TECHNOLOGY : NEXT-GENERATION OTAS
PhoCusWright
“ THESE METHODS OF BOOKING AND THE EXPECTATION OF DEEP DISCOUNTS THAT THESE SITES ENGENDER ARE IRRECONCILABLE WITH OUR BRANDS ’ PERCEPTION IN THE MARKETPLACE AS WELL AS A PROFITABLE HOTEL BUSINESS .”
– LARRAINE VOLL MORRIS , MARRIOTT INTERNATIONAL
metasearch model proves better for their bottom lines than the commission-charging OTAs . “ Today there is a big focus on direct bookings and ADR , so any partner that will drive business to our website for booking is generally a great fit ,” says Kathleen Cullen , vice president , revenue and distribution , Commune Hotels & Resorts , San Francisco . “ The newer players are developing models that are friendlier on a hotel ’ s bottom line . We are hopefully getting away from the large margins .”
However , given that consumers typically shop around extensively online before booking , it is unclear whether metasearches are less expensive overall than OTAs if hotel companies want to be effectively advertised online . “ While it is cheaper for hotels to be on Google Hotel Finder , for example , that might not be the only place the consumer goes — they may go to TripAdvisor first , or Facebook ,” Estis Green says . “ Hotels may have to advertise in multiple places to drive consumers to book directly . At the same time , OTAs may become cheaper for hotels to use due to competition from the metasearches .”
Although direct booking offers a lower commission , independent hotels ’ lower marketing budgets make partnering with OTAs more attractive . “ OTAs definitely help independent hotels capture new customers , as independents do not have large marketing budgets compared to the bigger chains and OTAs , so partnering with the OTAs definitely helps to get the word
CONTINENTAL DIVIDES
In addition to user-functionality changes , the online travel market outside the United States is yielding many new players that could eventually shake up the U . S . market .
While the United States remains dominated by Expedia , Priceline , Travelocity and Orbitz , Europe ’ s OTA market is splintered by smaller local players and has recently seen the rise of Booking . com . The United States could see Europe ’ s more predominant retail model OTA supplant its merchant model giants , as hotels may be attracted to the better terms the retail model provides them . “ We expect the retail model will gain more U . S . recognition in the medium term , as commission paid by smaller chains and independent hotels in Europe are less than those paid in the U . S .,” says Michaela Papenhoff , managing director of hotel consultancy H2C , Dusseldorf , Germany .
Asia Pacific is seeing a rise in regional OTAs like China ’ s Taobao , CTrip and eLong and India ’ s MakeMyTrip . Looking ahead , social could drive the most change in Asia Pacific ’ s online booking market . SilverNeedle Hospitality , Singapore , plans to focus on working with social media to boost direct booking .
“ In Asia , online peer influence and word-of-mouth referral are at the forefront of planning travel . Hence , we have started working closely with social media platforms including TripAdvisor that have the capabilities to refer direct business to our web booking engine ,” says Mark Simmons , SilverNeedle ’ s vice president of sales and marketing . “ We see the consolidation of social media and online travel distribution as the next generation of OTAs .”
Of course the big U . S . OTAs are keen to protect their market share . They have been investing in new user functionality , particularly in metasearch , with Expedia ’ s December 2012 purchase of German metasearch engine Trivago and investment in Room 77 . Priceline purchased Kayak in November 2012 for US $ 1.8 billion .
out about brands such as Joie de Vivre and Thompson Hotels ,” Cullen says .
Rate parity left behind ? Hotel companies are divided on whether rate parity , which emerged over the past decade in response to the pricing chaos that plagued online distribution , will continue to bind them and OTAs . Offering lower rates can increase bookings via opaque sites and flash offers . “ There is scope to move out of pure rate parity through opaque or closed loop channels ,” Jacob says . “ I think the future for hotels will be individual customer pricing and not a one-price-fits-all approach .”
However , ditching rate parity could give direct booking channels a competitive disadvantage against OTAs . The major hotel chains reiterate their commitment to rate parity , especially since Marriott , Choice , Hilton , Hyatt , IHG and Wyndham co-founded metasearch Room Key to increase direct booking .
“ While we realize the value of the OTA partners we work with , our philosophy is that we don ’ t ever want to concede a competitive advantage over our direct channels ,” Morris says . “ It ’ s extremely important to our owners and franchisees to encourage consumers to book directly on Marriott . com .”
Some hotel companies assert the opposite , though , and say tweaking or even ending rate parity could give hotels a competitive advantage over OTAs . SilverNeedle Hospitality is looking at ways to create more value for direct booking customers by ceasing rate parity . “ We have to integrate creative pricing strategies , which include tiered booking restrictions or rate fencing with relevant loyalty programs and marketing promotions ,” Simmons says . “ It is critical for us to optimize our rates , provide better value and start to differentiate ourselves from the OTAs .”
50 HOTELS March 2013 www . hotelsmag . com