OTAs VS Hotel Chains: Where Ground was won and Lost in 2017

This has been an interesting year for hoteliers, with the ongoing battle between bookings via online travel agents (OTAs) and hotel booking engines continuing to rage. Whilst OTAs can offer fantastic exposure for hotels, and help to improve occupancy rates significantly, they are also often detrimental to a venue’s bottom line – with discount rates and cheaper rooms enticing booking without encouraging visits to the central website of the venues whose accommodation they showcase. Let’s look at the challenges and wins for hotel chains and OTAs throughout the last twelve months.

The True Cost of OTAs

Unfortunately, in revenue terms, not all bookings are created equal. When seeking to maximise profits, it’s important each room sells for the best possible price – and online travel agents can be hugely detrimental in this regard, as well as simply destabilising existing profit projections based on your direct booking strategy. The latest data suggests a shift towards OTAs across the board, with hotel market share falling some 31.6% through to the middle of 2017. That’s a lot of money lost in average room rates – and could prove catastrophic for both established hotel chains and independents in a more precarious financial position. The same study suggests hotels routinely lose about .8% of their revenue each year, representing a gradual decline in direct bookings and therefore a commensurate drop in earnings for those same hotel chains.

Encouraging Direct Booking

However, it’s not all bad news for the profit-making-potential of the hotel industry. Hotel chains are becoming ever savvier in developing ways to encourage direct bookings, slowly but surely realising that in order to attract and retain customers they must focus on adding value to bookings made via the central hotel website.

There are a number of popular ways to do this, including launching and sustaining guest loyalty programs aimed at tempting custom at a discount or offering some other form of incentive or reward to book direct. Offering discounts as an incentive to directly book could prove counter-productive if seeking to compete with OTAs on financial grounds, but could serve to tempt custom away from those platforms and back into the strata of the hotel itself. Magnuson Worldwide’s own loyalty scheme is aimed at both boosting repeat custom and lending credibility to partnered hotels, encouraging trust.

The winners and losers

It is hard to select the true winners and losers in the past year’s hotel booking landscape. OTAs continue to dominate and gain ground, but the reaction from the hotel industry as a whole has been positive – recognising online travel agents as an ally, not an enemy. However some hotel chains, particularly those who have been slow to respond to changes in the marketplace, do report significant losses throughout 2017, just as those taking a proactive approach by offering enticing loyalty schemes report a spike in their direct bookings. It will take a little longer for the dust to settle and the true gains and losses of 2017 to come to light.

Calculate your increased profit by switching to a Magnuson Hotel brand

While most major brands charge an average of 15% of total revenue with complex additional charges and corporate renovations, Magnuson offers one simple 5% of gross fee. See how much you can save with us.

[calculator title=”” blurb=””]