TravTalk Middle East Online Magazine
Even if it may seem so that OTAs are ruling the markets, they can’t afford to be complacent in these times of evolving technology as sooner or later other entities will challenge their dominance.
Hotels were guilty of sleeping on the job when it came to the rise of online travel agencies (OTAs). Stepping in when they saw the opportunity, OTAs took a huge chunk of the online distribution method and it’s only now that hotels are belatedly trying to catch up. However, going forward, both distribution platforms will need to cooperate and co-exist for their own benefit and for that of the guest.
Hotels are fighting back against the OTAs’ clout in various ways, such as advertising, e.g., Hilton’s clever tagline ‘Stop clicking around’ or IHG’s ‘You always get a better rate when you book direct’. They also try to redirect OTA booking guests to book direct. For example, when I have used an OTA to book, the hotel will invariably suggest at reception that I sign up to their frequent guest programme or say, “The next time you book direct, we’ll give you a room upgrade, a free breakfast, whatever.” And they will remind you that you can’t earn programme points when you book through an OTA.
Similarly, experienced travellers know that they can log onto an OTA, check out the location, type and the price of where they want to stay and then phone the hotel, tell them what the OTA is offering and ask what they can offer. Invariably the hotel will better the OTA offer, either in terms of price, room upgrade or other amenities added on, as by booking directly the hotel doesn’t need to pay the 12 to 20 percent OTA commission.
The pendulum, so long trending the OTAs’ way, has begun to swing back in favour of the hotels through legal challenges to ‘rate parity’ clauses in contracts, which prevents a hotel selling below the price of the OTA. Such clauses have been challenged in the courts throughout the EU and overturned on competition grounds in a number of jurisdictions, with more such decisions likely.
The two leading OTA groups, through their various subsidiaries, now hold about 80 to 90 percent of the market and that kind of concentration could make them subject to competition laws going forward, which could reduce their negotiating power with hotels in the future.
So, who is to say the OTAs’ strong position today will remain so in the future? The Internet wasn’t here 20 years ago and neither were the OTAs some 10 years ago; who’s to say the OTA model may not be replaced by evolving technology or at least something that reduces their current dominance?
With this in mind, more nimble and customer-specific OTAs may develop, such as boutique or lifestyle OTAs — the ‘green traveller’ or ‘gourmet traveller’. These are already developing and may chip away at the dominance of the bigger OTAs. The same is likely to happen in response to the consolidation of the larger brands and the inevitable so-called ‘McDonaldisation’ that comes with large scale, despite the rollout of endlessly new and diverse lifestyle brands. Many guests — particularly at the higher end— will be turned off by the association with the behemoth brand and opt for something more personal and tailored to their likes. The $10 to $20 distribution savings that the larger brands can offer, while an advantage for the budget product, will not matter to this higher-end guest.
As hotels learn to offer a more individually tailored service to their guests and when OTAs evolve to appeal to more niche customer groups, they will both learn through adaptation to collaborate and co-exist.
The author is Scott Antel – Hospitality and Leisure Partner at Berwin Leighton Paisner LLP.
