The relationship between hotels and online travel agencies (OTAs) has always been a complicated one. There’s no denying the impact that OTAs have had on global travel and hospitality, connecting millions of travelers to rooms every year. In addition, these distribution platforms gave independent hoteliers the opportunity to boost their visibility and accept reservations from around the world. Companies like Booking.com and Expedia spend millions of dollars annually on marketing, doing a large part of the work for the accommodation providers. The catch is obviously the commission and with guest trends and spending patterns changing all the time, hoteliers are becoming increasingly wary about commissions charged.
As the number of online bookings grew and OTAs became increasingly dominant, they began to gradually alter their business model. Large hotels were offered lower booking commissions while the smaller independent properties were forced to pay stiffer rates, sometimes as high as 30%!
The two largest OTAs in existence today are Expedia and Priceline, and they respectively dominate the markets in the United States and Europe – Expedia controls about 70% of the US market while Priceline accounts for about 62% of Europe. This is because both companies have been taking active measures to strengthen their position in the industry – Priceline’s acquisition of Booking.com and Expedia’s purchase of Orbitz and Travelocity and just a couple of examples. With the danger of this duopoly growing rapidly, hoteliers are becoming increasingly concerned about the receding negotiation room in terms of commissions payable.
OTAs are also beginning to follow hotels in offering loyalty programs, rewarding guests who make repeat bookings regardless of the hotel or the number of rooms reserved – this directly competes with one of the hotels’ unique selling points as loyalty programs were initiated by them to forge a stronger relationship with their guests.
So What Should the OTAs Do?
A large number of bookings do not go as per expectations simply because of a lack of consistency from suppliers – the hotels. While this is an issue that can be handled by the property’s administration, OTAs need to be more diligent before listing them and carry out frequent checks to ensure that the hotels they distribute have some standards in place, rather than just concerning themselves with the commissions paid. Online agents today accept no responsibility for things that go wrong during the guest-cycle, instead directing all complaints to the hotel itself. This does the OTA’s reputation no favors and by implementing a system through which they can monitor hotels’ quality standards from time to time, online agencies will be able to prevent these unpleasant scenarios.
Hotels also need to be given the freedom to advertise and offer guests special packages – as long as OTAs restrict their partners from offering incentives to their guests for direct bookings, their relationship with these suppliers will continue to deteriorate. Hotels do want to maintain a good relationship with online platforms and recognize the benefits of the global visibility they provide. But with direct bookings dropping and with OTAs even mimicking hotels’ loyalty schemes, owners are beginning to feel the pinch of the commissions.
Booking Suite, launched by Priceline.com (parent organization of Booking.com, Agoda.com, Kayak) is a great example of an online agency taking the initiative to help hoteliers lower their dependence on OTAs – Booking Suite offers a variety of marketing services that replicate a hotel distribution system, and can be employed to help drive direct bookings, such as a professionally designed website with auto upgrades. If more of the big players follow in Priceline’s footsteps, it could diffuse the tension gradually building between hotels and their OTA partners.