Are hoteliers being fooled by OTAs for a second time?

Are OTAs pulling a bait-and-switch while calling for cooperation?

“Fool me once, shame on you. Fool me twice, shame on me.”

Hang it on a sign in the revenue department’s office. Put it on T-shirts. Heck, get it tattooed. Because it’s a saying that hoteliers need to remember fondly and frequently as we move through 2018.

What I’m referring to—and using as a history lesson for anyone who entered the hotel industry within the past 15 years—is the first time online travel agencies came knocking at hoteliers’ doors asking for stronger partnerships. It was 2002, and the terrorist attacks of September 11 had travelers on high alert. Hotel demand was plummeting, and hoteliers were struggling to get their product in front of consumers.

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OTAs like Expedia, Orbitz and Travelocity were already selling airline tickets, and they saw hotel bookings as the next logical step. They were much quicker to move transactions online, and early partnerships were considered successful, because hotels were just happy people were coming through the doors again.

It took a few years for hoteliers to realize the mistakes they had made by bargaining with the OTAs. Once hoteliers moved their inventory online, OTAs had already established themselves as the cheapest and easiest place to book hotel rooms. A natural power struggle developed, and hoteliers have been fighting to gain back control of their bookings ever since.

A dozen years later, while some of the OTA names have come and gone, Expedia, Booking.com, Kayak, Trivago and more are still really good at driving demand to hotels. In fact, they’re still better than hotels themselves. Far too many travelers today book through a third-party distribution partner over directly through a hotel supplier.

The first year OTAs surpassed hotels in total U.S. hotel online gross bookings was 2016, according to Phocuswright. Hitwise data midway through 2017 showed hotels’ market share of all online bookings in the U.S. fell to about three in every 10 bookings. OTAs saw their market share rise to about seven in 10 bookings.

While commission costs are coming down thanks to some hard bargaining by the biggest hotel brands, the share of consumers booking through an OTA continues to grow.

OTAs Are Knocking Again

But even as OTAs grow share of bookings, overall revenue growth hasn’t been fast enough for Wall Street.

In November, just after Q3 revenue numbers showed weaker growth than expected, stock prices fell for TripAdvisor, Priceline and Expedia, prompting Reuters to write the “once industry-disrupting model is under growing pressure from other competitors.”

So both Expedia (parent of Hotels.com and Trivago) and Priceline (parent of Booking.com and Kayak) have been forced to grow their business by entering new verticals.

Priceline was first to enter the hotel IT space, first launching its BookingSuite division to provide additional B2B services to hotels. It bought PriceMatch, Buuteeq and Hotel Ninjas respectively to build out the product.

If hotels aren't careful, they could end up giving away the keys to their operations to OTAs

Expedia followed and has been strongly touting the company’s lodging arm, called Expedia Travel Platform, which is building out technology to insert itself more into the daily operations of a hotel. In 2016, the company led a majority investment in ALICE, a hotel operations platform. Later the company launched a revenue management tool called Rev+.

Expedia boldly announced it would offer Rev+ free to properties that are already part of its distribution network on sites such as Expedia, Hotels.com and Venere. Expedia and Priceline are no longer just OTAs; they’re now trying to become back-of-house tech providers as well.

This is where hoteliers have the potential to be fooled for a second time. OTAs have once again pushed innovation faster than the hotel industry itself, and they’re prepared to disrupt the stagnant back-of-house tech stack.

The question hoteliers must ask themselves before partnering with these distribution conglomerates again—the question they forgot to ask the first time—is whether Expedia, Booking, etc. have hoteliers’ best interests at heart.

Are the tools Expedia and Priceline are building and buying driving the most cost-effective demand to your hotels? Or are they offering them free to hoteliers in order to drive more bookings through their own sites and giving themselves more control over your inventory?

Protect Your Turf

Clearly the hotel ecommerce space is up for disruption. Cloud functionality and data analysis are revolutionizing the way hotels can connect with their guests, and it’s all happening very quickly. A more seamless and personalized hotel experience—from search to booking, through the on-property experience and post-stay follow-up—is here, and if done right has the potential to multiply guest satisfaction and hotel revenue.

But does that mean that outsourcing more of your operations to online distribution companies is the right move? Or should hotels look elsewhere for innovation?

Most hotel tech vendors are finally embracing cloud technology and open-API platforms. Two-way connections allow for syncing data across multiple platforms. When hoteliers own customer preference and spending data and can access it in real time, they can create tailored rates and packages for maximum conversion.

Perhaps it has been 15 years, but we all know what an over-reliance on OTA demand will do to a hotel’s profitability. Before you hand over the keys to your guest data and hotel operations, this time be sure to consider the consequences.

Marco Benvenuti is co-founder and chief marketing and strategy officer for Duetto, hospitality’s only revenue strategy platform. Prior to starting Duetto, he pioneered the concept of revenue strategy as an executive director at Wynn and Encore resorts in Las Vegas, where he founded and managed the Enterprise Strategy Group, leading revenue management as well as data analytics, marketing and distribution.