OTA penetration fell drastically during COVID-19 as travelers reached out directly to suppliers to allay safety concerns. But, as we return to the new normal, initial indications are that OTAs are regaining their dominant position within travel distribution.

The question is: Is this a certainty, and what can hotels do to retain their newfound market Share?

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Max Starkov
Max Starkov
Hospitality & Online Travel Tech Consultant

Did OTA penetration fall drastically during COVID-19? I am not sure where this notion comes from, since PhocusWright reported that 50% of U.S. gross online hotel bookings in 2021 came from OTAs vs 49% in 2019. In Europe the OTA contribution is even higher, due to the lower market share of branded properties, known to enjoy much lower OTA exposure.

I believe the notion that the OTAs have lost or are losing market share is simply wishful thinking and here is why.

The OTAs amassed huge loyalty programs

Booking and Expedia used the pandemic to overhaul their loyalty programs by investing heavily in technology, talent and sales efforts. Expedia consolidated its three loyalty programs (Expedia, Hotels..com, Orbitz) into one single program and technology program, and now boasts over 155 million members. Booking..com's Genius loyalty program has similar membership count. Member discounts are available to all Genius members at over 390,000 participating properties around the world. Genius Level 1 members enjoy discounts up to 10%, Level 2 - up to 15% and Level 3 - up to 20%.

Who provides these discounts? Hoteliers, of course, all 390,000 of them, discounts which are in addition to the OTA commission they pay Booking..com.

Why is all this important? A loyalty or guest appreciation program means repeat business! Most importantly, do you see any of these 300 million+ members of the OTA loyalty programs to book directly with a hotel? I don't.

How many independent hotels have a CRM technology and any loyalty or guest recognition program in place? Less than 10%! This explains why, on any given night, only 10%-15% of roomnights at independents are from repeat guests. In the post-pandemic, repeat business will make or break a hotel. Repeat guests already know the property location, the hotel product and value proposition and are 5-15 times cheaper to acquire compared to new guests.

You cannot increase your repeat business without CRM technology and program in place. Only a meaningful CRM technology application - as part of your hotel tech stack - can ensure deep engagement with your past and future guests. CRM tech not only provides automated pre-, during- and post-stay communications, guest satisfaction surveys, guest retention marketing automation and drip marketing campaigns, but takes it a step further via guest recognition program management and loyalty marketing. All of these fully automated CRM initiatives keep “the conversation going” with your upcoming and past guests, keep them engaged and steer them in the right direction: to book your hotel when it's time for them to visit your destination again. In addition, you can use your CRM first party data about your best guests to launch similar audiences marketing on Google, Facebook, Instagram, etc. to target potential customers with similar characteristics as your best guests.

In my view, post-crisis developers, owners and managers will flock in droves to the major chains, attracted by their deep pockets, ability to implement safety and cleanliness protocols, huge loyalty programs able to generate 58%-62% of room nights, dominance in the corporate travel and group markets, comprehensive technology stack, expertise in maintaining and increasing occupancy and RevPARs in post-crisis, unparalleled direct channel distribution, 2x lower OTA commissions and 3x-4x lower dependency on the OTAs.

The OTAs never stopped investing in marketing

In 2021, a full pandemic year, Expedia spent nearly 45.8% of net revenues on marketing, resulting in marketing spend of $3.9 billion in marketing presence. Booking Group reported it spent $3.8 billion on marketing in 2021, out of revenue of $11 billion i.e. 35%.

How about hoteliers? In “normal” years like 2019, hotels spend on marketing less than 2.5% of net room revenue. STR/CoStar recently released some troubling data, clearly showing that marketing spending in U.S. hospitality during the pandemic shrank significantly compared to 2019, dropping to as low as 50% in 2020 and rebounding slightly to 54% in 2021 of the pre-pandemic level. In other words, hoteliers spent on marketing 1.35% of net room revenue (54% of 2,5%).

Similar is the situation in technology investments. STR/CoStar data clearly shows that IT spending in U.S. hospitality has declined significantly throughout the pandemic to an average 50% level, compared to before the crisis.

Hoteliers' marketing and technology spending in Europe and APAC is even worse than in North America.

Already OTA vs Direct online distribution ratio at independent hotels is negative 3:1 to 4:1. Compare this to chain hotels' positive 1:2 to 1:3 ratio. Plus independents pay 2x to 3x higher OTA commissions + loyalty members discounts vs branded hotels.

Independents are already falling behind in the adoption of best practices in revenue management, CRM, digital and brand marketing and technology applications, crucial to service the tech-savvy and digitally-obsessed travel consumers: next gen technology applications like AI-powered RMS, CRM, chatbots, IoT devices, guest-facing applications such as guest messaging, issue resolution, virtual concierge, mobile check-in and self-serving kiosks, etc.

With all the lingering repercussions in hospitality from the pandemic, I do not expect hoteliers, all of a sudden, to double their marketing and technology spend in 2022.

The OTAs are benefiting from the accelerated digital transformation

The pandemic accelerated digital transformation by 10 years (McKinsey & Company) and today's travel consumers have become even more digitally-savvy than ever. Because of the shelter-at-home mandates around the world, the vast majority of the population - even late adopters - were forced to use online services to communicate and work or study remotely, search for news or information, purchase goods and services, order food, communicate with friends and family, watch streaming services and entertain themselves.

This “online planning and purchasing education” has created millions of converts and believers in online travel planning and booking, which will benefit the OTAs immensely, since they are investing billions in marketing to reach and engage these new audiences.

How about hoteliers taking advantage of this new crop of digital converts? Unfortunately, our industry is vastly unprepared for this new digital reality. Most hotels are desperately lagging behind as far as digital marketing and technology are concerned: knowledge, investments and talent. A huge gap exists today between hospitality industry's digital and technology preparedness and customer's expectations, due to systemic underinvestment in technology and digitization in our industry.

Many hospitality owners and managers are lacking the education in or knowledge of hospitality technology and digital marketing, and even the motivation and will to learn about the latest innovations, trends and best practices.


Unless hoteliers somehow overcome their systemic underinvestment in technology and marketing, I am afraid the OTAs will continue to gain market share in the post-pandemic era. Contrary to some hoteliers' wishful thinking, I believe the OTAs will (once again!) emerge stronger after two years of pandemic, similar to all of the previous crisis and calamities: 9/11, SARS, MERS, the recession, ZIKA, H1N1, etc.

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