Are hotels getting ready to give the online travel agencies the boot? | TravelResearchOnline

Are hotels getting ready to give the online travel agencies the boot?

The think I like most about an unstructured conversation is that you never know where it will lead. After a late brunch the day after St. Paddy’s Day, I was shooting the breeze with the General Manager of a small chain of independent hotels about business in general. Of course, I am always interested in how other parts of the industry are doing and asked a simple question–“So what are your biggest challenges today?” It was somewhat of a mundane question and I expected to hear the tales of lower than ideal occupancy, lower yield due to the economy or something equally as mundane as the question. The answer I got surprised me.

“We need to find a way to take more business away from the online travel agencies.”

Wow. Normally, those would be fighting words since I often feel I am in the same classification as the online agencies—we are all travel agents. So I pried some more and learned a few things.

Volume Counts

She told me that for each booking made via an online agency cost their hotels 25%. Now I am not sure if that is in pure commission, overrides, or incentives with particular agencies, but that number is significant to the agencies and the hotel. Their business is 30% groups and the remainder transient bookings. Of the transient bookings a whopping 70% to 80% comes from online agencies.  So obviously if you can provide the market share, you can call your own shots. Niche agencies take note: this is a scalable proposition—if you can provide the value, you can be rewarded.

Social Media Muddies The Water

She acknowledged that Trip Advisor was a huge source of business for the hotels in the chain. They realize that in today’s market, you must be on the social bandwagon and playing in the mud. Trip Advisor is a great tool for the transient market for hotels—however, 90% of the referrals from Trip Advisor originate with (wait for it) Expedia, which owns trip advisor. Yes, consumers can go to the site and research and then book by whatever means they like, but Trip Advisor makes it very easy to book through Expedia—which is a well-known and trusted brand.  Of course, if the hotel would like to have a direct link on Trip Advisor, there is a $4,500 per year program available. Expedia has the lock on Trip Advisor.

SEO Is King

So, they are paying to play with Trip Advisor and now have a direct link on their profile and are hoping it is attractive enough for consumers to book directly and not use the Trip Advisor/Expedia links.  But they are also investing in local SEO and local marketing to bring their brands as high as possible. Included in their budget is simple textual ad placement on various websites—including travel agencies.

The Goal

When I asked where they wanted to be in a year, she said that currently, only 30% of their transient bookings come from their own website (for those following the math, that leave 10% from other sources—calling direct, non-online travel agencies, etc.) and they want that to be a minimum of 50%. And the interesting part is that they are willing to spend up to that magical 25% (that they are paying for OTA bookings) to do it. They felt they have lost control over their own business to a degree.

So, what does this mean to today’s non-online travel agent? There is opportunity available for you. I can’t believe that this hotel is alone. Look at your business and see if you can find some of your more popular destinations and properties and make a phone call—see if you can strike your own deal. Also, keep an eye out for changes and opportunities in the online travel agency/hotel relationship and see if you can use them to your advantage.  And while you may never be able to get 25% commission, if it makes sense, perhaps consider allowing some select hotels the opportunity to place ads on your website where you can earn ad revenue and a commission.  There are changes afoot. It is time to think a little differently.

  2 thoughts on “Are hotels getting ready to give the online travel agencies the boot?

  1. Good article, John! Continuing on, I sure do not understand why the cruise lines don’t put an end to the speculative bookings. A lot of big cruise only agencies book huge amounts of speculative space. If prices on the cruise lines’ web sites go up, these agencies make a fortune. If the cruise lines drop their prices, the agencies just cancel their group space and lose nothing. The cruise lines are playing a game they can not win – – except by only permitting space to be blocked for 30 days maximum!!

  2. John Frenaye says:

    Interesting. I do not personally do a lot of group cruises but that makes a LOT of sense!

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