“It’s healthy that hotels have a distribution mix.”
Those are the words of Booking.com’s Gillian Tans, speaking at ITB last week. You might not hear us say this too often, but we wholeheartedly agree with her. It’s right that hotels have diverse streams of revenue so that they can reach as many customers as possible and stay flexible in a fast-moving sector.
Still, even after an industry-wide push for more direct bookings, we hear so often of hotels, particularly across Asia-Pacific, becoming increasingly dependent on one, expensive channel — OTAs.
Of course, we know that OTAs have their place and that for many hotels they are valued partners. But given this worrying trend, we wanted to revisit exactly why, when it comes to distribution, we’d advise against putting all your eggs in one basket.
The prevalence of OTA undercutting
An OTA and hotel partnership should be a win-win. Hotels get the opportunity to market their rooms to a wider audience and the OTA gets a reward for its role as shop window. But it doesn’t always turn out to be mutually beneficial. Hotels are undercut by online travel agents 27% of the time, meaning OTAs often drive business away from the hotels and to their own sites and cheaper prices.
And the amount OTAs are shaving off the overall price is not always an insignificant sum. Our recent analysis of 7.7 million searches for rooms via the websites of our hotel clients in countries across the APAC region showed that when they undercut, OTA prices are on average of 11.4% lower. In Thailand, the average undercut rate is 17.7%, in Indonesia it’s 17.8%, in Malaysia it’s 23.4% and in Vietnam it’s as steep as 30%.
That matters because your online conversion rate is on average 31% higher when your prices are in parity with OTAs, compared to when they are being undercut.
