Why OTA’s are Uber Successful
By David Lund, The Hotel Financial Coach
Have you ever wondered why we all hear so much complaining and downright all-around annoyance being expressed from hotels about the on-line travel agents? You would naturally think that because there is so much protest being made that hotels would simply not use the service and opt for something else? Right? Well - not so fast as hotels are reportedly using OTA's more than ever.
There are three key reasons why OTA's are so successful and, in turn, why hotels and customers all flock to use them.
Imagine, if you will, for a moment that an industry popped up and aligned itself with the fashion world. This imaginary industry existed for one purpose only and that is to advertise and allow the clothing manufacturers, retailers and brands to list and advertise their products for free; the trade-off was each retailer had to pay a commission for sales through this medium. The only time the fashion world pays a commission is when there is a sale. The fashion world gets to decide what clothing products need additional exposure. I am willing to bet that the fashion world would jump at the opportunity given someone else is willing to pony up the development and ongoing operational cost.
Two. Variety is the spice of life. Right? We all love choices and the OTA's have put this love of selection into the stratosphere. I just did a search for accommodations for an upcoming long weekend in Chicago and guess what? There were only 1108 options. How is this possible? Everyone hates the OTA's…I don't think so. With this kind of selection why would anyone what to shop anyplace else? Surely if you know your favorite hotel in the windy city and you're not looking for a deal then just pick up the phone and call and make your reservation. But for the rest of us, the one-and-done traveling public, we're interested in "getting a deal" and "finding the hot spot."
The OTA's provide a great view to location, amenities and the sheer variety of selection that ensures a lineup of products to satisfy a longer line of travelers. I remember working in San Francisco almost 10 years ago and our reservations manager telling us at the department head meeting that Tom Hanks had just booked his room in our fancy hotel using Expedia! I guess even Tom appreciates a deal and I say, "Good for him."
Third and perhaps the most compelling aspect of the OTA's popularity. People love getting a deal or the idea that they received a good deal especially after doing their homework. When was the last time you were at a party or social gathering and someone told you about the deal they got on a vacation, hotel or airline ticket? People are always bragging and why not, they did the work and found what they believe is a deal. I totally get this and, as someone who heads straight for the clearance rack at Barney's, I know all too well how much getting a deal means to me.
In the travel world people are naturally suspicious of the big players and the very thought of paying the rack rate makes most customers run for their laptop and the next thing you know they are searching out their version of a bargain. Another powerful attribute the on-line travel agents bring the consumer is a wider choice - an ever-expanding set of possibilities. Using my recent search in Chicago in a very short moment or two of looking at hotels, I was fascinated to see the options from different downtown neighborhoods to the adjacent suburbs and many offered locations and amenities combined with favorable pricing that was very attractive.
Without the OTA visit I would be left without an informative guide to help my search. We all love choices and when we are presented with options we were not previously aware of we often see the value proposition in a unique and powerful way - our way - because we discovered it. When was the last time someone just had to share their secret travel tip with you? Travel is one of those experiential things that humans love to talk about and when we find something we perceive as exceptional we love to share it.
Hotels can, and many do, find a win/win with their OTA's. Here are some examples to think about:
- Hotels can get absolutely free advertising on the OTA's site. Add some great pictures and descriptions of your services and property and you have a wonderful marketing piece - free!
- They can take advantage of free revenue management tools that OTAs offer that help hotels drive more revenue, including recommendations for when they should price lower to take more business and price higher when they are able to.
- They can also work with market managers who are experts in the industry and trends for their specific local markets.
In my opinion, hotels need to get onboard with their OTA partners in a more wholesome and collaborative way. The hotel's success is in many respects a product of a mix of business; treating the travel agents with anything other than the respect that a partner deserves is shortsighted.