OTAs have become somewhat like your worst best friend. While the exposure properties gain from OTAs is undeniable, many hoteliers are asking themselves if the pleasure is worth the pain.
When bookings are made through an OTA, hotels find themselves paying commission fees upwards of 25% on booking revenue. Morgan Stanley Research estimated that the global hotel industry saw revenues of $570 billion last year and of that amount, brands took home about $11 billion for branding fees.
OTAs, on the other hand, collected $16 billion in commissions… Ouch!
OTAs also have massive budgets – in 2015, it’s estimated that both Priceline and Expedia spent more than $5.7 billion on direct advertising (something hoteliers would find it difficult to compete with), and because of their size, OTAs have massive leverage when it comes to negotiating contracts – everything from guest information that is (or more than likely, is not) passed to the hotels, commission rates that are set, last room availability clauses, rate parity and everything in-between.
However, hotels are fighting back; Marriott and Hilton managed to renegotiated their contracts and got the OTAs to agree to lower fees, eliminated last room availability as well as putting in a clause to get around rate parity, something which seems to be heading towards the hoteliers’ favour (finally a win!).
In Europe rate parity has been banned in France, Germany, Italy, and Sweden with many others following suit by trying to instate the same law.
However, OTA’s are still a force to be reckoned with and according to research OTAs account for 71% of all online bookings and for smaller hotels it can be as high as 85%!
But one area where hotels have a major advantage over the OTAs is controlling the actual guest experience during their stay, and it’s arguably one of the most effective ways to create loyalty among customers.
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