January 11, 2013

Hotel marketers loose control of inventory/pricing as OTAs focus more on hotels

Brian Mullan, research analyst with Janney Capital Markets in New York, studies moves made by five of the most influential OTA players and how their near-term strategies will directly affect the hotel industry. He notes control of inventory and pricing should be a top priority for the industry to overcome.

“As investors, what you want to watch is how the industry continues to evolve,” he said. “Will the hotel industry be able to succeed in its quest to lower distribution costs? So far it has proven difficult.”

As an overall trend, Mullan noted many of the large OTAs are shifting their business model to less airline business and more hotel business because the margins on a hotel booking are much larger.

“Every OTA recognizes the economics are far greater in the hotel industry,” he said. “From the OTA perspective, they want to see fragmentation in the industry ... in the hotel industry, there are countless brands and then you have all the independent hotels on top of that.”

Mullan said hoteliers’ fears that they’ve lost control of inventory are real, and he suggested that issue should be a top priority for the industry to overcome.

“Occupancy has finally caught up and now you are hearing of more hotels in the pipeline,” Mullan said. “In what other industry would you be adding more supply when you have lost control on the pricing of the existing supply?”

Similarly, OTAs face a potential threat in Google, Mullan said. The search-engine’s inroads into the travel space are “making customers acquisition more expensive for all OTAs.”

Get the full story at HotelNewsNow.com