(Please note, the below refers to online posts and blogs and our interpretations may not be comprehensive nor completely accurate – The reader should make up their own mind)

We recently noticed a surge of posts on the phenomenal growth in the scope, overwhelming online presence and incidence of hotelier and customer complaints against the main Online Travel Agents (OTA’s) for Hotel and Guesthouse bookings – Booking.com (owned by Priceline) and Expedia. Among the online stories are the following :-

otavshoteliers

Higher commissions, higher room prices, financial pressures growing for Hoteliers in the war destined to hit customers worst

https://skift.com/2016/04/25/everything-you-ever-wanted-to-know-about-hotel-industrys-complaints-against-otas/

https://wallop.ca/insights/gripes-otas-well-founded/

http://www.bighospitality.co.uk/Business/Independent-hotels-still-unhappy-with-OTAs

  • for balance, two articles about the growth of AirBnB and a fascinating history of online bookings –

http://www.bloomberg.com/news/articles/2015-11-16/morgan-stanley-hotels-don-t-need-to-worry-about-airbnb-as-much-investors-might-think

https://www.theguardian.com/travel/2014/mar/12/how-25-years-of-the-web-inspired-travel-revolution

Among the problems detailed in the Skift article are the following :-

  1. A consumer search for a cheap hotel room may not actually show the cheapest rooms – instead the results may be headed by Hotels and Guesthouses paying the highest rates of commission to the OTA
  2. It has also been alleged that any individual search may be influenced by the searcher’s history on Google, who have their own agenda when it comes to booking accommodation (see item #5 below).
  3. Currently estimated at up to 84%, online market penetration of the “big two” OTA’s, Priceline/booking.com and Expedia are set to reach 94% by 2020. The fear is that smaller, independent Hoteliers may disappear from the online “map” unless they can afford ever-increasing commission rates.
  4. Generally unknown or unrecognised by the public, the typical OTA commission rates of 15 to 30% have risen dramatically in less than a decade and are “enforced” by “parity-rate” clauses. These are intended to prevent the Hotelier offering rooms at cheaper rates under threat of “disappearing from the marketplace if the OTA pulls the plug”. The threat can also be clandestine, via “unexplained restructuring” of property listings in order of prominence.
  5. Although apparently shaping up to become online rivals to the big OTA’s, currently Google profits handsomely from them (e.g. booking.com paid them $1.9Billion in 2014 – both for their own high search rankings and the rankings of their favoured client hotels! In other words, fall out with an OTA and you may be “lost” on Google as well – a real “double whammy”.
  6. Things do not get any better when looking for a room using the so-called “aggregator” sites, such as Trivago or Kayak or TripAdvisor. It could be that these sites are not so impartial as their advertising might suggest. Trivago is owned by Expedia. Kayak is owned by Booking.com and TripAdvisor is trying to sell you rooms via their own channel, in a deal with booking.com!
  7. Rate parity is a main gripe for hoteliers – indeed the Skift report states that France and Germany have declared such arrangements by the OTA’s are illegal and Italy recently voted 434 to 4 against them. However, there seems no sign of removing these restrictions in UK or USA. The nett effect is said to be increased room rate overall, since the Hotels cannot offer “bargains” for fear of reprisals. This upward pressure on room prices, coupled with threats of even higher commission rates benefits nobody except the OTA’s.
  8. Consolidation of the OTA market means that, basically, only two big conglomerates dominate the market (Priceline/booking.com and Expedia) – although there may be some penetration by TripAdvisor – in reality, this deal may financially benefit Booking.com. AirBnB may prove a reasonable alternative but the jury is out yet.
  9. “Traditional” methods of being found on the internet – e.g. “good” website, SEO, directory listings, links from local authorities and travel sites, social media presence, good reviews (etc)  – are fast fading into oblivion against the onslaught of the “Gods of Mammon” (OTA’s). There is a danger that some lovely and excellent quality small establishments may founder and disappear under the weight and number of the OTA “average cash-cows”.

The above online sources are lengthy but contain a wealth of information and may inform as to the near-future of the accommodation travel industry and the threats we all face. Unless some “disruptive” element surfaces in the near-term, then the future looks to be driven entirely by two corporate bodies with threats of ever-higher commissions, ever higher room rates and ever-fewer accommodation providers as the OTA’s chase ever-greater profits.

 

About Jim Groves

Current qualifications BSc, MSc (+prize), PhD, GRSC, CCol, ASDC, IEng, MIET (previous now retired - MIM, MIMF, MICorr, ATSC, CChem, CSci, MRSC, MAOC, MCEA, recently retired from WHGLA as Committee Member and IT Manager.)