While AirBNB is gaining momentum with its revenues of $900 million expected to grow 10 times by 2020, hotel leaders are more concerned about how online travel agencies (OTAs) and metasearch sites are eroding their profit margins.
This was a key theme discussed during a hospitality panel at the recent Hotel Investment Conference Asia Pacific in Hong Kong.
“To me this is the single biggest issue facing the industry,” said Michael Issenberg, Chairman and CEO for AccorHotels Asia/Pacific, in this recent Hotel News Now article. “The power that OTAs and metasearch have created is extraordinary.”
To counter the OTA challenge, the executives on the panel discussed how relationships with these sites should not be combative because of their partnerships with OTAs, and commission rates have dropped. These executives also highlighted how using these third-party systems could be more cost-effective.
The challenge of this strategy is that hoteliers cannot agree on an industry standard. In addition, if a third-party owns this data, then it is all too easy to get locked into higher pricing arrangements with the OTAs.
An even bigger challenge is that the hotel industry is very different than airlines. For example, airlines don’t have REITs that own commercial planes with national brands painted on them. In addition, airlines don’t have local managers with the degree of autonomy that can make or break the reputation of a carrier at an airport.
In other words, hotels are dealing with major complexities when it comes to getting all of their properties on a uniformed booking system.
Of course, REITs want better profit margins out of their hotel properties, which is possible only when the hotel owns the complete booking path — in completely standardized way. By doing this, it is possible to own the guest experience from booking and beyond, which is where long-term loyalty is created and sustained.
Dealing with OTAs is no small challenge and we applaud these hotel leaders for discussing this issue openly in this type of forum. It’s clear that this is will be an ongoing issue, which we will be tracking in the foreseeable future.