The independent hotel market in Europe is a big business, big in terms of employment, tourism and contribution to local economies and most importantly for our industry, independent hotels are big in terms of room inventory – the collective number of rooms these hotels represent.
This inventory is what makes independent hotels attractive partners for online travel agencies (OTAs), and it’s at the heart of the current struggle for independents and chains alike to strengthen their direct bookings.
Fortunately, along with all that inventory, independents have 10 powerful, often overlooked advantages when it comes to competing for market share.
We’ll talk about those 10 reasons below, but first, how did we get to the current state of play?
Independent Hotels are an Attractive Market for OTAs
European independent hotels make up almost two thirds of the room supply in Europe. This makes them a very attractive market for OTAs like Booking.com and Expedia.
The independent hotel business is so attractive and so profitable to OTAs because they have grown their businesses very successfully on the back of one thing: availability. They sell your room stock on their sites, for a fee. Through the strength of their brand, marketing and technology, OTAs have cornered a very nice business for themselves.
This availability is an independent hotel’s most powerful tool. Forget rate parity. Parity without availability is a moot point.
Let’s step back for a minute. How did OTAs corner this market?
PhocusWright and H2C commissioned a study in 2015 which reported that independent hotels believe that their direct website is their most important channel. In other words, direct bookings are a priority for them.
However, there is often a disconnect between what an independent hotel prioritises, and the actions they take to make those goals a reality.
Part of this disconnect lies in the scarcity of resources that many independents face. Namely, there is an industry-wide deficit in revenue management and marketing skills, as well as limited advertising spend. This can, at times, lead to independents struggling to stay on top of a rapidly changing technology landscape.
This is where OTAs have excelled. They filled a critical skills void at a time when independent hotels were cutting back on staff numbers and technology, following the recession in 2008 and onwards.
Hotels turned to the OTAs for much needed business and gave them their room stock to sell.
That’s how we’ve gotten to where we are today, and the OTAs have been extremely valuable in helping independents sell their rooms. Unfortunately, this has come hand in hand with high commission rates, and independent hotels have little leverage to negotiate better rates due to the sheer size of OTAs.