By Chris Crenshaw and Alex Smith
REPORT FROM THE U.S.—The “Distribution Channel Analysis” study, recently published by the Hospitality Sales and Marketing Association International Foundation and based partially on data provided by STR, shows demand share contributed to the U.S. hotel industry from online travel agents to be 10.7%. This sounds like a relatively small amount of demand compared to the whole channel strategy that each hotel has to manage, especially in light of how much attention this topic gets.
When peeling back the layers and looking deeper into the data, it becomes clear why OTA demand continues to be such a hotly debated topic. There are very few hotels that fall on the average. The majority of hotels are below the average, and a small number of hotels are significantly above the average.
First, a look at the industry (Chart 1): When looking at the number of properties that reach each level of demand, it is clear that for many of the hotels in the industry the OTA demand is low. Nearly half of the roughly 24,000 hotels studied (41.9%) draw 5% or less of their total demand from OTAs. Another 15.4% of hotels are under the 7.5% mark. In total, 57.3% of hotels in the U.S. receive less than 7.5% of their roomnights from OTAs.
But on the other end of the spectrum, some hotels have as much as 90% of their total rooms booked through OTA channels. Slightly more than 15% of properties in the U.S. draw 20% or more of total demand from OTAs; 5.3% of U.S. hotels (approximately 1,300 properties) draw 30% or more of total demand from OTAs.
And that last line on the chart? There are 350 U.S. hotels (1.5%) that have more than 50% of their mix coming from the OTAs.
(A note on reading the histogram charts: The bars are a measure of the number of properties that fall into the demand percent at or below the number bins along the bottom axis. For example, the far left bar on Chart 1 indicates that approximately 4,500 properties have 0% to 2.5% of their room nights coming from OTAs. The second bar shows that 5,400 properties have between 2.5% and 5% of their demand coming from OTAs.)
Let’s break down the data further. When looking at what hotel types tends to book more through the OTA channels, it becomes clear that the OTAs tend to sell more for hotels that are leisure-driven.
When the data is broken down into resort and non-resort properties (Charts 2 and 3), two very distinct stories emerge. Forty-three percent of non-resort properties distribute less than 5% of their rooms through the OTAs while 44% of resort properties distribute up to 10% of their rooms through the OTAs. The lowest bin, those selling 2.5% of their rooms or less through OTAs, comprise 7.5% for resorts and 20% for non-resorts—a striking difference. Another interesting number is the 25% of non-resorts that fall between 2.5% and 5% in OTA demand mix.
Here again, there are very interesting numbers at the top end of the scale. For non-resort properties, 31.3% are above 10% OTA mix while 56% of resort properties are above 10% OTA mix. Five percent of non-resorts are at or above 30%, and 5% of resorts are above 50%.
Clearly resorts rely much more heavily on OTAs. This makes sense as OTAs allow travelers to look at all options for leisure travel (hotel, air, car, etc.)
When looking at chain scales (Chart 4), the least reliant on the OTA channel is the upper midscale (81% at or below 10% channel mix) and upscale (79% at or below 10% channel mix). On the other end (Chart 5), the most OTA-reliant segments are economy (44.5% above 10% channel mix) and independents (48.6% above 10% channel mix). Luxury hotels had a full 25% of properties with less than 2.5% OTA demand mix.
Lastly, we looked at the top 10 cities in terms of OTA demand. A few really jumped out: Atlanta (Chart 6) had the most hotels with the lowest average OTA mix—60% of properties below 7.5% of mix. New York (Chart 7) had the most hotels (77%) drawing more than 7.5% of total room demand from OTAs. Orlando (Chart 8) had the most hotels with more than 50% of their mix coming from OTAs (19 properties, or 8%). Dallas (Chart 9) had the largest number of hotels that had 2.5% or less OTA mix (17.4%).
Overall, the takeaways remain the same as what was illustrated by the authors of the “Distribution Channel Analysis”: There is no one answer for what the correct mix from OTAs should be. However, there is a correct answer for each hotel. Factors such as hotel type, location, scale, group/transient mix, etc., need to be taken into consideration. The question of how much business to allot the OTA channel is not the starting point of the analysis.