As the industry knows, online travel agents (OTA) bring additional bookings to hotels, but while doing so, the hotel pays a commission that it could otherwise have avoided via a direct booking on its brand website.
So, in this context, is the OTA a friend to the hotel? Or an enemy? Or are they frenemies as of now?
These were the issues discussed during a recent Travelclick-Ideas conference in India.
Highlights of the discussion below:
What do hotels think about OTAs from a revenue management perspective?
OTAs are certainly friends, but at a price. OTAs add to the top line revenue when needed, at the same time, hotel brand dilution happens, and they take a pound of flesh.
The relationship between hotels and OTAs cannot be categorized as black or white, it is a bit grey.
OTAs bring in distribution and reach. For small hotels especially this is of great benefit, because not all small hotels have the budget for marketing and branding.
The hotel's relationship with an OTA cannot be seen from a seasonality point of view.
For example, on December 25, OTAs can send thousands of bookings for hotels in Goa. However, the hotels would have got the same volume of bookings (because its December 25). Considering this fact, a hotel cannot stop working with OTA for a brief period. The power of OTAs (the bookings they bring in) will be felt during the non-season days.
Anyone who brings in revenue to a hotel cannot be seen as the enemy. Its up to the hotel to be smart enough to work with various channel partners, ensure the bottom line is not impacted and avoid practices like commission undercutting.
Yatra gave an example of how a two-star hotel in Goa (ranked about 60 out of 85 in TripAdvisor) worked with the OTA, and resulted in a 200% growth in Google search queries.
OTAs are not just a transactional channel, its a marketing channel as well, where as a travel agent is a transacting channel, and not a marketing channel, according to Yatra.
OTAs bidding for hotel keywords in Google - right or wrong?
OTAs spending on Google Ads and bidding higher than hotels (using the hotel brand keywords) is not uncommon.
A hotelier made an interesting comment that "OTAs bidding for hotel keywords in Google is a good sign for my hotel".
Tnooz asked the hotelier for more information as well as asking Yatra for its view on why OTAs do it.
Summary of the answer:
An OTA bidding for a hotel name keyword in Google will result in a customer clicking on the OTA site listing in Google, landing on the OTA site, making a booking and thereby making the hotel to pay a commission to the OTA. This process is commonly understood.
This event in isolation is probably bad for hotels but, there is another angle to the process.
When a user sees an OTA ad in Google, the user is taken to the hotel detail page in the OTA website. Effectively, OTAs take a user to content that would have got showcased on a brand hotel website.
At the time when a user is searching for a hotel in Google, neither the brand hotel site nor the OTA knows the user search dates, and room availability of the hotel.
A number of variables kick in once the user lands on the brand hotel website or on an OTA site.
Assuming a hotel doesn't have inventory on the date a user is searching for, and the next closest hotel of the brand chain is many kilometres away or in a different city (or it could be just a single small hotel) , then the user doesn't have any practical choice of selecting a hotel as his/her travel dates are not going to change (especially in the case of a business traveller).
In this case, the user is anyway going to go to an alternate hotel in the city, where as, in case of the OTA, it can easily show alternate hotel choices if a hotel doesn't have room availability. This is a better use flow from an end user perspective.
Also, in a lot of scenarios, while a hotel brand might have a good website, it might not have a decent mobile site/experience. Since the number of hotel related queries in Google are on the rise, this would only result in a bad customer experience.
A hotel has to have a mobile optimized site, if not, then it is better for the hotel to pass on the user traffic to an OTA (via Google keyword listing). In this case, at least, a user can see the hotel in the right perspective.
Hotel content in OTA website - to what extent the OTAs care?
OTAs not only care about the completeness of hotel content, but also the quality of content. Even the tiniest details are looked for - to bring in high marketing impact for the hotel.
- A hotel that has a ramp for wheelchair usage can either be represented in plain text or a picture. A user might miss reading the text, or not notice the facility icon. But, the hotel can produce a picture that shows a person pushing a wheelchair on the ramp - this will have higher visibility for the hotel facility.
- In a three, four or five-star hotels, guests might not be worried about the availability of a gym, rather they will be worried about the number of treadmills in the gym. So, a picture that highlights the total number of treadmills could have a great impact.
- A standard room picture of a hotel could be four years old and in the meantime, the hotel could have been renovated. But, the older picture of the room still remains in the OTA and causes a hit in the conversion numbers. So, an OTA marketing manager, not only checks for the presence of photos for a hotel, but also checks for the accuracy.
Though these are tiny details, an OTA still cares about them.
Hotels displaying in first page results in OTA - A peek
In most of the OTAs, there are both organic (natural) search result listing of hotels and paid listing. The model is similar to Google.
Yatra explained how its hotel search result display mechanism works:
In Yatra, hotels do not bid for listing position in search result. Rather, its a first come first served process.
Yatra has a threshold on the type of hotel that can be shown in the first page search result. For example, when Yatra knows that a hotel does not have a presence in a destination for which a flight was searched for, it doesn't show the hotel at all.
Also, a number of parameters are considered to display a hotel in the first page search result, these include:
- Each city has a value
- Quality score of hotel
- Fulfillment score
- Price - is it better, equal, or on par when compared to other OTAs. If the pricing in other OTAs are consistently found to be lesser, then the hotel would get a negative rating.
- Content - how much content the hotel has given to Yatra.
- Connectivity - is the hotel connected to Yatra via automated channel manager systems? If the rates are real-time, then the end customers can be served better.
- Brand vs non-brand hotels. Brand hotels attract higher score.
MakeMyTrip (MMT) said that it also has a sponsored listing program in search results, but again, there is no bidding concept.
The closer a hotel is to its competing hotels in pricing, the higher the probability for the hotel to show in the first page of MMT's organic search result listing.
Rate parity strategy
With the emergence of TripAdvisor's metasearch service, rate parity has become complex.
With mobile channels emerging in the market, rate parity is not seen sometimes in some smartphones from an OTA (but it can be seen in other OTA mobile apps). Scenarios like this could happen when OTAs are still doing A/B testing.
Unless there is a trend or history of rate parity issue with a hotel, an OTA wouldn't bring a hotel rate down. OTAs would not want to spend additional man hours to fix the price issue for only a specific set of hotels, but when there are trends then OTAs have to do some discounts on the price.
Yatra says it corrects the price only if a hotel is out priced by that hotel's brand site or some other OTA - this scenario could lead to a potential dispute with the hotel, adds Yatra.
If a hotel is priced high in a OTA (when compared to other online channels), and if a customer notices it, s/he will simply lose trust on the OTA brand. To make things worse, the customer might also stop buying flights from the OTA. In this case, the OTA has to either cut down the price of the hotel to be on par or refrain from selling the hotel.
In Yatra, there are about 16,000 hotels contracted, but about 1,500 hotels are not listed on the site because the OTA cannot get into a price/fulfillment agreement with hotels. Yatra does not sell these hotels because of the effort involved to enforce rate parity.
Speakers on the panel were:
- Moderator: Curtis Brewer, VP of reservations marketing, Travelclick
- Aditya Gupta, national head - hotel network, MakeMyTrip
- Rohit Manghnani, business head & VP - hotels, Yatra
- Kapil Dua, founder, REVolution in revenue management
- Najmul Khan, national head - revenue management, ITC Hotels
- Gaurav Pallial, CEO, Citrus Hotels
- Rohan Nayyar, director of market strategy - Bangalore, Marriott International
image via Shutterstock.