Online Travel Agencies (OTAs) like Booking.com, Expedia, and Airbnb have revolutionized the travel industry. For many hotels, guesthouses, and apartments, these platforms have become essential sales channels for attracting guests. However, voices within the hotel industry increasingly ask: Are OTAs friends or foes? A closer look reveals that the answer is not straightforward.
Benefits of OTAs for the Hotel Industry
Extensive Reach
OTAs like Booking.com have millions of users worldwide. For smaller hotels and family-run businesses without the budget for large-scale marketing campaigns, this reach is an invaluable advantage. These platforms allow guests from all over the world to discover accommodations they might not have found otherwise.
Easy Booking Process
The user-friendly interface of these platforms is another key benefit. Guests can quickly check availability, compare prices, and book instantly. This ease of use reduces the booking barrier for potential customers, increasing the likelihood they will choose a property.
Trust and Reviews
Many travelers rely on OTAs like Booking.com because of their established review systems. Positive reviews help hotels attract more guests. Additionally, OTAs provide a sense of security through cancellation policies and trusted payment methods, which many customers appreciate.
Challenges and Drawbacks
High Commissions
One of the biggest issues for hoteliers is the high commissions charged by OTAs, which can range from 15% to 30% of the booking price. These fees eat into profits, posing a significant challenge for smaller hotels. Hoteliers are often left wondering whether to pass on these costs to their guests or absorb them, reducing their profit margins.
Restricted Pricing and Control
The European Court of Justice’s ruling on September 19, 2024, clarified that Booking.com’s rate parity clauses violate European competition law. However, OTAs have already adapted by imposing unfair discount programs that undermine rate parity. Read the interesting IHA blog by Tobias Warnecke.
Dependence on OTAs
Some hotels have become dangerously dependent on platforms like Booking.com, generating a large portion of their bookings through these channels. This dependence can lead to neglecting direct marketing efforts and their own sales channels. Should OTAs tighten their terms or raise commissions, it could become a significant problem for these hotels.
Long-Term Strategy: Striking the Right Balance
The key question is not whether OTAs are “friend” or “foe,” but rather how effectively and strategically hotels use them. OTAs can be valuable partners when used as a complement to a hotel’s own distribution channels. Hoteliers need to strengthen their direct bookings by investing in a professional website (and an efficient booking engine), search engine optimization (SEO), social media, and loyalty programs.
One strategy could be to use OTAs to acquire new customers and then convert them into direct bookers through excellent service and tailored offers. Over time, this approach can reduce a hotel’s dependence on OTAs and increase profitability.
Conclusion: OTAs – A Matter of Perspective
OTAs like Booking.com, Expedia, and others are neither purely friends nor outright foes of the hotel industry. They offer substantial opportunities but also present significant challenges. Hotels that rely too heavily on OTAs risk losing control over their pricing and reducing their profit margins. On the other hand, smart use of these platforms can expand reach and visibility. The key lies in finding the right balance and not neglecting direct distribution.
Ultimately, OTAs are tools – and like any tool, their value depends on how they are used.
