Finance

Hotels should continue reducing unnecessary rate leakage because it protects pricing integrity, strengthens partner relationships and improves profitability. But pursuing absolute zero leakage is increasingly unrealistic in a fragmented global distribution ecosystem.

Zero rate leakage is a bit of a fantasy: a room that never appears cheaper elsewhere.Distribution is a network. A room moves from hotel to wholesaler to bedbank to affiliate to OTA, and every layer that is added also removes visibility.

Asking whether hoteliers should stop chasing rate leakage suggests accepting contract breaches as a routine cost of doing business. The issue isn't technological complexity or API caching—it is a direct breach of written commercial agreements.Historically, wholesale rates resided in printed brochures as opaque, bundled packages—a volume trade-off generating incremental demand without exposing room pricing.What changed?

Visa Destinations is an interesting development, but it's too early to call it a major shift in hotel distribution. Visa has huge global reach through its billions of payment cards, giving it the potential to become a significant travel booking platform.

I wrote some time back about the emergence of banking as a genuine alternative to traditional distribution and their depth of customer intelligence as compared to other business types competing for the same customer.It’s a mistake to look at this strictly through the lens of Visa's direct customer relationships or draw parallels to Amazon's travel missteps.

Visa's 4.3 billion cards in circulation miss something AMEX has: an aspirational brand cardholders actively choose because of what it says about them.That distinction matters more than scale here. Amex built travel credibility over decades with their concierge desks, Centurion Lounges, curated hotel collections...

The most significant impact might not be operational, but psychological. Why? Because it's the hotel industry's fault. Let me explain:For years, hotels have trained guests to treat bookings as placeholders: reserve today, decide later.

In my view, the Full Prepayment Model is not the future of hospitality. While full prepayment has been practiced for decades for charter vacations, extended beach vacations and unique experiences like safari tours, it’s definitely not user friendly as far as plain hotel bookings are concerned. Merchant bookings - fully prepaid bookings - at both Expedia and Booking now represent over 70% of the total gross bookings. Improved cash flow, controlling the price the customer pays, opportunities to bundle hotel stays with air, transportation and experiences are some of the reasons for the OTA preferences of the merchant model.

The biggest impact of full prepayment is that booking a hotel becomes a much bigger commitment for guests.Hotels benefit from fewer cancellations, better cash flow, and more predictable occupancy.But guests may book less often or take longer to decide because they must pay upfront.Trusted brands like Marriott International and Booking.com may benefit most, while smaller hotels could struggle more with guest trust.BNPL services may become very important because they make upfront payment feel more flexible and less risky.

In many ways I look at this as an extension of Expedia. I suppose another clip on the ticket on the way through, which I can only imagine will make an Uber hotel booking more expensive.Is more distribution opportunities a good thing?

The big winner here is Expedia, adding another marquee player to its affiliate network. Uber will join other significant affiliates of Expedia, together with Chase Travel, Walmart Plus Travel and numerous airlines, tour operators, cruise lines, etc.

For hotels already locked into aggressive distribution deals with Expedia, this is a warning signal, as it reinforces intermediary power at precisely the moment the industry has spent years trying to rebuild the direct guest relationship.

The Cloudbeds data is striking, but let’s be honest — a 21.8% OTA cancellation rate isn’t just a distribution problem. It’s a relationship problem. OTA bookers aren’t disloyal by nature; they’re simply responding rationally to a system that hotels helped create. When a guest can book a hotel through five channels and find five slightly different prices, they begin to treat their reservation like a placeholder, not a commitment.

What can hotels do to decrease their cancellation rates? Maintain Rate Parity! If travelers find a lower rate for your hotel on the OTAs, they can cancel their direct booking and be tempted to book your hotel on the OTA or be lured away by a competitor with lower rate or better value. Maintain Market Parity!

High cancellation rates – particularly for OTA bookings – are a growing challenge for hotels. They make planning harder, put pressure on rates, and often lead to last‑minute discounting that hurts overall performance.

This stage of AI evolution is not just predictable, it was inevitable as it addresses the very natural consumer expectation to be able to complete the transaction within the same app without having to click out. UCP in itself is not the biggest disruptor (AI search is).

Google's Universal Commerce Protocol (UCP) absolutely could pave the way for a meaningful shift in hotel distribution in the next 24-36 months. Its impact will depend heavily on both technological readiness and traveler adoption.

There's a significant gap between what's technically possible and what consumers will actually adopt, especially for high-involvement decisions like hotel bookings. For commodity purchases (cables, everyday items), delegating the entire process to an AI agent makes sense, but hotel bookings for holidays is a different story.

This is a pivotal shift. The issue is no longer which channels we use, but who controls the guest narrative and the data behind it. Hotels will not win by fighting OTAs on scale or ad spend. We win by aligning revenue, marketing, and sales around a single guest intelligence strategy using data to drive relevance, not just reach.

OpenAI, Google and Perplexity will reshape this landscape again. Nobody knows how exactly but 2 years from now the picture will be very different.

Stop playing the OTA game—change the game with the product. Yes, third parties are taking control of search, booking flows, and traveler data—but copying their playbook won't reclaim the guest relationship. If you try to "out-CRM" Expedia or "out-loyalty" Airbnb, you're choosing a scale game you can't win.

Hotels don't need another mega OTA, rather, they need partners who create real value. Airbnb's shift into hotels is less innovation and more defense. With Booking.com dominating STR volume and commissions rising, Airbnb is simply repositioning to stay competitive.

To be fair, one could argue Airbnb has already been functioning as an OTA for years. It facilitates transactions, controls the marketplace, shapes pricing behavior, and now they are onboarding more hotels and aligning its commission structure.

I believe we're at the point where it really doesn't matter anymore how many OTAs we have. It's gotten so bad for hotels that it almost can't get any worse — and it barely matters which one of them is draining our margins or taking over our guests.