Online Travel Agents (OTAs) are known as an effective distribution channel for hotel rooms, but with more major hotel brands pushing direct bookings in an effort to reduce commissions paid out to agents – this leaves OTAs searching for the next goldmine product to fuel their continued growth.
With this in mind – for years – hotels have enjoyed a non-competitive landscape with their loyalty programs by essentially ring-fencing their guests into the scheme by not offering elite benefits and points if the room was booked through a third party distribution channel such as an online travel agent. This has had a side effect whereby hotels lose high value guests if they book a room through the ‘wrong’ channel.
While this strategy of not awarding loyalty benefits to guests for booking through the non-preferred channel has some logic around OTA commissions being so high – it’s not worth alienating important guests all because they committed some type of crime for not booking through the preferred channel of the hotel. After all – it’s not the guests’ problem if the hotel made a sub-optimal deal with the OTA. The guest wants to stay at your hotel, and an OTA may have communicated the right message to the customer at the right time to win the booking – and the hotel loyalty program penalizes this otherwise loyal guest!
In an effort to boost loyalty member numbers, we are seeing hotels shell out free status like candy through status matches – and partnerships with banks & businesses become more common. This flooding of the market with elite status has an underlying effect of locking in more guests/corporates into direct booking channels while educates these potentially guests not to book through online travel agent websites.
The problem this poses for OTAs is that their high frequency customer base is being plucked out one by one from under them as hotel loyalty programs move to put on the golden handcuffs to more and more travellers by offering cheap and easy elite status. These moves have created a cheap customer acquisition for hotels, and kills off otherwise potentially high value customers for OTAs in the process.
OTAs already have a strong reputation for having the lowest rates – and despite what major hotels are trying to tell the world – it can still be cheaper to book through an OTA under the right circumstances. However as hotels move to compete on the battle ground which OTAs are known for (best pricing), this opens a new, larger and lucrative opportunity for OTAs to move in on the hotels traditional turf – loyalty programs.