Insights from Thadani: When OTA’s took over from hotels
As OTAs grew over the years, customers continued to benefit, whereas hotels feel the pinch
In continuation of ‘Finding the balance between OTAs and Hotels – Part I,’ which features inputs from ‘The Ultimate Indian Travel & Hospitality Report’ provided by Hotelivate to Hotelier India, we look at how hotels began to lose the plot in their battle with OTA’s based on Manav Thadani insights published in the column – ‘The Mighty (OTAs) and the Influential (Hotels): Finding Their Balance’.
As OTAs grew over the years, customers continued to benefit, whereas hotels started to feel the pinch specifically in the following areas:
Increase in indirect bookings via OTAs: Equipped with huge marketing budgets, OTAs could reach a much wider consumer base, coupled with benefits like greater choice of properties and ease of bookings, they had a higher conversion rate than hotel websites. As a result, customers booked hotel rooms via OTA’s not just for the first time, but for repeat visits as well.
Increase in the commissions charged by OTAs: From 10% in the early years of their partnership, the OTA commission per booking dramatically increased to 15% – 30%, which ate into the bottom line of hotels. The amount of commission paid was of greater significance to smaller hotel chains and independent properties than the major players, as the former usually paid a higher amount.
Loss of vital customer data: Who controls the guest data, OTA’s or Hotels? Both parties want to develop a direct relationship with the customer and collect valuable information to personalise their experience and gain repeat business. Hotels get the best data when guests book directly with them. In case of OTAs, while contracts may differ across agencies, most provide daily analytics of the bookings, which may or may not include all the information hotels would ideally like to have.
Rate parity agreements: Hotels often must sign rate parity agreements, prohibiting the former from selling the same room online at a lower rate than what is offered by the OTA. This limits the hotel’s ability to attract customers directly using discounts. In addition, OTAs have their own loyalty programs, offering special rates to select users. However hoteliers and regulators are opposing this practice, seeking to introduce more diversity in rates.