March 11, 2013

Hotels should use OTAs to their best advantage


Hoteliers acknowledge that third-party distribution continues to pose new challenges. It’s not only about making the most of emerging channels or platforms but also about keeping an eye on how intermediaries are approaching new developments.

The continuous shift to the business online is a big change. Many properties could live off online business as their staple. There was a time when we considered only offline channels for wholesale business. Now online channels are as good for wholesale or base business at hotels. More direct competition between some segments of online and the offline business is the result of this. This is a double-edged sword though; if the hotels are not careful in keeping an eye on distribution costs, it is possible to generate worse revenue on average from online channels compared to the offline channels, considering commissions or margin bidding.

OTAs are effective in reaching out to customers. They have the financial wherewithal to cast a wide net. They can reach out to customers in countries and segments that suppliers might find difficult to get to. Look at how Booking.com has captured the market in the Middle East. The big difference between suppliers and OTAs here is that OTAs are predominantly interested in capturing the existing demand. They do little to generate demand, which is largely left to suppliers and tourism agencies.

This may sound more like wishful thinking but OTAs could do better in promoting the destinations. Most OTAs are active in the lower part of sales funnel but have less or nothing to say. If I am still at the planning stage, I am less interested in a particular hotel or flight. How can they help a consumer with more information on the destination, activities, events and more? How can they inspire travel where the key selling point is not the price? Most OTAs do pretty awful job at this.

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