DUOPOLISTIC MARKET SITUATION
Updated: Sep 6, 2020
Listen to the battle of OTA's and Direct Bookings now.
At the beginning of the year 2019, all the indicators suggest that the hotel
industry could know the outcome of a fight that the hotel distributors have been
fighting for several years: to know who will definitely take the lead of the hotel
distribution between OTAs and the institutions themselves via their official
website. Today, it is undeniable that the OTAs are the champions of the online
sale of nights with a market share of nearly 80% worldwide for the two leaders,
Booking.com and Expedia. The two behemoths in the distribution can also boast
double-digit annual growth rates over the last decade. However, some events in
2018 suggest a reversal of this trend.
Difference between OTA's & Direct website
OTA's will play the game until the end:
An OTA is a travel consumer’s best friend when they’re scoping out their
vacation plans. They can see all the options available from flights, to hotels, to
packages and more. OTA's and their rich search engines are also an incredibly
useful research tool that helps the consumer find the best hotel based on price,
location, and quality.
Hotel Sites Can Give Loyal Customers The Royal Treatment,
On the other hand, repeat customers who book directly through the hotel get a
different set of benefits, particularly if they participate in the hotel’s loyalty
program. Successful hotels are able to create loyal customers by providing great
experiences. Great experiences are created by knowing who their customers are.
The bottom line is that both OTAs and direct bookings provide value to consumers
in different ways, depending on where the consumer is in the buying process, how
familiar they are with a property, and if they participate in loyalty programs.
While hotels may love to hate OTAs, they provide a valuable customer stream to
The illusion of choice
Since early 2015, the relationship between hotels and OTA have gone somewhat
sour. Why is that? In a competitive hospitality landscape, hoteliers must fight on
a variety of levels, from customer experience where free wifi, hearty breakfast
and quality room amenities are expected, to convenient location and, of course,
best possible rates. In a context where RevPAR (revenue per available room) is a
mantra indicator that requires constant optimization, hoteliers turn to reducing
costs to increase their profitability. And that’s just the thing: commission levels
paid out to OTA are high, between 15-30%, and their share of online sales is
increasing year over year!
Dominant in Europe and Asia, Priceline is the OTA that holds the biggest market
capitalization, at 64 billion dollars. Besides its well-known Priceline brand, and its
equally famous tagline “Name Your Own Price”, it also owns Booking.com, Agoda,
Expedia, Make my trip, Hotels.com &. Like a classic OTA, it offers booking
possibilities for everything from hotels to flights, cars, cruises and vacation
packages, for individuals and groups alike.
Less choice, higher commissions?
The major hotel groups of reference focus their strategy more and more around
Direct Booking. Marriott International, the world’s leading group in 2018 with
more than 1,200,000 rooms, launched its It pays to book direct campaign in 2016,
with the essential aim of restoring consumer confidence as to who has the best
price. According to Arne Sorenson, Marriott’s CEO, this is ‘an absolute war about
who will win the customer’. The same goes for its outsider Hilton Worldwide
which has nearly 900,000 rooms, which with its campaign Stop clicking around
claims to regain control of the marketing of its products.
Mark Weinstein, says : There is a common misconception that third-party
distributors always offer lower prices for our hotel rooms, which is simply not
true’ . For large international groups, it is, therefore, to convince consumers to
change their mode of consumption by offering better rates, but not only.
Because hoteliers have weapons that do not have OTAs: possibility to offer gifts
or discounts on services for a particular stay (airport transfer, meals, spa, latecheck
out …), offers various add-ons, local experiences etc… These small
gestures towards the customers, in combination with an improvement of their
official web site at the level of its ergonomics (setting up of a Book now button
in particular) and its design, constitute significant arguments to improve their
Keep an eye on rate parity
Maintaining parity can be difficult when you have dozens of distribution channels
to manage. This is why hoteliers are turning to parity analytics tools such
as Parity Insight, which can help you monitor and enforce rate parity by allowing
you to uncover discrepancies across your channels.
For example, many lesser-known booking sites can (and do) buy hotel inventory at
a wholesale price from a reseller, and undercut the hotel when they resell the
rooms. Metasearch sites such as Trivago or Tripadvisor pick these rates up and
display them alongside your own website and OTA rates. Without a business
intelligence tool, it would be difficult to discover, manage and tackle such rate
TripAdvisor, Google and others….
Not so fast. There are many other players in the online distribution landscape,
including TripAdvisor which is becoming less of a review site, and more an
integrated booking solution for everything related to the travel experience:
hotels, restaurants, vacation rentals, attractions, etc. Hence, its new “Plan.
Compare. Book” advertising campaign, meant to get consumers to not only check
out TripAdvisor for its comparing features, but also to book directly on its
platform. And then there is Google. Will it ever launch a direct-to-consumer
travel solution, as many industry experts have been predicting ever since it
bought the ITA software, back in 2010?
So while the OTA scene has become a mere duopoly, it doesn’t necessarily mean
there is less choice for hotels. It does mean, however, that travel brands must
realign their online strategies and tactics to make sure they make the most of
their owned media before relying too much on external sources such as online
travel agencies, TripAdvisor or Google, among others.