Taking on The OTA’s: How Do We Define Victory?

It’s been all over the industry newswire of late that Hyatt is the latest global brand to challenge the overall power of the OTA’s (Online Travel Agencies).  Specifically, Hyatt has gone out to the owners of its hotels and let them know that it plans to launch “’an aggressive sales & marketing plan’ to drive more direct bookings...”.  As so many are now doing, Hyatt is looking to reduce its dependence on the OTA’s and their associated cost model by pushing more customers to book direct.

We’ve seen this before and it’s perfectly understandable, though the outcome of this particular scenario is not yet clear.  What is apparent, yet again, is that our own past sins in sitting back and watching as the OTA’s have gradually built (and stolen) market share over the last many years have put us in our current day’s predicament.  That which Hyatt is experiencing today is simply another example of a major hospitality brand having to go to extraordinary lengths to win back those same customers that they gave up to the OTA’s in years past. 

What’s wrong with this picture?  The painting of the OTA’s as an ‘adversary’ is not only unwise, it is actually also unfair.  One of the most common terms used in our industry today is “disruption;” everyone talks about it, everyone wants it, but not everyone understands it.  The OTA’s are a classic illustration of disruption in creating the business model that we now so strongly rail against.  OTA’s have disrupted the traditional hospitality business in how customers can shop and book our hotels, and the result is that they have successfully stolen tremendous market share from us.  We still get the business, of course, but the rub is the fact that we must now pay significantly higher margins to the OTA’s for that same business that we used to get through traditional travel agents (10% commission) or by booking directly with us. 

Important to this conversation is an understanding of how we arrived at this situation.  The “evil” OTA’s are not “evil” at all; through advances in technology and powerful financial commitments to the marketing of their products, the OTA’s essentially swooped in and “disrupted” our traditional business model.  We watched this happen, we did not react effectively, and our market share fled to the OTA’s.  This does not make the OTA’s our enemy.  Rather, the OTA’s represent a new stage of our industry’s existence, and as we cannot deny this fact, we need to accept it and learn how to more effectively deal with it.

We are not advocating a complete handover of the booking model to the OTA’s; rather, we are advocating a realistic approach to this situation.  Included in this approach should be:

1.       Continuing to work as closely as possible with the OTA’s and their local market managers on an individual property basis as well as on a brand/portfolio basis to ensure that we maximize our relationship with them, and therefore maximize our share of this business

2.       Continuing to work as aggressively as possible to drive more & more customers to our own direct booking channels

Currently, there seems to be a school of thought in our industry that the above two points cannot co-exist.  This is faulty logic.  With great respect to those who in the past or currently have gone to battle with the OTA’s, it is our position that we should focus our efforts not on a fundamental denial of the fact that OTA’s exist and control market share, but rather than OTA’s are major (major!) customers of ours who control significant market share, and whose business we need and want.  At the same time, of course we should be doing everything in our power to grow the loyalty of our customers so that they come to us directly.  The OTA’s recognize that we need to do this, as it is a fundamental of any business model. 

In today’s hospitality world, there are two (at least) important realities that we cannot ignore; first is the reality that OTA’s control market share, and second is that hotels need to increase loyalty from their customers.  By focusing our strategic efforts on both of these realities, we attack the issue from both sides, and position ourselves for far greater overall success.