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The benefits of using OTAs
January 31 2011

OTAs—how do we love thee? Let us count the ways.

Highlights
  • An Expedia official questions why some hoteliers are hesitant to use OTAs.
  • Diversifying a property’s guest base is a key OTA benefit.
  • There is evidence that the presence of OTA sites can lead consumers to book directly on a brand site.

Melissa Maher understands there are people in the hotel industry who don’t have kind words to say about online travel agencies. But OTAs do serve a useful role, Expedia’s VP of global strategic accounts and industry relations said.

“Why wouldn’t you use an online travel agent?” she asked. “My pitch would be, why exclude them, because there are significant revenue opportunities?”

Del Ross, VP of United States sales and marketing at InterContinental Hotels Group, was quick to tout the usefulness of OTAs.

“We certainly value our relationship with OTAs and feel they play an important role in influencing consumer choice,” Ross said. “They are definitely a part of our distribution strategy, and they always will be.” Ross declined to quantify how big a role OTAs play in driving business for IHG.

Increasing revenue is but one benefit of using OTAs. Following are five other ways that OTAs positively influence the hotel industry:

1. Occupancy boost. Obviously, driving occupancy is one key benefit of OTAs.

Mark De Intinis, GM of the Cambria Suites Pittsburgh, said this can be especially helpful in downtrodden markets.

“In Pittsburgh, the demand pie hasn’t got much bigger,” he said, “so we have to capitalize when we can find another source of business. There are good partnerships to be made out there.”

Of course, De Intinis and others don’t rely solely on OTAs to get heads in beds. Driving occupancy through these channels requires a strategic balance with other means of distribution.

“We don’t rely as heavily on (OTAs) as some other hotels,” said Craig Campbell, director of sales and marketing at the InterContinental Hotel Cleveland. “They are certainly valid channels; they are a viable option to work with depending on your individual market. We only use them to the extent that we need them.”

 

George Massa, Hilton Worldwide

 

 

2. Introducing new guests. And speaking of guests, OTAs can help diversify a hotel’s client base by delivering new customers who otherwise might not have considered staying at a particular hotel, Expedia’s Maher said.

“Because of our size and global scale … that allows a powerful marketing tool for hotels,” she said. “It’s a reach that (some) hotels can’t get for themselves.”

Ross also stressed the importance for IHG to reach new guests. “It can be a costly channel, but if the customer is a new customer, it’s worth the higher cost.”

The same can be said for markets outside the United States. George Massa, VP of development of Mexico for Hilton Worldwide, said the  company’s hotels in Latin America and the Caribbean gained “substantial” market share because of OTAs.

3. Dynamic packaging. As far as Max Starkov, chief e-business strategist at Hospitality eBusiness Strategies, is concerned, there is only one benefit of using OTAs: dynamic packaging.

The reason OTAs came about was to present meaningful packages to undecided consumers.

“When they combine a hotel with air with car rental with some entertainment, that’s the only benefit that the OTAs bring to the table.

“Unfortunately, this is such a small percentage of the OTA business—all of this is less than 12% (of total booking volume). We need OTAs, but we need them to provide incremental business. … This is the true role of a wholesaler—of a tour operator.”

Richard Millard, president and CEO of Desires Hotels, praised OTAs’ ability to package and market deals.

“The OTAs can do some things we can’t do,” he said. “The OTAs can package other parts of travel, which we can’t do, and their sheer size allows them to have huge marketing clout. I also think their sophistication continues to lead. Even though we all think we’re brilliant, these guys are on the cutting edge.”

4. Personal attention. Those hotels that choose to work with companies such as Expedia aren’t simply throwing their rates out into the dark. Maher said Expedia works with its hotel clients.

 

 

Chris Anderson, Cornell University

Expedia has market managers on the ground in markets across the United States who understand each local hotel market and can use that knowledge to help hotels efficiently drive bookings.

“We can drive last-minute business if a group cancels or get bookings further out,” she said.

5. Direct bookings. There is some evidence that a majority of consumers end up booking on brand websites after comparison shopping with the OTAs. 

Certainly, OTA sites have made their mark on the consumer. In a follow-up to his “billboard effect” study, Cornell University’s Chris Anderson studied approximately 2,000 bookings on IHG.com (i.e. any of InterContinental Hotels Groups’ direct websites) and, using comScore tracking information, was able to track where those consumers had gone previously online. He found that “roughly 62% of IHG.com consumers visited Expedia before booking on IHG.com.

“For each reservation at Expedia, there’s two to three or more that are made at a brand direct channel that are impacted by Expedia,” he said. This behavior is constant across the IHG chain scales, though people tend to spend more time on the OTA as they move up the chain scale.

HotelNewsNow.com editors Jason Q. Freed and Patrick Mayock contributed to this report.

 

 

 

 

COMMENTS   Show All
Martin Soler - Mirarmedia.com
2/13/2011 2:58:00 PM
That 60% of the guest which booked on an official site went via an OTA at some point of the booking process is possibly true, but then we could say 80% of our guests come from Google. It's not quite a fact. Per surveys we've done at WIHP it's rather 20% - which is great too. OTAs are good, unfortunately they are extremely expensive. I wrote a piece about how I shifted from being 80% OTA to about 20% when I was general manager. you can find it on my site at mirarmedia.com Some interesting points in the article though.
Patrick - Xotels
2/4/2011 3:15:00 AM
But how do hotels benefit if the OTA advertise on the hotel name in search engines? Expedia is claiming to add incremental bookings, but this not correspond if the try to convert consumers looking for a specific hotel to book trhough their website. OTA are a valuable distribution tool for sure. But the need to market the destination and not the hotel. We approached Expedia on this practice for our hotels, as they are cooperating on this challenge with the chains. However the said, that they cannot do this for independent hotels. Strange? Incremental Business does not equal Brand Hyjiacking...
Madigan Pratt
1/31/2011 5:24:00 PM
There is no doubt OTAs are a valuable distribution and sales resource for hotels. Some hotels don't get enough business through the OTAa and some have the mix just right. The real problem arises when hotels become addicted to OTAs. Because commissions are hidden many hotels don't even realize how much money they are giving away - the $5.5 billion in leakage that Max talks about. That's why we developed the Hotel-OTA Hidden Cost Calculator - so every hotel can see just how much they are spending on the OTAs. That way they can adjust their mix to get it right. The calculator can be found at MadiganPratt.com/Calculator.
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