Hotels vs. the (OTA) World

Seven years ago, airlines – one in particular – were coming to blows with the OTA. American pulled out of Orbitz and Expedia rallied behind its competitor and booted the carrier. I wrote our take on what was going on and where it was headed: Airlines vs. the World.

Now here we are in 2017 and hotels continue to ratchet up the pressure on online intermediaries, from direct booking campaigns and member-only rates to concerted lobbying efforts by the American Hotel & Lodging Association (AHLA). We get asked all the time: Why now? What does it mean? And how will it play out? So here it goes:

Why now?

  • 2015 was a watershed year. Expedia acquired Travelocity and Orbitz, effectively turning the U.S. market into a two-horse race. Between a hot mix of M&A and organic growth, Expedia Inc. and The Priceline Group (really combined accounted for nearly two thirds of OTA global gross bookings. Their combined share of the U.S. OTA market is well north of 90%.
  • The OTAs are crushing it. They are growing much faster than the U.S. hotel market. In fact, 2016 was the first year when OTA lodging bookings in the U.S. exceeded total hotel website gross bookings. And they’re growing even faster overseas in the more fragmented hotel markets of Europe, Asia and elsewhere. Such aggregation of demand among two major players means enormous leverage at the negotiating table.
  • The Seeds of Discontent. Hotels serve several masters, but chief among them are owners. All owners ask a fundamental question: Why affiliate with a brand? The answer, of course, is obvious: to bring in more demand and more revenue. The rapid growth of OTAs has many hotels rethinking those calculations. Why pay fees to the brands and still pay more commission to OTAs as their contribution grows?

Read rest of the article at HospitalityNet