How the hotel-OTA relationship has matured
How the hotel-OTA relationship has matured
06 SEPTEMBER 2018 8:21 AM

Speakers at the Hotel Data Conference discussed the complicated and ever-evolving relationship between hotel companies and online travel agencies.

NASHVILLE, Tennessee—The on-again, off-again relationship between hotel companies and online travel agencies has been the cause of so much head scratching and hand wringing over the years, but in the end, the two sides usually end up finding a way to work things out.

Panelists on the “Two decades of love and hate: OTAs” session at the recent Hotel Data Conference shared their experiences and observations of the evolving relationship between hoteliers and OTAs.

Early on the relationship, hoteliers thought it was like pushing the easy button and new business would come out of the air, said Susan Guimbellot, VP of revenue and channel strategy at Hospitality Ventures Management Group. However, record occupancy levels and rising costs started challenging the bottom line, she said, and they realized it wasn’t just this magic additional incremental business.

“It’s trying finding the nice balance between ‘How can I engage those guests and get them back to me directly?’ and ‘How do I get a broader audience of new guests?’” she said. “That’s where I think they play a great role, so it’s about finding that right balance.”

Hotel companies and OTAs had a honeymoon period, said Klaus Kohlmayr, chief evangelist at IDeaS Revenue Solutions, but they’ve settled in and now have a more mature relationship. Some hotels do need different forms of distribution that they don’t have access to, and OTAs provide that access.

Hoteliers want to have their product on the shelf when a customer goes to convert, he said, and the reality is OTAs convert better than many of the other channels or distribution opportunities for hotels.

Hoteliers know how to better manage the relationship now, he said.

Combating OTA loyalty
The idea behind direct booking is that it should come in at a lower cost of customer acquisition, said Andrew Taymans, VP of asset and revenue management at GF Management, and that is still up for debate. That has involved a discounted rate to buy loyalty back, he said, which comes at a cost.

“At some point you wonder who is going to come up with a magic potion that brings people into a direct channel in a way they want to be brought in as opposed to a way brands think they want to be brought in,” he said.

It’s interesting how hoteliers start to book business and how the industry has changed, said Amy Brodrick, VP of sales and marketing at Chartwell Hospitality. Hoteliers do want to convert by booking directly, but if they don’t have distribution in a city the traveler wants to go to, someone else can provide something they can’t.

“I don’t think third parties are going away by any means,” she said. “I think somebody else will just get smarter. If one of the brands had thought of it first, they would have done it. If they had a product in this market, they would have done it.”

When talking about loyalty, it’s about how hoteliers engage with the customer and making the experience as sticky as possible to make that guest come back as many times as possible, Kohlmayr said.

“How do you create more opportunities for touch points?” he asked. “How do you create more interaction to create more loyalty?”

Citing a recent experience, he spoke of booking a stay at a hotel with a preassigned room. He said he made a request at 8 a.m. to change to another room, but by 3 p.m., he hadn’t heard any response.

“If I booked through an OTA, I would have heard a response,” he said.

Loyalty means different things to different people, and delivering that is key, Taymans said.

“It has to be through the entire experience,” he said. “It can’t just be a thank-you with points at the end or a bottle of water at the beginning. It’s got to be from the time when you envision the trip to time you telling your friends about it afterward.”

Hoteliers can educate guests who book through OTAs about the loyalty program and talk about the benefits they can have, even starting with that stay, Guimbellot said.

“We’re in the position of having power,” she said. “They’re on property, dealing with our employees, not face to face with the OTA employee. It’s up to us to convince that guest to come to us directly.”

Commission rates and data ownership
Guimbellot said she loves the variable commission program, because the base commissions should be lower. When hoteliers need the help, they can then go to the OTAs, she said.

That’s where the partnership matches up, Taymans said. There are times when hoteliers don’t need the OTA business, and there are times when they do, which is when hoteliers should be willing to pay for that. He believes it’s about finding that balance.

“The set rate will come down significantly, but as you pay to play you end up paying for business you want it and need,” he said.

When it comes to who owns the data, ultimately, the guest is staying at their hotel, Guimbellot said. Her company once had to pay a $3,000 commission to an OTA, and she investigated the situation because it didn’t sound right to her. As it turns out, the guest had a long stay in a two-bedroom suite at a high-end hotel in New York City, she said.

“I should know who that person is,” she said. “Shame on me for not knowing who that is and immediately finding out why are they here and saying ‘Come back, bring the whole family and stay for two years.’”

Airbnb as an OTA
Listing inventory on Airbnb is more manual, Guimbellot said. There’s a lack of inventory integration, so hoteliers have to be well-connected with their front office, she said. However, this is where technology will go, especially as they see OTAs add more and more features, such as apartment living, to their platforms.

Airbnb is no different from an OTA, Kohlmayr said. OTAs connect guests to supply, which is what Airbnb does.

“If you ask people that are in that space, that’s how they think about Airbnb as well,” he said.

Younger travelers don’t think about it as a hotel stay or an Airbnb stay, Taymans said. Instead, they think of it as going away for the weekend to a different city, so they’re open to different experiences. There might be times where it makes perfect sense to get an apartment, while there are others where it makes sense to get a regular hotel room. The delivery of those is the key, he said.

1 Comment

  • user7447447 September 14, 2018 11:32 AM Reply

    It is natural the hotels resist exorbitant OTA commissions and look for ways to reduce it. I found one of the ways is to incentivize hotel stuff for direct bookings and for incremental revenue (upgrades). At some point upgrades only made 5% of our monthly revenue ($15,000) and the pay out to the front desk agents was $1,000 (which is 6% cost). When Susan G saw those numbers she said: "Why do we have a pay out of $1,000 to agents, that is wrong. Stop it." And we stopped. Now the incremental revenue is $1,000 (0.3% monthly revenue). OTA's commission of 15-20% was preferred to staff incentive of 6%.

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