How do hotels cope with the strong growth of OTA?

The author invited Professor Peter O 'Connor, academic director of the Master of Hotel Management in Essex Business School, France, to share his views on the possible progress in OTA in the next few years. He has been paying close attention to the market dynamics with keen observation. Great changes have taken place in the field of online hotel distribution in the past few years, and online channels have become more and more important. Nowadays, many consumers make travel plans through online channels, which has a positive impact on the penetration rate of online booking. In American hotel industry, sales from online channels account for more than 50% of hotel room income. Although the penetration rate of online booking is lower than that of American hotels in other parts of the world, for European hotels, online booking accounts for an average of 35% of the total booking volume, which is expected to increase significantly in the short term. However, for many hotels, the channel of online booking business has been controversial. In the highly concentrated American market, hotel chains can make use of their brand influence, expertise and strong financial strength to ensure that most of their online bookings come from their own brand official website. However, the European market is relatively fragmented. The brands of international chain hotels in this area are relatively low, while the number of small hotels and single hotels is increasing. This means that most of the online hotel business of European hotel chains is not from official website, but from online travel agencies (OTA). The relationship between hotel operators and OTA has a long history, with love and hate. Hotel operators thank OTA for its support to their business in harsh environment. However, most hoteliers are very reluctant to pay "huge" commissions to OTA, and they will also verbally complain that OTA is cleverly placed between hotels and consumers, forming an unfair competitive environment. OTA can create benefits for hotels. Hotels need to be clear: OTA can really add value. OTA, through its professional marketing skills in the field of e-commerce, helps hoteliers to sell more rooms and make them contact more customers and markets. In other cases, hoteliers may not be able to achieve this. OTA provides customers for hotels in the form of performance payment. In fact, they continue to market hotel brands to audiences all over the world (the so-called "bulletin board effect"). However, only when they successfully attract consumers to make reservations and complete the sales business will they get the commission paid by the hotel. Although OTA is regarded as an expensive channel, hotels must invest heavily in search engine ranking, website optimization, booking engine and credit card fees if they want to obtain the same business volume through direct sales channels. Compared with these huge costs, the 18%- 25% commission paid by the hotel to OTA is negligible. OTA, as a part of the hotel online distribution strategy, is not a challenge that the hotel industry is currently facing in the distribution field. In fact, in today's highly competitive market, hotels need to regard OTA as an important partner in their distribution process. The real problem is that the accelerated growth of online travel companies and strategic mergers and acquisitions make some OTAs so huge that they start to monopolize the market and use their market size to effectively force hotel suppliers and consumers to accept their terms. This happens in the European market, where industry giants Expedia Inc and Booking.com control most European hotel reservations. The analysis report recently released by Nomura, a financial service company, points out that in the indirect online hotel sales business in the European market, the business from the above two companies accounts for more than 65%, although enterprises in other specific regions also have a certain number of audiences in some markets (for example, the online hotel reservation system HRS/ hotel.de has advantages in Germany). However, in order to benefit from the strong growth of online sales of hotel rooms, hotels must choose one or more OTAs among the few online travel enterprises with high influence (or in a "dominant position") to cooperate. Unfortunately, although enterprises have gained a dominant position, they often monopolize the market. Expedia Inc has been censored by market regulators in Britain and the United States because of price manipulation allegations, so it is trying to shift from the prepaid model that it used to attach importance to to to the supplier's agency model. However, in the end, hotels will still pay for this-they will have to pay a higher fee for each reservation service they provide. In the past, hotels always thought that Booking.com was the most hotel-friendly online travel enterprise in OTA. However, with its growing influence, it began to put forward stricter terms to its hotel suppliers. For example, Booking.com recently began to restrict hotels' access to customer contact information. In the past, hotels could get this information. Now, however, this website uses the above methods to ensure that the customer relationship remains on the OTA side, instead of contacting the hotel. In addition, Booking.com also began to automatically book the cancelled rooms, and ensured that they were resold to other consumers through its own reservation system, so as to get commission. However, the regional online booking system HRS is by far the most "rampant" enterprise that abuses market dominance. After it acquired the +0% share of its competitor Hotel.de 665438, it actually controlled 2/3 of the online hotel market in Germany. The company announced that it would charge higher commission to hotels in the future. In addition, if a hotel wants to distribute its products and services through the HRS system, it must not only provide the best available price (bar), but also provide the availability of the last room. If the hotel is unwilling to abide by these terms, it needs to seek other distribution channels. Can industry pressure or regulatory measures force OTA to make concessions? The M&A tide of online travel will continue to appear, and small-scale enterprises will be swallowed up by large enterprises, and many enterprises may accelerate this monopolistic behavior. In the view of the dominant OTA, hotels will eventually use OTA channels whether hotel operators like it or not, so how should hotel operators deal with this situation? Because OTA has great market influence, the only way to make OTA yield is when they are forced. To force OTA to make concessions, hotel operators can consider two basic methods, namely industry pressure or regulatory measures. The hotel industry is too fragmented, but hotels can cooperate with Qixin to put pressure on these influential enterprises. Different from the aviation industry, in the hotel industry, even if all hotel chains add up, their room inventory still accounts for only a small proportion of all inventory, so they can't challenge the current business environment. Even if hotels boycott OTA (unlikely), the latter can ignore those hotels that boycott them and concentrate on distributing the products provided by those hotels that don't boycott them. Past experience shows that hotel operators are not good at cooperating with the interests of hotels, which can be reflected from the lack of global lobbying organizations in the hotel industry. Unfortunately, regulatory measures do not seem feasible. Recently, some mergers and acquisitions in the OTA field have been reviewed by institutions that supervise industry competition. Although these institutions finally allowed OTA to conduct mergers and acquisitions, their strict review of mergers and acquisitions made the hotel see some hope. Because these regulators seem to be very concerned about the operation of the hotel industry, the above-mentioned lawsuits such as price manipulation and anti-competitive behavior will undoubtedly have a long-term impact. OTA has put forward strict terms for hotels, and this situation is likely to continue, leading to an increasingly serious confrontation between hotels and OTA, especially 20 13. In order to survive in a highly competitive environment, hotels need to manage the distribution channel mix more actively. They not only need to develop and cultivate their cooperative relations with major OTAs, but also need to establish cooperative relations with other channels. Hotels need to cooperate with small-scale enterprises aiming at market segments to avoid relying too much on a single business channel. In terms of distribution, hotels need to abandon short-sighted thinking mode and consider the problem from a broader level. If they continue to provide inventory and preferential prices for major OTAs, they will soon fall into a situation of "no choice". Hotels need to formulate distribution strategies with wider coverage and more channel combinations to minimize risks and ensure the long-term success of hotels.