Why online travel agencies are bad for business

Online Travel Agencies or OTAs, have become a necessary part of the hotel and travel industry. Today, many hotels consider giant booking engines to be their highest priority when it comes to generating more bookings. But this is, according to industry experts, bad for business. Unfortunately, OTAs are now an essential part of the guest booking experience, which leaves many hotels struggling to stay afloat in the present climate.

So, what it is about online travel agencies that can be so damaging to the hotel industry? We look at the top five reasons booking engines are bad for business, even when boosting room night sales.

Hotels have a high dependency on OTAs

Booking engines have dominated the online hotel room reservation service. Customers these days have been shaped by online travel agencies to have lower cost expectations. Instead of searching for a hotel via a location and making a direct booking through the hotel website, potential guests often make the booking engine their first port of call. That means direct bookings with hotels have fallen on average to just 50% of business across the hotel industry.

Online Travel Agencies hinder data collection

If a direct booking is made via a hotel’s own online reservation system, valuable data is collected immediately from that guest. Hotels can then decide how they use that data to take measures which encourage repeat bookings. However, when information is taken through an online travel agency, the booking engine keeps most of the data. This means that although the hotel will have the opportunity to collect guest data at some point, it is by no means automated in the same way. The booking engines don’t share their information with hotels either, as to do so would be to loosen their tight grip over this market.

High commissions and costs

Online travel agencies charge hotels high commissions to prioritize their properties. This means that in order to improve booking rates, each property must pay a premium for the privilege. Not only that, but customers have been conditioned to search for the most economical options, so room rates are consistently pushed down. This erodes profit margins for hotels, who routinely take bookings at a loss to keep businesses ticking over.

Online travel agencies erode customer loyalty

The emphasis on price and room rate per area is often the greatest priority for customers searching online booking engines. This means that their guest experience comes second to cost. But it is the guest experience that each hotel offers, and its unique services, which result in guests returning to properties. While hotels can implement ways to collect data, it’s a now commonly a method that starts on the back foot. Ultimately, a room booked via a booking engine will be lower in cost than the direct booking. This means the guest has a price point and may not return if that is breached.

Online travel agencies dominate the net

Booking engine giants have massive advertising budgets. They have extremely well implemented SEO and marketing strategies. Therefore, they are the first travel option to be ranked when searched for in search engines. It’s difficult for individual hotels to compete with that level of presence. This is another reason why hotels have become so reliant on the online travel industry giants. However, as technology and mobility develop, hotels can implement strategies to combat the booking engines.

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