Independents scrutinize OTA relationships
17 DECEMBER 2015 9:26 AM
Following a year of OTA consolidation and changes, independent hoteliers are looking closely at what benefits and challenges OTA partnerships bring to the table and how to prepare for what’s coming next.
REPORT FROM THE U.S.—In a year fraught with consolidation in the online-travel-agency space, punctuated by some players rising to the top (Expedia’s purchase of Orbitz) while others exited the scene altogether (Amazon Destinations), independent hoteliers are carefully weighing their options moving forward regarding involvement with OTAs.
In general, some independent hoteliers said via email interviews that 2015’s heavy consolidation activity has caused them to pay closer attention to the terms of their OTA partnerships and look internally to evaluate the best way to create optimal distribution mix moving forward.
One positive that has come out of 2015’s merger madness is that in most cases, independent hoteliers have fewer points of contact to deal with, making the landscape a little easier to manage.
“One of the benefits of consolidation is that it has allowed us to really focus our strategy, efforts and marketing with the two main partners, Expedia and Priceline Group,” said Leslie Lew, corporate director of revenue management for Provenance Hotels. “There is value in reducing the number of partners and the communication layers in order to increase speed-to-market efforts and see more immediate results.”
Wendy Norris, corporate director of revenue and e-commerce for Valencia Hotel Group, agreed that the company’s relationships have become a bit easier to manage since the consolidations, with fewer market managers in the mix to deal with.
What happens next
While none of the independent hoteliers interviewed for this story could talk about commission changes with their OTA partners, they had some differing views on the overall benefits consolidation will have on the industry.
“It’s a reality, and ultimately good for the industry, (since) hoteliers are able to focus on the primary players,” Lew said. “Consolidation streamlines the administration, increases the value and impact of OTA marketing and makes it easier to do business.”
Norris, however, said she’s not convinced consolidation is good for the business—a sentiment echoed by Anna Marie Presutti, VP and GM of the 532-room independent Hotel Nikko San Francisco.
“We believe in the benefits that all consumers receive when there is a competitive marketplace, and consolidation eliminates or minimizes that competition, hurting the end consumers, specifically our guests,” Presutti said.
At the same time, Presutti said she doesn’t expect this year’s consolidations to have much of a net positive or negative effect on the hotel’s OTA business in general.
“The volume of business through those distribution channels is more dependent on our market mix strategy and the economy,” she said.
Norris said Valencia Group’s main strategy dealing with OTA impact in 2016 is to continue to push hotel-direct bookings. The company has five independent properties open in Texas, California and Missouri.
However, that initiative can be hampered by OTA pay-per-click ads, Norris cautioned.
“We are working on trying to get our customers to book with us directly,” she said. “Unfortunately, quite a few of our customers believe they are booking with the hotel direct due to pay-per-click ads and market messaging the OTAs are using when searching for our brand terms.”
She said the company is trying to negotiate with OTAs during the next contract period to eliminate this problem.
Lew said Provenance’s overall OTA business volume will likely stay the same in 2016, but the contribution mix will change “to optimize the net return and cost of acquisition,” he said. “Most importantly, the placement of OTA business is critical to match production and business need.”
Provenance owns and/or manages 12 hotels, 11 of them independent, in the Pacific Northwest, and Lew said the company’s goal to be cutting-edge translates to its OTA relationships as well.
“We don’t have the time to pursue every new OTA that is promising a lower cost of acquisition, but we look for emerging like-minded tech partners that can disrupt online distribution,” he said. “Provenance looks to be an early adopter of an emerging platform that can grow and show potential.”
To that end, he said the company had been an early partner of the now-defunct Amazon Destinations platform, which shut down operations in October. He said Provenance had been hopeful that Amazon’s e-commerce expertise could have made it “the third meaningful OTA company,” but even though it didn’t work out, the company is “always on the lookout for who might be the next big player in the market segment.”
Instant booking pros and cons
Norris, Lew and Presutti had differing opinions on the impact of instant booking channels from TripAdvisor and Google, and the effect they have on their specific business.
For Presutti, it’s all about margins. “Anything that lowers margins is better for our guests,” she said.
Norris said Valencia has only dabbled in these channels, with no great success. “These types of bookings are still costing the hotels quite a bit of money,” she said.
But Lew said instant booking platforms can have value now and in the future, in large part because of the e-commerce model they bring to the table.
“Google brings minimal click conversion, incredibly rich customer profiles and automatic payment to the table,” he said. “This feature is undervalued today but will become more impactful as digital payment and minimal click booking become the standard.”
Norris said that as consumer mindsets around travel change, the OTA landscape gets more challenging.
“The OTAs were founded on the principle that their consumers were not aware of our properties and we would get the ‘billboard effect,’” she said. “This has changed, and consumers believe the only place they can book and get the best value is on OTA websites.”
Norris said the industry at large needs to shift the conversation to direct bookings.
“I am hopeful with the (planned) Marriott/Starwood acquisition there will be some changes coming in distribution with the chains,” she said. “Until the ‘big’ chains make a move, the independent hotels have to hold tight and continue to try to get consumers to buy direct.”
Lew, on the other hand, said the hotel industry can learn a thing or two from OTAs, particularly when it comes to e-commerce.
“The e-commerce guest experience continues to evolve and improve at hyper speed while the digital hotel booking experience lags behind,” he said. “Technologies like Amazon’s One-Click, Uber’s Rush product delivery system and GoButler’s on-demand service highlight just how clunky and time consuming the hotel booking experience is today.
“As an industry, we are far from best in class when it comes to e-commerce.”
Correction, 17 December 2015: An earlier version of this story used the incorrect pronoun for Leslie Lew on subsequent references.