Direct channel vs OTAs


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Direct channel vs OTAs

  1. 1. OTAs and Hotels entwined relationships
  2. 2. The World is turning digital <ul><li>People now use internet to buy travel products </li></ul><ul><li>Number of websites with interaction between hosts and guests constantly rises (user reviews important for reputation) </li></ul><ul><li>Power of community, online distribution, social media and the mobile Web changed how we connect and engage with customers </li></ul><ul><li>The aim of hoteliers is to be reached by their own website: in the US, real increase in the number of bookings via hotels websites, not using intermediaries. </li></ul>
  3. 3. What and Who are OTAs? <ul><li>O nline T ravel A gents: </li></ul><ul><ul><li>expedia. com </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li>etc … </li></ul></ul><ul><li>Specialized resellers of hotels and tourism products </li></ul><ul><li>New scary OTA: Google Hotel Finder, a new platform that links with OTAs and provide rate-comparison component! </li></ul>
  4. 4. Main negative effects on the relationship between hoteliers and OTAs <ul><li>OTAs’ demand share dramatically increased (except within the luxury segment) since 2008, especially for independent groups and hotels; they usually demand from 10% to 40%. </li></ul><ul><li>Hotels have to respect the rate parity , and cannot favor one OTA from another one. </li></ul><ul><li>Hotels demand is inelastic : a rate reduction (discount) would not generate enough incremental demand to offset the discount. </li></ul><ul><li>Hotels lose their control on their pricing and marketing strategies </li></ul>
  5. 5. Main positive effects of using OTAs <ul><li>Make booking easier for the consumer: has the choice between several ways to book his room, and this is what consumers like. </li></ul><ul><li>Create dynamic packages: train+car+hotel for example. </li></ul><ul><li>A study ( click here to access the article, the Billboard effect) revealed that when a IHG hotel appears in the firsts listed on Expedia, an increase of booking from 7.5% and 14.1% was observed => the demand share of 25% is then justified! This is one of the perfect examples of hotels well positioned in OTAs. </li></ul><ul><li>Independent hotels have not understood yet that online marketing is not an expense , and they sometimes do not have access to the internet marketing services and technologies (usually accessible for larger hotel chains), this is why they use OTAs to control their sales. </li></ul>
  6. 6. <ul><li>If OTAs did not exist, the industry’s occupancy would be slightly lower , and room rates would be considerably higher ! </li></ul>
  7. 7. What Hotels should do to make the OTAs feel better <ul><li>Hoteliers focus on selling as much inventory as possible via the most cost-effective distribution channels; therefore they should: </li></ul><ul><ul><li>Select the OTAs according to the segment they are targeting (not all the OTAs correspond to any kind of segments) </li></ul></ul><ul><ul><li>Respect the rate parity </li></ul></ul><ul><ul><li>Manage good relationships with OTAs, and negotiate lower margins! </li></ul></ul>
  8. 8. What OTAs should do to make the hoteliers feel better <ul><li>OTAs should preserve rate parity and price erosion </li></ul><ul><li>Have to be more creative </li></ul><ul><li>Lower their margins until the financial crisis has recovered? According to this article , the demand share should now not be over 25%. </li></ul><ul><li>Restore pricing control to hotels </li></ul><ul><li>OTAs are nowadays a way too expensive to launch … hoteliers can be released, only the ones that actually exist will continue to frighten them! </li></ul>
  9. 9. Comparison OTA vs hotel direct booking <ul><li>Hôtel du Louvre *****, Paris </li></ul><ul><ul><li>Hotel direct website : 1 standard room for 2 adults, night of December the 24th: 7 special offers (check it) ! From 216€ to 290€, best available price (without promotion): 240 €. </li></ul></ul><ul><ul><li> : 1 standard room for 2 adults, night of December the 24th: 168 €. </li></ul></ul><ul><ul><li>In this hotel where I worked during 8 months, the demand share for Expedia is usually between 10% to 15%. </li></ul></ul><ul><ul><li>=> OTA is the lowest price, but the direct website has a lot of interesting packages to offer! </li></ul></ul>
  10. 10. My personal opinion <ul><li>Hotels really need to develop and be active on their own websites so that customers will be directly attracted on it and won’t go through OTAs pages to find the best available rate. </li></ul><ul><li>Consumers need to be persuaded that OTAs do not offer the best prices, so that they contact the hotel directly, and then hotels can start controlling again their pricing strategies. </li></ul><ul><li>Hotels then have to promote their own packages on their social medias accounts and own websites. </li></ul>
  11. 11. The Mobile channel is a reality … <ul><li>Thanks to the F-Commerce, hoteliers can spread out their direct channel bookings, by attracting people who « like » them on Facebook to their own mobile application , allowing customers to book directly via their smartphones! </li></ul><ul><li>Remember : 800 million active Facebook users, and 70% of these users have downloaded the application on their smartphone! </li></ul>