How OTA’s erode hotel customer loyalty; There is a paradox in the global hotel industry that has had a paralyzing effect on the hospitality industry. Online travel agencies claim this paradox is a necessary evil. In exchange for services – namely placing vastly reduced room deals in their booking engines – they help clinch more bookings for the hotel.
A destructive relationship between OTA and hotel
But it’s simply not that easy or that symbiotic. OTA booking engines (for they are too vast and powerful to simply be called websites) have achieved a suffocating stranglehold on the hotel industry. Hotels must now rely on them to fill rooms and get enough bookings to survive. But the price is heavy indeed. Rock bottom rates must be offered, coupled with high commissions. OTA’s erode customer loyalty too.
Huge marketing budgets
Online Travel Agencies now have huge marketing budgets and the market stranglehold on the reach to customers. They offer customers (who are remarkably price-savvy) the apparent best deals available. But this is often at the detriment to the hotel that provides the service.
OTA’s argue that they provide hotels with a platform upon which to pitch their ‘best deals’. But this platform has become a double-edged sword as the online travel agencies have risen in power. Hotels are now at the mercy of high commissions and hard sell deals that leave many properties out of pocket. Just recently, the CMA announced a full investigation to the six biggest OTA operating globally.
OTA disruption of customer loyalty programmes
Coupled with this, OTA’s break down the process of customer and brand loyalty, stripping the hotel stay experience down to it’s lowest common denominator – namely price. That means hotels now have to offer increasingly competitive prices on rooms to fill them while paying high commission fees to OTA’s so their deals will be featured.
Not only that, OTA’s take the valuable customer data they collect through their booking engines and fail to share that information with the hotels. As a result, it is the OTA that has the privilege of contacting and wooing the customer once again with the latest deals on offer – and not the hotel that has provided the service. Chances are, there will be other deals on offer and that customers won’t return to the same hotel. Price, rather than stay experience dictates the choice of the traveler.
‘Naked’ deals destroying price expectation
But it’s not this simple either. There are other factors at play. Hotel deal packages which are supposed to be combined with airfare and car rental rates are being touted as naked deals by some leading OTA’s. These so-called naked deals result in the hotels being forced to offer unfeasibly low prices without the benefits of the collaborating deal with air and car rental packages.
Damaging OTA practices
In short, the relationship between OTA’s and hotels could be likened to an unhappy and almost abusive relationship, where one party takes the best and most one partner can provide and gives very little in return for the privilege. Very often, the collaboration can be damaging for the hotel partner, as they are forced to pay high commission fees to feature prominently on the OTA booking engine. Yet, the gratification of the booking is short lived as the customer data is withheld by the OTA and won’t be sustaining unless more commissioning fees are paid to keep the deal in prominent view.
This unfortunate relationship pitches hotels against hotels in an ever-decreasing spiral of price wars. Customers are wooed and won via a booking engine rather than on the level of service or customer loyalty.
With price-savvy customers now honed to expect rock bottom prices, the ‘naked’ deal becomes the expected deal. All too often, a visit to the hotel’s own website will result in the potential guest bouncing away from that site, and onto an OTA booking engine instead. In the booking engine, they will undoubtedly find the stripped back deals that cost far less. The next time they search, they return not to the hotel website, but to the booking engine once again. And the hotel loses out.
Roomolo offers a future without OTA’s
The only way to circumvent this damaging price war stasis is to cut out the OTAs. Hoteliers globally should focus on a fairer way to offer customers great deals without paralyzing the hospitality industry. This is the goal of Roomolo, our principles are to provide hotels with a successful and world-class way to reach new customers, without sky high and crippling commission fees.