Factors Budget Hoteliers Should Keep in Mind While Negotiating with OTAs

Pranjal Parashar Jun 09, 2017

THE POWER equation and love hate relationship between hoteliers and Online Travel Agencies that has been continuously been evolving, sometimes counter intuitively, has made the travel market very exciting both for investors and end consumers. Almost two decades, OTAs were just Global Distribution systems used for offloading the excess inventory in off season. And now it is a crucial part of a hotel’s marketing mix. By spending around 35-40 percent of its revenue on marketing, it promises the scale of reach and penetration that isn’t feasible for a budget hotel with its paltry six or seven percent contribution spend in marketing.

Consumers love shopping on OTAs not only due to the variety of options available (on price/ location/ time) and ease of booking an end to end trip but also additional features like trusted reviews, language support, currency conversion and tailored options based past purchasing behavior. Keeping this in mind, it becomes crucial for choosing the right OTA. For budget hoteliers, factoring in the following 4 things are a must before doing tie ups with OTAs.

The audience of the OTA

The geographical reach and the demographics of consumers booking on a certain OTA are important cues. Ctrip caters to the largest Chinese audience while Despegar is culturally suited to Latin American traveler’s needs. A bag packer that just needs a bed to crash after traveling, extensively will book on Hostelworld.com. B&Bs are popular with couples looking for romantic getaways, adventurous travellers and guests seeking unique experience. AirBnB has successfully penetrated this space by offering a win win deal to both end consumers and hotels/holiday rentals/homes – community experiences, variety of locales & security promise by the brand for the former and low commissions for the latter. Price elasticity of the consumers using this channel and the ability of the hotel to communicate value rather than just price are important considerations. Being listed on the right OTA will increase visibility for the budget hotelier to a larger section of its niche market, thus increasing more conversions on bookings.

The health of the OTA

It is very important to study the performance of the OTA in the market in which you are operating. It needs to have sufficient resources to be able to service the hotelier and their guests. Staffing and training of the customer support team is important. Unanswered calls and messages, mails that no one seems to notice as well as agents who appear in a rush when explaining their products/services should be marked red on your list of reliable OTAs. Similarly method of management of inventory and bookings (capability of integration with your channel manager or individual portal), capacity of this channel to generate incremental demand / poach competition share have to be studied in advance.

Many OTAs are considered to be thought leaders with a brand so strong that consumers place high trust on the information displayed about hotels on such platforms. For example: Booking.com uses “Verified reviews” to ensure that only those guests that have stayed at the property can write a review for it. This ensures good quality of content / description available about a hotel thus helping consumers make an informed decision.

The satisfaction of guests sourced through OTA

Monitoring of the experiences of guest sourced from particular OTA is important. Listing on an OTA that does excessive price cuts can bring in audience that cannot appreciate the offerings of a particular budget property, thus leading to a negative guest experience. Such price cuts can impact bookings through other sources (like corporate bookings) or set a wrong benchmark for future price expectations. Packaged deals and promotional offers offered on OTA should be such that it enhances the overall service experience and helps the hotel in building loyalty and advocacy.

Market intelligence and analytics

Online travel agencies can serve as trusted partners of hotels helping them optimize revenue through correct business decisions. To back this with sufficient data and analytics, OTA are now partnering with technological platforms that gather such market intelligence and provide actionable inputs to hotels. For example: OTAs are often accused of not parting with guest information to hotels. However there lies the opportunity of collaborating with Guest Experience Management platforms that can create guest profiles and capture their preferences / feedback for a more personalized experience and better service by the hotel. All information required to capture the Customer Lifetime Value of a guest is present with the OTA. Such analytics can help hotels better target customers with promotional offers / loyalty programs. While choosing OTAs, budget hoteliers should evaluate the quality of such tools provided on the platform.

The key to successfully managing use of OTAs by budget hotels is to assess its full value properly. OTA doesn’t just contribute in the “billboard effect” but has impact on other channels as well. This is the reason why other parts of the marketing and distribution mix (Social media/ newsletter/ website/ SEO/ blogs) have to be aligned with the OTA strategy to obtain the maximum impact. The millennial traveler has completely gone digital and this has taken the significance of OTAs to another level. With the right OTA backed by the right technology, your hotel is bound to emerge a winner in this competitive market.