The War Between Hotels and OTAs: We Win, Who Loses?

The New York Times has made it official: war is on between the big hotel groups and the online travel agencies (OTAs).  Let me tell you: there will be losers. But it won’t be us.

At least no time soon.

I cannot remember the last time I booked a flight at an OTA, mainly because United and American (nee USAir), the two carriers I generally fly, have well oiled websites that do pretty much everything I need to comfortably fly, on my terms. I track my frequent flyer miles, pick my seat, if I want, I may buy an upgrade with miles, and – sometimes – I have even bought bundled hotel nights at jaw dropping prices (because that hotel rate is “opaque,” meaning it evades the rate parity demands of the OTAs).  

Other than Las Vegas hotels, I also cannot remember the last time I booked directly with a hotel.  I am much more likely to use Expedia or HotelTonight, even Amazon Local, and, honestly, I’ve come to see hotel websites as garish eyesores populated with really bad images, worse copy, and balky booking engines that just weren’t worth the bother.

(I only go to Las Vegas for big meetings which have special rates and – usually – special booking sites.)

But now the big players – Marriott, Hyatt, Hilton, Starwood – want to change my mind about the wisdom of booking directly with them and they just may be succeeding.

It’s about money of course. The OTAs nick the big chains maybe 15% on every booking and that is money they hate to part with. (The OTA rate has never been confirmed and it also varies from case to case. But multiple sources have whispered the 15% rate to me as a good average for the industry giants.)

Say it’s a $200 hotel room. That means $30 is in play – the hotel can afford to give me up to $30, just to get the direct booking and to spite the OTA. And that is exactly what they now are doing. Reported the New York Times: “major hotel chains are offering a host of benefits to lure travelers to book with them directly: digital check-in, free meals, Wi-Fi and even the ability to choose a specific room.”

You want free breakfast? Done. Upgraded WiFi, no charge? At your command.  Maybe bonus rewards points? Done.  

Some chains even are withholding loyalty points on rooms booked through OTAs and that is a direct shot in this bow.

Give this a few years and my bet is that most frequent traveler hotel bookings will have migrated to the big chains’ own websites and away from the OTAs. Besides saving OTA commissions they also will gain better – more direct – communication with guests and that makes them salivate. They definitely have skin in the game and will play accordingly.

We also will be winners because frankly we are being bribed. The hotel chains can see the prize- our direct loyalty – and they are grasping it. With free WiFi, drink coupons, whatever it takes.

Who stands to lose? Obviously the OTAs will see sales reduction but, to me, the blood on this track is likely to be that of independent hotels and very small hotel groups. For one thing: they are paying OTAs as much as 30% on every booking.  On a $200 room, perhaps $60 goes to the OTA. Ouch.

That number is unlikely to go down.

Independents lack negotiating clout and as the chains squeeze the OTAs the logical place for OTAs to squeeze is the independents. They are unlikely to lower that 30% rate.

For two: at the independent hotel websites I have looked at, the booking engines are creaking antiques, just bad code, and there is no clear path to tweaking them to offer me the amenities and upgrades that the chains are using as bribes. Independents also lack loyalty programs in most cases, too, so no bribes possible there.

For three – and probably case closed – independent hotel websites that I have looked at are plain wretched, many are much worse than the sites of big chains.  I have no idea who designs these sites but, probably, neither do the hotels that put them up. They are just Internet train wrecks, flecked with hyperbole, false claims, and lots of creepy shots of models.

A lot of independents also are addicted to their profits from resort fees – a personal hatred – and they are not eager to surrender those dollars.

Independents, too, at least many of them, just are slow to move.

But if they reading this, they just got their wake up call and let’s hope they are listening.