAs to their maximum advantage to drive revenues and boost occupancy levels.

When it comes to the seemingly strained relationship between OTAs and hotels, it's important to remember it is a two-way street. There's no magic pill to take, but like every successful partnership there is always some give and take, some push and shove, and learning to be had. OTAs may push at hoteliers' bottom lines but hotels are the substance behind an OTA's search. Without hotels, OTAs would have a paltry existence. One simply can't live without the other.

Keeping with the marriage metaphor, it's time for OTAs and hoteliers to renew their vows. Thanks in part to a still-sluggish economy; global hotel occupancy rates are at a lukewarm 60 percent. That means there are plenty of rooms for OTAs to sell. There may be pills to swallow, for sure, but there aren't any side effects for joining multiple OTAs, be it five, 10, or 25. Viewing high commission costs as some form of penalty is narrow-minded at best, and business-foolish at worst. Think of all the savings hotels enjoy by simply printing fewer brochures? In the end, OTA commissions are more a fee shift away from traditional travel agents, than an added cost of doing business. The bottom line is this: OTAs, help generate between $20 and $30 billion in sales.

Who else can do that? No one.

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Headquartered in Sacramento, CLIA is a member lodging and hospitality industry association, providing legislative, educational, marketing, and profit-oriented programs for independent lodging owners and operators.

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