Tim Lee | January 13, 2020
By Tim Lee
The relationship between hotels (especially big international brands) and online travel agencies (OTAs) can sometimes seem like a difficult alliance. Large hotel companies, such as Hilton, Marriott, and IHG, are adding policies on price match guarantees to encourage direct bookings and hurt the perceived value of OTAs. Meanwhile, OTAs are pushing even harder for competitive pricing and investing hundreds of millions of dollars in Search Engine Marketing (SEM) to increase their market share.
Due to acquisitions and mergers over the past two decades, most OTA brands are part of or work with the two biggest players in the space: Booking Holdings & Expedia Group. This may come as a surprise to many hotel operators and managers who are used to seeing reservations coming in for dozens of different OTAs.
As a result of this consolidation, it appears that OTAs have gained market share and bargaining power in order to compete more effectively with branded âdirect bookâ campaigns. This has resulted in constantly evolving disputes in short-term agreements between hotel companies / brands and OTAs. As such, the OTA strategies that a hotel may or may not engage in continually change and can be confusing for general managers or revenue managers.
Beyond providing feedback on their respective brand’s rules of engagement, there is little that a branded hotel or hotel group can do to influence the terms of OTA web marketing. Frustration with terms of engagement is one of the most common sticking points in the OTA-Hotel relationship, and it can prevent hotels from taking advantage of some of the free tools and services offered by OTAs.
Some hotels would prefer to do business 100% direct, and in an ideal world this might be possible. In the meantime, there are market inefficiencies and gaps in branded platforms that will require centralized online marketplaces for accommodation, where bookings can easily compare options between brands and pool their experiences with d ‘other travel components, such as flights or rental cars. OTAs are an important part of a hotel’s business mix in the modern age.
Under these circumstances, the most productive thing a hotel can do is engage with OTAs in a mutually beneficial manner and exercise control over their marketing / revenue management strategy. In this article, we offer three ways that hotels and hotel groups can benefit from working with OTAs.
- Establish a relationship with your account manager:
A working relationship will help hotel management navigate and understand the ever-changing backdrop behind OTA platforms, and how they are permitted to interact with your hotel. For example, the OTA can provide training materials and support to hotel staff. In addition, an OTA account manager will have access to a multitude of analysis tools that he can share which will explain your market segmentation, your monthly and annual performances and will identify the valuable customer segments to retain.
- Keep track of scans:
In addition to monitoring your performance, rate, and revenue, OTA analytics offer insight into customer segmentation. Hotels tend to view OTA overnight stays in the same bucket as transitional leisure business. However, most OTAs have tools that allow hotels to analyze the type of customer they send, segmented by website, country of origin, business or non-business, sometimes even broken down by length of stay or ADR. . By identifying the most profitable customers entering the market and targeting them through OTAs, hotels are more likely to generate rates on this channel. Finally, a hotel group may sometimes receive data at the portfolio level to help with budgeting or a marketing plan, or a general revenue strategy.
- Use flexible pricing to generate income:
In the pursuit of the growth of ADR, most hotels are reluctant to offer discounts. OTAs can provide tools to attract last-minute demand and target specific customer segments with higher booking windows and ADRs, such as international guests or business travelers. While most revenue management tools are automatically designed to entice customers to book early and build core business that allows them to generate a rate of return when squeeze hits the market, OTAs have options over the timing and segmentation of price reductions, allowing savvy revenue managers to complement their existing strategies. For example, length of stay discounts, booking window discounts, scheduled discounts, or discounts that only appear if the conditional customer segment criteria are met.
With the growth in occupancy rate and ADR slowing nationwide, hotel management needs to use as many tools and channels as possible to keep growing their revenue. While proper discounts on OTAs can provide upside opportunities, hotels should also understand that an excessive discount on top of commission can represent a significant marketing cost. As the landscape surrounding the hospitality business-OTA relationship continues to change, hotels need to make the most of their current situation and leverage the tools they have at their disposal if that makes sense.