FOUR reasons not to book through an OTA: By 2020, it’s estimated that more than 40% of all hotel bookings globally will take place via an online travel agency (OTA). This is very bad news – not only for the hotelier but also for customers too. Read on for FIVE reasons why online travel agencies should not be your first port of call.
OTA’s erode competition
A competitive market is a healthy one. Competition forces contributors to provide not only the best service they can – but also the most cost-effective prices for customers. The more competitors there are, the more innovations and variety there is available. The trouble is that online booking agencies destroy competition. Much like giant supermarkets putting indie traders of business, they have now got a monopoly stake in the market. Only the biggest hotel chains can afford to pay the high commissions and take a hit on their room prices. The smaller chains struggle with that loss and therefore can’t afford to be featured as heavily via the booking agencies. With almost 40% of bookings now made by OTAs and direct bookings on a downward spiral, the chances of many hotel chains going out of business are high. That means less competition in the market and less choice for the customer. This combination is a fail-safe way to see UK hotel service standards slipping.
The OTA is a greedy middle man
Lots of customers think that by using an online booking engine, they are cutting out the middle man – ie, the actual, not virtual, travel agency. This simply isn’t true, because the OTA is a very big middle man, who simply passes the cost of hosting a room/hotel onto the hotel, rather than the customer. The result is that the hotel ends up paying very high commissioning fees to the booking engine. The hotel then has to decrease the room price to ‘sell’ its deal. With so many hotels vying and jostling for position on the OTA booking engine, very often rock-bottom prices mean the hotel loses money on the sale. This is not an equal relationship between sellers, retailers, and buyers. Instead, it creates an unrealistic and unsustainable price expectation for the customer, which in the long term, has a damaging effect on the hotel industry.
OTA’s destroy customer loyalty
Online travel agency booking engines are called booking engines because they are far too big to be described as simply websites. They have extreme and far-reaching power simply because they contain so much content and have been so well marketed that they receive hundreds of thousands of hits per day. By comparison, hotel websites are simply too weedy to compete. The larger chains are able to compete on some level – but individual properties and SME’s literally have no chance. That’s why direct bookings have reduced so much over the past decade. OTA’s provide customers choices relate4d directly to competitive prices, and not experience or personal service. They also retain all customer data, which means when new deals appear, the first email to hit a customer inbox is from an OTA.
OTA’s are bad for customer service
OTA’s don’t only manage hotel stays, but very often air travel and car rentals too. If you opt for a package and your dream holiday doesn’t materialise because one element fails, your options for complaints and compensation fall very short. Added to this, with an unrealistic expectation on price value, customers themselves are inadvertently being led to damage to the hospitality service industry. A hotel running at a loss due to low room rates will be forced to make cuts in the budget somewhere to stay open. Those cuts more than likely will affect guest experiences. Ergo, OTA’s are setting up price expectations that fall short of actual profitability in many cases.