OTAs and Hotels: The invisible battle over hospitality market

Recent questions

• What is a traditional Japanese inn?

  A traditional Japanese inn, known as a ryokan, is a type of accommodation that offers guests a unique cultural experience, often featuring tatami-matted rooms, futon bedding, and communal baths. These inns typically emphasize hospitality and provide a serene environment, allowing visitors to immerse themselves in Japanese culture. Many ryokans are located near hot springs, offering guests the opportunity to enjoy onsen baths, which are believed to have therapeutic properties. The experience often includes traditional meals, such as kaiseki, which showcase seasonal ingredients and meticulous presentation. Staying at a ryokan is not just about lodging; it’s about experiencing the essence of Japanese tradition and hospitality.

• How do online travel agencies work?

  Online travel agencies (OTAs) are platforms that facilitate the booking of travel services, including hotels, flights, and car rentals, through their websites or apps. They act as intermediaries between travelers and service providers, allowing users to compare prices, read reviews, and make reservations conveniently. OTAs generate revenue primarily through commissions charged to hotels and other service providers for each booking made through their platform. This model has transformed the hospitality industry, as hotels increasingly rely on OTAs for visibility and customer acquisition, despite the high commission fees that can significantly impact their profit margins. The rise of OTAs has changed how travelers plan and book their trips, making it easier to access a wide range of options in one place.

• What is rate parity in hotels?

  Rate parity refers to the practice where hotels maintain consistent pricing across all distribution channels, including their own websites and various online travel agencies (OTAs). This concept is crucial for ensuring that customers do not find lower prices on OTAs compared to the hotel’s direct booking platform. However, achieving rate parity can be challenging, especially for smaller hotels that may struggle to compete with the marketing power and technology investments of larger OTAs. In some regions, narrow rate parity is allowed, enabling hotels to offer slight price variations, but many still find themselves at a disadvantage. Maintaining rate parity is essential for protecting brand integrity and ensuring fair competition in the hospitality market.

• Why do travelers book through OTAs?

  Travelers often choose to book through online travel agencies (OTAs) for several reasons, including convenience, price comparison, and access to a wide range of options. OTAs provide a user-friendly platform where customers can easily search for hotels, read reviews, and compare prices across multiple properties in one place. Additionally, many travelers may find that hotel websites are not as well-designed or optimized for mobile use, leading them to prefer the streamlined experience offered by OTAs. While hotels typically invest around 6% of their revenue in marketing, OTAs can spend significantly more, up to 50%, on advertising and technology, making them more visible to potential customers. This dynamic often results in travelers opting for OTAs, even if they are aware of the possibility of booking directly with hotels.

• How do hotels compete with OTAs?

  Hotels are increasingly finding ways to compete with the dominance of online travel agencies (OTAs) by promoting direct bookings and enhancing the overall guest experience. Major hotel chains, such as Hilton and Marriott, have implemented strategies that include offering exclusive deals and utilizing advanced technology, like mobile apps for remote check-in and room selection. These initiatives aim to incentivize guests to book directly through the hotel’s website rather than through OTAs. Smaller hotels, on the other hand, must focus on improving their website design, ensuring mobile optimization, and providing unique services that cater to loyal customers. By creating a more personalized and user-friendly experience, hotels can attract direct bookings and reduce their reliance on OTAs, ultimately improving their profitability and customer relationships.