One of the bigger gripes leveled at brands is that there are too many of them. If you’ve attended any hospitality conference, you’ll recognize this as a frequent refrain uttered, as expected, by hotel owners. Hotel brand executives—hey, more brands the merrier!
Drifting down the funnel, brand executives have a tendency to grouse about online travel agencies, the duopolistic Expedia and Booking.com. Even though OTA success was sealed off their own miscalculation, hotel companies bleat about high commissions, and invariably fall back on this line: ‘If it wasn’t for our hotels, the OTAs would be out of business.’ To that I respond: ‘Don’t cut off your nose to spite your face.’
OTAs did not get rich by being dumb. They realized the ultimate asset-light business: thrive on other people’s stuff. And when they got to critical mass, OTAs like Expedia began to pivot from simply being a distribution platform. For instance, it offers hotel owners a host of technology solutions, products that include white-label offerings and revenue management tools to guest review insights and marketing services. You know, many of the same tools brands provide their franchisees. Oh, and most also offer loyalty programs, from Hotels.comRewards to Orbitz Rewards.
Let’s review: a suite of technology tools—check; loyalty programs—check; and the distribution part they have down pat. The question becomes: What is preventing OTAs from initiating their own hotel brands, just like the Marriotts and Hiltons of the world?
It’s not implausible. And for hotel franchisees who already pay fees to the brand on top of OTA fees, it sounds even better. According to HVS, hotel franchisees pay upwards of 11 percent of their rooms revenue to their brand or franchisor. This includes a royalty fee, a sales fee, a marketing fee, a loyalty fee, miscellaneous fees and an initial startup fee. That’s a lot of fees, which is why some hotel owners make the decision that operating an independent hotel is more profitable in the long run.
