OTA Myths

OTA Myth #1 – OTA customers are just looking for the lowest rate.  Fact: The Expedia ADR for hotels increasing at a faster rate than the ADR of hotels at large. “The average daily rate (ADR) for U.S. hotels booked on Expedia in the first half of 2011 was 6.2% higher vs. the same period last year, the story says, citing Expedia’s figures.  That’s more than the 2.4% ADR hike recently projected for the full year by PKF Hotel Horizons, and more than the actual 3.4% ADR increase seen by Smith Travel Research during the first half of this year, the story says”. (USA Today, 8/30/2011 quoting from Hotel Management Magazine)

Part of the OTA ‘bash’ is that people only go there for low rates. Au contraire, there are many reasons travelers use them and one is to scope out which hotels are in the market at what price points.   Many then go the hotel’s web site for enhanced descriptions of the Property and then convert to booking on the site.  It is this perception of low rates versus value that compels hoteliers to only put their lowest rated rooms on these distribution channels when in fact according to Amy Severson, Expedia’s director of strategic accounts and industry relations.   “…over half the customers booked rooms in the mid-to-high range of available rates vs. the lowest-available rate.” (same reference as above)

OTA Myth #2 – They charge too much commission.  The commission that most of them charge is in addition to the commissions and marketing fees that Franchises typically charge.  In that situation, franchised hotels should use them judiciously.  However, for independents and boutiques that don’t labor under franchise contracts the total fees are equal to or less than they would pay if the hotel was a franchise in most cases.

Hotel room nights booked through OTAs accounted for 9.8% percent of total U.S. demand during 2010, said Steve Hood, senior VP of research for STR.  Brand.com was the most dominant booking channel, accounting for 17% of all room nights booked, followed by voice/central reservation system (13.7%), the aforementioned OTAs, and GDS (7.9%), among others. (Hotel News Now, 8/04/11).  Hotels need to be focused on the cost of reservations from all channels and open and close them according to demand.

In addition, many of the distribution channels can be negotiated with in terms of the discount and the commission rate.   Don’t just accept what they are telling you they must have, push back – what does the hotel have to lose?

OTA Myth #3 – They have too much power in how hotels manage inventory and rates.   Not if you don’t give them the power!  Hotels can control the amount of inventory by room types that the OTAs can sell.  Hotels can open and close room types and availability on the extranets.   Rates should be in parity across all channels including the OTAs and the web site.  Not to do so not only violates your customers’ trust in the hotel’s rate integrity but also risks sending them out onto the internet in search of a better rate and/or another hotel.

In general, the OTA’s and most distribution channel’s customers (Opaques notwithstanding) are convertible. That is, they can be converted t o loyal guests through service and the quality of the facility.  Once they are impressed, they can then be persuaded to book directly through the hotel web site.

This is not to say that the OTAs don’t have to be managed – they absolutely do just like all distribution platforms.  The point is that all of the above are important in the mix of occupancy and rate.    Does this make the Revenue Manager’s job more complex – yes it does but if the hotel is to maximize opportunities, this is how the game must be played!  The rewards are high, especially for independents trying to compete in a franchise world.

Source: ehotelier.com