Why there should be no raging war between hotels and OTAs

Dr Nicolas Graf, chief academic officer, Les Roches Global Hospitality Education

Many hoteliers feel some hostility towards OTAs, why do you think this is?

15 years ago, when they desperately needed to fill empty rooms, hoteliers welcomed OTAs and greatly benefited from them. Today, they see their relationships with OTAs as unfair as they have lost significant bargaining power. Despite recent mergers, the market of OTAs has consolidated much faster than hotels, and the biggest OTAs are significantly larger than any hotel chain. In this context, OTAs are stronger at the negotiation table, but also in the online marketplace, with more advertising budget, better search results, high brand recognition, etc.

This bargaining power enabled OTAs to require rate parity and other similar practices that hoteliers view as unfair and detrimental to them. This is where most of the hostility comes from.

Do OTAs take revenue away from hotels?

I do not think OTAs take revenue away from hotels, quite the contrary. The question really is: do OTAs add sufficient incremental revenue to justify their costs, including commissions and loss of access to customer data?

Not every hotel benefits from OTAs. Location, branding, own distribution strengths, loyalty programs, are all factors affecting hotels’ gains from working with OTAs. However, I believe the majority of hotels benefit from OTAs as long as they manage this channel well.

How do you think hotels can use OTAs to their advantage?

OTAs need to be used in a way to attract new customers you would not be able to reach with your other sales channels. Hoteliers need to understand who these new guests are, where they come from and when they book. They need to identify the OTAs most likely to attract these new customers without overly competing with existing customers.

Hoteliers also need to develop a good working relationship with the OTAs they are using and regularly negotiate for special allowances such as block-out dates. Nor should they list too many rooms as this can impede control and evaluation. Finally, hoteliers need to ensure their returning guests book directly. If hoteliers manage to do all of this, they should benefit from working with OTAs.

What can hotels do to work more closely with OTAs?

The working relationship with OTAs needs to be constantly managed. The key areas to manage carefully are: (1) accuracy, comprehensiveness and quality of content provided to OTAs, (2) ease of use and content quality of your own website to capture direct bookings coming from OTAs, (3) take full advantage of the market intelligence provided by OTAs, (4) manage inventory constantly on all channels, (5) manage rates and promotions constantly on all channels, (6) respond timely and fully to questions and reviews on OTAs sites, and (7) systematically evaluate your distribution strategies.

The importance of OTAs as a distribution channel, as well as the complex working relationship has led to the creation of new job roles dedicated to online marketing and distribution. At Les Roches, we train students to understand, monitor and evaluate different channels and offer a marketing specialization for students wishing to enter this dynamic area of hospitality business.

Dr Nicolas Graf is chief academic officer of Les Roches Global Hospitality Education. Before joining Les Roches in 2016, he was managing director of Alain Ducasse Education & Consulting and director of the IMHI Center at ESSEC Business School in Paris. He holds a PhD from Pamplin College of Business at Virginia Polytechnic and an MBA from HEC Lausanne and Ecole hôtelière de Lausanne in Switzerland.

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