Industry Update
Opinion Article15 August 2018

Hospitality Financial leadership – Why Your average Joe Should never Use an OTA – and… Why He Will Never Stop Using Them!

By David Lund, The Hotel Financial Coach

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With two large shortcomings, I can't see why the average person who has a basic understanding of how the travel world works would ever use an online travel agency.

In making this statement it occurs to me that—obviously—most people don't know the basics. If they did know the two things I'm going to talk about here, the OTA world would be dead on its feet.

The real question is why hoteliers do not get together and create a presence in the online world and inform people so many more customers can make a favorable decision. Then hotels, in turn, could increase their own traffic and reduce commission costs. This is the $64,000 question for all times in our industry: How can hotels and airlines get consumers to book their needs on their site and not on an OTA?

The number one thing the Average Joe needs to know about booking a flight, airline ticket, car or anything else at an online travel agency is the fact that they are not customers of the hotel or airline. They are customers of the OTA. As such, any problems the customer might encounter with that flight or hotel room stay are not met or dealt with in the same manner as a client who books through the hotel or airline's booking system.

Here are stark realities of this fact

As a customer of the OTA when there are problems with flights being overbooked you can bet your grandmother's knitting needles that you are going to be on the short list of people to get the kind of trip adjustment we are all too familiar with these days.

As we all also know, hotels need to overbook to end up full. Who do we bump in the middle of the night when our math did not work? Not the loyal customer, that is for sure. We pick the reservations with the lowest potential negative impact profile and many times that means an OTA reservation. I think we get the picture here. I am not saying the OTAs do not care when there is a "problem." I am saying they do not have the same ability to remedy the problem as the hotel or airline does.

The second thing every Joe needs to know, at least the North American Average Joe, is the price is the same at BLANK hotel or BLANK airline as it is on the OTA because of a little-known agreement called "rate parity."

Little known outside our industry, rate parity simply put means the final pricing has to be the same on originating businesses' booking platforms as it is on the literally thousands of OTAs. Do not believe me, just do a search across multiple OTAs for a specific flight or hotel room on a specific date and see.

I always tell people: Use the OTA to do the research, routes, flight times, pricing, hotels in the location you are looking for—then book it on the brand, hotel or airline platform. You will get the same price and, in many cases, get a little extra something, especially if you are a member of that brand or airline's loyalty program.

With these two ugly facts and a public relations campaign, the hotel and airline industry could turn the OTA world on its head, quite literally. So why, I ask, don't they do it? You cannot go anywhere in the hotel news world and not hear about the supposed war on the OTAs. Hotels and brand owners are all crying foul. If it is a war the hotels are waging against the OTAs, then they are not sending many soldiers or missiles and certainly no warships.

The reason why the war is not really a fight is that hotels are chicken. They are afraid to be singled out and dropped by the OTAs. They are also worried about competition regulations and any whispers of price fixing.

I think the big hotel brands must be careful with how they try to tackle the OTAs. They don't want to be seen as trying to interfere with the competition. I also think they are hiding out behind the lodging association that they largely fund, which some say has had success limiting home sharing services.

You can't fight when you are running away. Hotels are not aligned in any large enough or meaningful way even with massive consolidation to fight the OTAs. But, if they were, and, if they really went at it, they could. OTAs take advantage of the fact that the hotel world is unorganized and incapable of a unified position.

The old practice of playing hotels against the other as rates drop is still the nightmare that keeps revenue managers, directors of sales, GMs and owners up at night.

OTAs drive more business to hotels than any other channel and hotels know this as well about that business: it's free. Yes, there are commissions, but no one complains when the business saves the day or the month's financial results. So why then do we hear so much negative press regarding the OTAs? I say it is largely a negative campaign, not unlike election ads. Negative advertorial.

Back to the other part of this piece and the reason why Joe will not and never should stop using his OTAs. One simple fact. Joe can find all his options in one convenient place. He can literally find all the obvious options for his travel needs in one search that not only yields what he is looking for but also several options and features he may not have considered.

Here is an example of an OTA positive

I just did a search on Expedia for a three-night stay in the City by the Bay in late September. My simple search reveals a whopping 510 accommodation options. It is all there: The Ritz and Westin at $1,299 and $1,454 a night all the way down to the I won't mention the name hotel in the mission for $103. My search also turns up some interesting options I had not considered. First, it shows me I can enjoy San Francisco and stay at the airport or further down the peninsula for a 75 percent reduction in room pricing. I even see home sharing and vacation rental options. They have it all: good inventory, great pictures and descriptions of rooms, the hotel and their services.

Some OTAs even have a rewards program that is actually worthwhile!

With an OTA I can also book my air travel and ground transportation all in one place, with as many as 35 currencies and languages and seemingly more trustworthy reviews.

This is an incredibly powerful tool. For Joe, he is more than willing to trade this convenience for the largely useless customer loyalty program and a little parity.

I say OTAs provide an incredibly valuable service for the Average Joe.

For a complimentary copy of my guidebook on creating a finically engaged team in your hotel head over to my website, www.hotelfinancialcoach.com and don’t forget to email me [email protected] for some of my free spreadsheets.

David Lund

David Lund is The Hotel Financial Coach, an international hospitality financial leadership expert. He has held positions as a Regional Financial Controller, Corporate Director and Hotel Manager with an international brand for over 30 years. He authored an award-winning workshop on hospitality financial leadership and has delivered it to hundreds of hotel managers.

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