It ‘s a story known to hoteliers: intermediaries dominate the market and put under pressure hoteliers to keep prices low and increase commissions.
The OTA (Online Travel Agency), who continued to use the same old business model of travel agencies adapting to web, are not really interested on the innovation of the market structure.
Two examples for better understanding:
Expedia and Booking.com.
Expedia has made a deal with Groupon, while Booking.com launched Flash Deals (offered a 50% discount for fans of Booking.com on Facebook).
The fanpage has reached nearly 200,000 fans and many hotels have received phone calls from Booking.com to participate in this initiative.
No matter how advanced is the use of vouchers in online social networks, the business model is still the same.
It ‘a kind of vicious circle:
Hotels need of customers every day and intermediaries offer them customers, but they are not enough because the number of beds is high and the fixed costs to be incurred are worrying.
Intermediaries offer more customers for more fees and so fewer gains to the hotel (a kind of sale), putting competitors in the position of being forced to accept their offers, having also need more of customers to survive.
Competition between hotel is, therefore, forced by intermediaries through lower tariffs and increased commissions. That works subtracting customers to competitors.
The total number of customers is not growing because other hotel react and do the same thing but the hotel will always pay more for the broker to find more.
With this logic, the end customer is convinced that reservations are cheaper with intermediaries. The high commissions earned are invested by the intermediaries in marketing to achieve greater visibility, increasing its market share at the expense of the hotel, since they can not afford that kind of investment.
This free fall is as valid today as 30 years ago, when the market was dominated by tour operators.
The Expedia-Groupon voucher and booking of Flash Deals don’t save any hotel from falling or crisis, in contrast, often contribute to worsen the situation.
So here’s three simple rules to follow:
- Renew the direct sales channel and implement a system of effective customer support and allow direct dialogue with the customer
- Intended to this channel more resources than they would with the more expensive intermediary
- Pay attention to the low season. If you find special offers, do it on every channel (parity rate).
OTA is an opportunity, not a threat, but should be used strategically, with awareness and in the right measure support which is rarely done.
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