Industry Update
Opinion Article18 September 2020

The future of OTAs: what to expect from their new adaptive strategies

Should we reinforce our direct channels of distribution or rely on intermediaries?

By Bogdan Romashko, Chief Marketing Officer at HotelFriend AG

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Online Travel Agencies have always been a subject for debates among hoteliers. Should we reinforce our direct channels of distribution or rely on intermediaries? In general, there is no universal answer to that question. But when the pandemic struck the hospitality industry, many hotels started to get together to oppose the OTAs.

There are several reasons for that matter. First, hoteliers have always felt the pressure by paying commissions. Such giants as Booking and Expedia continued to dominate on the market, leaving no other choice. And during the current crisis, the hotels have a great need in this money.

Second, the miscommunication at the start of the global shutdown wave made it even worse. When Booking.com introduced forced cancellations and announced that hotels will refund non-refundable rates as well, everyone was shocked. This move gave hoteliers an impression, that if you collaborate with OTAs, you do not have full control over your business.

But the peak time of the COVID-19 was harsh for everyone. Even the biggest companies experienced significant losses. The mistakes are inevitable in these circumstances, and collaboration is our only viable solution.

Today we are going to tell you why, despite everything, working with OTAs is necessary in the post-pandemic world.

Hotels vs OTAs: the lost battle

You may have heard about the Room Key project. Launched in 2012, it is supposed to be the alternative to the famous OTAs. Such household names as Marriott, Hyatt, Hilton, and others brought their resources together to prove their independence. The main idea was that Room Key would charge lower fees and give a link to make a booking directly on the site. Sounds promising, however, the result was a complete failure.

What were the reasons for this failure? First and foremost - a mad competition. They needed to stimulate high rates of traffic and conversion from the very first day in order to succeed. However, this is quite a challenging task, noting that their objective was to compete with the best of the best.

Another problem was a selfish purpose for creating this project. Let us be honest, the main motivation for all of that was saving money, not creating something unique and valuable for the clients. The prove is their site, which constantly bombards users with pop-up ads. Choosing this against the convenience of the guests is the main marker of false priorities.

In addition, it was the lack of resources and competence. According to PhocusWire, Booking Holding and Expedia Group have spent together more than $11 billion on advertising in 2019. This is a huge sum, which no hotel can cover even in collaboration with the partners. And such big investment was worth it, since Booking.com, for instance, has more than 500 million visitors per month.

And, finally, you cannot expect to build a really great product in a short timespan. It is not only expensive but also requires a big team of professionals. To match the expectations of a modern user, just making and promoting a website is not enough. It must also include state-of-the-art technologies, e.g. Machine Learning.

Creating such a complex project from scratch may take years of hard work. And still, famous OTAs will always have resources to be the first to implement the newest features. This makes catching up with them almost impossible! Should you try to do it? Well, taking into account the unsuccessful Room Key experiment, we would definitely not recommend it.

The OTAs in the post-pandemic world

The COVID-19 is the most devastating event that happened to hospitality since 9/11 and the SARS pandemic. Nevertheless, the whole community believes that the tourism sector will swing back to normal soon. But this "normal" will never be the same as before.

For example, recent events have proved that an incredibly wide range of actions can be done online. This "digital revolution" had an enormous influence on the customers' buying behavior. In the post-pandemic world, they will do much more window shopping. They will be comparing prices across OTAs, looking for the best bargain online. And since social distancing is the part of a "new normal", the in-store agencies may experience a huge decline.

After a long period of self-isolation, people crave traveling. At least domestic. Their increasing urge to change the scenery is bigger than ever. The reason for this is the same old Fear Of Missing Out. The inability to travel results in impulsive bookings whenever the opportunity arises. Even though the customers are more cautious than ever. And it is much more likely that they will make an impulsive booking with convenient mobile apps, kindly provided by OTAs.

The combination of these tendencies creates favorable conditions for the future of Online Travel Agencies. Even though the wave of cancellations was devastating for them, OTAs still possess a great share of the market. And thus, we can make even more optimistic forecasts for these distribution channels.

Some other changes to expect

However, what changes can we expect in their strategy? OTAs have become an indispensable tool for room distribution, but now they also have to compete for survival.

Here are several predictions on their further actions:

  • They will emphasize on the cleaning standards

Nowadays, safety is more valuable than any set of fancy amenities in the hotel. Customers want to be sure that the place where they decided to stay meets all official requirements. To stimulate more bookings, the OTAs are to rank the hotels with a big cleanliness score higher than others. Positive travelers' reviews will also play a significant role in this matter.

The hotel with certificates and marketing badges may be also among the winners in this race. And if OTAs follow this path, they will gain much more trust than Airbnb. Since the latter does not have an opportunity to ensure users that the available accommodation is safe.

  • They will offer more hotels in local destinations

Another smart move that OTAs may possibly make is promoting local traveling. Taking into account traveling restrictions, the clients will mainly focus on the destinations close to their homes. This is cheaper, and thus, this kind of trip is easier to organize.

Since outdoor activities are gaining popularity, the hotels which offer them will be on top of the list. Hiking, cycling, horse riding - all similar activities are fun and relatively safe to practice. And this can be an effective revenue stream nowadays!

  • They will try to cover new fields

The OTAs have been focused solely on accommodation for quite a long time. But now is a suitable time to experiment with the new formats. There are so many other options to pay attention to, including the food and beverage sector, theme parks, etc. Offering packages for a short weekend trip may also prove beneficial in the new realities.

So what should hoteliers do?

As the practice shows, aiming for the competition with OTAs is pointless. The only viable solution is to cooperate with them and encourage direct bookings at the same time. The more distribution channels there are at your disposal, the better!

Online Travel Agencies spend a lot of resources on marketing and UX, and this has a huge impact on your hotel's promotion. They are popular among users since there are both mobile and desktop versions available. And the ability to easily book a hotel at any time and place makes a solid ground for the growth of their influence.

But to make this happen, you need a smart technological solution. The best option is to use a Channel Manager. It will help you to control the unlimited number of online distribution channels at the same time. Integrated with your PMS, it will protect your business from overbooking and keep all prices up-to-date. It is a great tool to save your time and resources so that you can focus more on your customers.

If you want to improve your ranking on the OTAs lists, do not forget to adapt the hotel to your guests' needs. Show that you really care about cleanliness and safety on the premises. Arrange more outdoor activities and offer special packages for weekends.

Finally, go with the flow and invest in technologies. Besides, right now hoteliers from Germany can get financing thanks to the "Digital Now" funding program. With HotelFriend help, hospitality businesses can receive up to € 50,000 for 4 years. The program is aimed at both helping hotels in advancing the digitization and overcoming the negative impacts of the COVID-19 pandemic. This is the only possible way to stay afloat during times of instability and the digital revolution.

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Bogdan Romashko

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    HotelFriend is a global provider of business software with offices across Europe. The company specializes in R&D in the travel and hospitality sectors, cloud computing, e-commerce, CRM, ERP, and the development of mobile and desktop apps.

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