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Is OTA competitive viability waning? By Mike Parker-Brown, Industry Reporter
Having bounced back strongly from previous crises, the financial crisis of 2007 to 2008 and the impact of 9/11 to name just two, online travel agents’ (OTAs) competitive position and outlook has shifted and is now looking very different in the postCOVID environment. According to travel industry intelligence platform, Skift, OTAs have recovered robustly in the past, their revival fuelled by hotels needing them to help secure bookings, but as 2022 and life in the new normal gathers momentum, that scenario has changed. In his report, Skift senior research analyst, Seth Borko said in the current environment, hotels have maintained pricing power, and average daily rates (ADRs) are nearly 90 percent recovered. The result of that, he said, is that OTAs’ reputation for discounting has suffered as hotel direct bookings come with lower rates, and customers have more to spend.
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“This time, during the pandemic, the OTAs aren’t getting the same lift they did after past crises,” he said.
direct bookings have diminished, Mr Borko warned that channel wars are coming back in the next few years.
outset, at a minimum enabling commission free upsells which subsequently increases the profitability of the hotel.”
“Although they are recovering quite fast, it has not been quite the boon to OTAs that many thought it might have been, because it wasn’t quite a repeat of the last two crises.”
“In other words, as online travel agencies try to regain their profit momentum, hotels won’t sit idly by in the contest for travellers’ eyeballs,” he said.
Ms Johnston said the rise of Google Hotels has already had a massive impact and has quickly become a prominent booking channel, the platform providing the comparison that the consumer is looking for with an abundance of accommodation options at a glance.
Mr Borko said the OTAs’ gross bookings and commissions have largely recovered relative to pre-pandemic 2019, setting themselves up to make gains. “The problem is on the cost side, they’ve driven themselves into a huge hole on profitability,” he said. “While revenue is coming back, earnings before interest, taxes, depreciation and amortisation and other profits are not coming back as quickly and OTAs margin levels won’t respond as quickly as gross bookings have.” The Skift report went on to say hotels chains such as Marriott and Hilton were very aggressive in pushing direct booking campaigns from 2017 to 2019 which Expedia countered to a degree, downgrading branded properties in favour of independents. Although the hotels’ frequent TV and other brand advertising of recent years promoting
HiRUM Software Solutions senior analyst, Sylvia Johnston said the industry shouldn’t expect a huge crisis bounce back for OTAs this time around. She said while hotels have in the past relied on OTAs to fill their rooms, alternatives in the marketplace have provided a significant shift towards direct bookings. The impact of COVID and changes in booking technology, she said, along with the rise of some very formidable competition such as Google Hotels, has created dramatic changes to the OTA landscape.
Additionally, it also offers the opportunity to book direct whilst still comparing pricing across all the available channels. “Those properties with a direct listing on Google Hotels are doing exceptionally well in overall direct bookings,” she said. “When googling for accommodation, consumers are now able to find the property’s own booking form, front and centre on page one.
“Hotels now have the opportunity to reduce their reliance on traditional OTAs to secure bookings, with the benefit of these bookings essentially being ‘Direct’ bookings, albeit via Google Hotels,” she said.
“Offering a risk- free opportunity for bookings made via Google Hotels, consumers feel confident they are dealing directly with the supplier, without the need to navigate or communicate via a third-party OTA.
“Whilst these bookings still come at a cost, the hotel is now able to communicate directly with the guest from the
“Through HiSITE, we’ve seen the dramatic growth in this channel month on month and it is definitely one to watch out for.
MANAGEMENT
ResortNews | March 2022
