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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

them.


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

Direct Booking.


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

disparities.


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.

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