For almost thirty years the power and reach of Online Travel Agents has grown, as more and more people have become familiar with, and adept at using the internet. OTAs such as Expedia, Booking.com, Tripadvisor, and Airbnb established themselves as the go-to and trusted sites to search for holiday packages and hotel bookings. And as these brands have developed, hotels of all sizes have benefitted from the massive ‘footprint’ of OTA dominance. What are OTAs? - They’re a very valuable way of hotels being searched for and seen from any part of the world. However there are also downsides from the point of view of hotels, as we shall see in this article. Now a new balance is being found between the OTA route, and the improved operational effectiveness that hotels are able to access through vastly improved technologies.
There’s little doubt that OTAs can provide a highly efficient one stop shop for searchers on the internet, where all travel-related services can be found in one place: including car rental, cruises, flights, and of course accommodation. The largest Online Travel Agents handle millions of searches and bookings every day for both leisure and business travellers worldwide. Booking.com - the third largest of the OTAs after Airbnb and Expedia, (although all the biggest OTAs are constantly jockeying for position) - was responsible for over 550 million bookings in September 2023 alone. OTAs provide an excellent way for people to compare and contrast the offerings of different hotels because each OTA has standardised formats, and rules for the businesses they promote, so it’s easy for potential guests to spot differences, and similarities. Searching for OTA travel, or a hotel in a particular area? Then an OTA site will comprehensively show the options, and rank them in order of cost, services or style, according to filters selected by the guest. What could be easier? In contrast, browsing the websites of individual hotels takes far more time, and is then sometimes a case of ‘comparing apples with oranges’ because each website tells a somewhat different story.
Hotels can find working with Online Travel Agents extremely easy, because they simply fit into a ready-made methodology. An extremely large variety of types and sizes of accommodations can sign up worldwide with OTAs, with the registration and advertising typically being free. The benefits of working with OTAs include:
So, with this kind of ‘muscle’ available, it’s not entirely surprising that hotels have increasingly adopted the attitude of, ‘If you can’t beat them, join them.’ The advantages of accessing a wider market through the OTAs’ greater spend on marketing and advertising means greater reach to more potential guests, so what’s not to like?
Another great power of the OTAs is that they are into Big Data, big time. Through their data mining algorithms they know in granular detail about the needs and wants of the market, often far more than any individual hotel has been able to analyse. Many hoteliers have no idea what a huge amount of data OTAs own. You can get information about competitors' quality scores, the booking window, and in some cases even their average prices. This information can also be key in assisting the development of a hotel’s pricing strategy.
The OTA earns its income from commission paid by the hotel for every single booking made through the OTA’s channel, or by the OTA being the recipient of the initial guest payment, which is then passed on to the hotel, minus the handling fee. Commission payments are usually settled monthly, representing a predetermined sum of between 10-30% of the total room booking value. But as well as ‘skimming off’ this commission, which impacts the hotel's bottom line, there can be other significant downsides to relying on Online Travel Agencies:
Big data, massive reach, a multi-lingual and always-on 24-7 platform: these are just some of the strong advantages for a hotel partnering with an OTA. And yet… What can be lost is the individual or even unique approach of a hotel’s own branding and marketing, and - for sure - that slice of commission that is automatically deducted by the OTA. In the recent past that’s just the way it was - ‘Can’t live with them, can’t live without them.’ However that has changed dramatically with the advent of powerful Property Management Systems. Now a hotel with a modern PMS can do many of the things previously only possible through the OTAs. This includes dynamic pricing to offer the best room rates to customers, at the best profit to the hotel. Bookings can be made by a guest through the hotel’s system, and paid directly through a payment gateway. All communication can be automated, but look personalised, from the initial booking confirmation, throughout a guest’s stay, and onwards through post-stay. What’s more, with the increasing use of chatbots on hotel websites, it’s easy and accurate to communicate with guests in a very wide variety of languages. That means a more user-friendly experience, and far fewer errors in registration details.
A smoothly functioning PMS also frees up hotel staff to be much more customer-facing, while hugely speeding up repetitive processes such as check in. This all helps build trust with guests, and enhances the hotel’s reputation for efficiency and effectiveness. And as we know, people like to tell their friends and families of their experiences through a wide variety of social media. A great stay in a hotel leads to great guest reviews, and something which in the past was mainly curated by the OTAs can now be managed by hoteliers themselves.
And as for Big Data? Well, it’s all available to a hotel using a modern PMS, in just as much detail as only the largest OTAs were previously able to access and analyse.
Let’s be clear, we’re not against using OTAs to attract business for hotels. The OTA ecosystem is trusted by guests, and is very well established. The ‘billboard effect’ is now well-documented, where guests do their ‘window shopping’ quickly and efficiently through OTA channels, but then revert to direct booking with their hotel of choice. Now the ‘muscle’ that only OTAs could previously flex can also be used very effectively by individual hotels. The smart thing to do is to continue exploiting the OTAs by linking the OTA and PM systems through integrations that facilitate seamless communication and data exchange between the platforms. Most PMS systems have a Channel Manager feature that acts as a bridge between the hotel's PMS and the various OTAs. This connectivity is crucial for efficient hotel operations and effective distribution of room inventory. By building up the strength and effectiveness of the hotel’s own operations, direct bookings can be taken efficiently, speedily and effectively. This means attending to and maintaining: