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No Defense for the OTAs

A recent article in this online journal labeled OTA bashing as a ‘fashionable sport,’ and went on to dispel some common perceptions and cite reasons why you, as a hotelier, should embrace the OTAs. Read it, then step back for a minute and look at the big picture. No matter what numerical data is presented, it doesn’t refute the simple fact that the OTAs are converting your customers into theirs.

One such proof is what’s called a ‘billboard’ effect, which they claim has been widely studied and verified. The concept is that your hotel is prominently mentioned on one of the OTAs for potential customers to find. This mention raises awareness of your property name so that people may go to your website, and may even make a booking there. Does anyone really think that this happens with frequency?

Look at the OTA contracts, and then examine issues of channel conflicts. Realistically, the only reason an individual might purchase on your website instead of the OTA is that the inventory on that OTAs site is either not the right room (or bed) type, or the desired dates weren’t available. It is all but impossible for the price on your website to be less than the OTA. If it was, you’d probably be in violation of your OTA contract.

Frankly, I just don’t buy it. The self-serving arguments put forward by the OTAs are just that. Rightfully so, these OTAs are businesses designed to build their own corporate revenue, like any other well-oiled organization. They have exceptional advertising media plans, often brilliant creative, expertly-produced booking engines, and they have worked hard to establish their own branding and loyal followers. The power of their marketing programs can outgun even the largest hotel chain.

So, let’s call it what it is:

  1. OTA customers are NOT your customers. You do not have them on your database for repeat marketing opportunities, and they are not a part of your loyalty marketing program. The motivation and drive for customers to choose your property through an OTA may not be the same as those for someone who came directly through your website, a traditional travel agency recommendation, or word of mouth referral. OTA consumers most probably have less loyalty to you and a different set of expectations.
  2. OTA commissions are high. Traditional travel agents are generally 10%, while OTAs are often 25-30%. In days where every dollar is precious, this commission level is an important consideration, especially for independent hotels where there’s no corporate backbone to lean against. As well, you cannot equate marketing fees levied by a chain/flag to this, as chains give back to the individual property through extensive branding campaigns, compounded over years of marketing activities.
  3. OTAs level the playing field. More than that, they scorch the earth! All that work you did in branding and creating points of differentiation for your property go by the wayside. Your hotel’s display within the OTA site is compressed into the exact same physical space as everyone else on the site. Our brains don’t process text the same way we do color photography and themed menu displays (like what appears on a hotel’s own website). As such, there’s not enough visual distinction for customers to remember or differentiate your property versus the next one on the list.
  4. OTAs’ primary goal is to secure reservations. The hotel a consumer selects is not really their primary concern. It’s a large-scale volume business, whether your boutique property is selling or not. They want your inventory – even at a higher price – so that they can sell rooms and hotel-air packages. That’s how they make their money. Anytime a consumer clicks through and books through a hotel website, it counts as a loss to them. In fact, everything about the OTAs’ websites is designed to motivate you to book through them.
  5. OTAs are still all about price. Despite what might be stated to the contrary, the OTAs generate customers primarily on the basis of providing the broadest distribution at the lowest price. Just look at most OTAs advertising strategies: they focus on offering the customer the best price, not necessarily the best travel experience, which is what should be touted by your property.

Again, the decision as to how you maximize your return on inventory is in your control. Your revenue manager will help guide you insofar as the appropriate balance of channel opportunities. But beware: the ultimate success of an independent property lies in cultivating your own core of loyal users and supporters. The odds of you finding these loyal guests in an OTA storehouse are somewhat remote.

(Article by Larry Mogelonsky, published on eHotelier on October 5, 2011)

Larry MogelonskyNo Defense for the OTAs