Frenemies. In my opinion, this expression explains the relationship well between hotels and OTAs. The OTAs provide a constant and reliable source of revenue for hotels, but on the other hand, they mean a significant cost for them, and in some cases, they seemingly overpower the hotel industry. In some hotels, OTAs are even called monsters. But does this relationship have to be so bittersweet?

I will try to figure it out in the following article.

What is an online travel agency?

OTA stands for online travel agency. It is practically an online marketplace where those interested can search for and book travel services. A site where all travel-related services can be found in one place: car rental, cruises, flights, and of course accommodation services. The largest OTAs handle millions of searches and bookings per day for both leisure and business travelers worldwide.

How do OTAs work with hotels?

An extremely large variety of types and sizes of accommodations can register worldwide for OTAs. Registration and advertising on the site are typically free. The hotels however have to pay a commission fee after every single booking that comes from the OTAs. This fee is usually paid monthly and represents a predetermined percentage of the total booking value.

What are the benefits of working with OTAs?

First of all, if your target audience is not a very specific niche that you can reach otherwise, then the use of OTAs is now basically unavoidable. In recent years, they completely reshaped people’s booking and travel habits. OTAs simplified booking processes and increased the user experience through continuous optimization and customer focus. How?

• They display relevant content in an easy-to-use format.
• They offer a consistent user experience across different devices.
• Most of them also have a mobile app that often offers additional benefits and discounts to the users.
• They provide loyalty programs that are independent of hotels and chains, offering their customers a varied experience and a wider range of discounts (e.g. Booking.com’s genius program).
• The websites of the largest OTAs are available in a myriad of languages, so most of their customers can be reached in their native language.
• They provide more flexibility for changes and cancellations, which increases trust in clients.
• They share authentic reviews and feedback based on past guests’ experiences.

Hotels can hardly keep up with this.

2. Wider target market and a larger variety

OTAs spend a large portion of their revenue on marketing and advertising. This allows them to reach more potential guests than the largest hotel chains. They offer an extremely wide range of accommodations to meet the needs of modern guests who want to see their options before making a decision. OTAs have a huge database on both their accommodation provider and customer side and their use in the hotel industry has now become unavoidable.

3. Countless useful data for free

A lot of hoteliers have no idea what a huge amount of data OTAs own. You can get information about your competitors' quality scores, the booking window, and in some cases even their average prices. This information can also be key in developing your pricing strategy. I suggest that you also call your account manager from time to time and ask him to inform you about current and expected market trends. The more data you have, the better and more profitable business decisions you can make.

What are the disadvantages of using OTA?

1. Power

OTAs' position of power evokes negative feelings in many of their partners. They may feel oppressed and left without support from the OTA giants. Some of the complaints raised by hotels are legitimate and cause for concern.

2. Overbookings and unsolicited cancellations

Unless you have a reliable Channel Manager, constant availability and pricing updates between all connected OTAs can be a problem and may even lead to overbooking. In addition, OTAs taking advantage of their power, can often force accommodations to accept cancellations that result in a potential loss of revenue for them.

3. Commissions

It is understandable that OTAs expect a certain amount of commission in return for their work and the sales platform they provide. Nowadays, however, taking advantage of their market leadership, they charge unreasonably high fees in some cases. This is particularly burdensome for smaller, independent hotels, which have almost no bargaining power and are thus forced to accept and pay disproportionately high commissions.

4. Lack of control

Hotels have almost no control over how their houses appear on OTAs. Each platform has its own special standard that even the biggest “players” have to accept.

5. Intermediation

OTAs were originally intended as a platform for managing online bookings. Today, however, they have completely infiltrated guests and hotels. Hotels are not given access to guests’ contacts, they are only allowed to communicate with them on the platform’s message board. This significantly slows down and makes communication more difficult. Even more annoying is that, in some cases, OTAs also force their own cancellation and refund policies if they receive a customer complaint that is acceptable to them.

Final words

Besides the many advantages of OTAs, their disadvantages cannot be ignored. Since their use is inevitable, the best you can do is to find balance with them: build them into your sales strategy, but don’t solely rely on them. In my next article, I’ll share some tips on how OTAs can be much more friends than enemies of your hotel. Stay tuned!