Hotels, OTAs find limitations in failing to work together

At the upcoming Annual Hotel Conference, taking place Oct. 11 and 12 in Manchester, UK, Michael McCartan will be leading a talk on the relationship between hotels and online travel agencies — more specifically, he's calling for a truce. 

McCartan is managing director Europe, the Middle East and Africa at Duetto, a post he has held since December, 2014, where he handles the rollout of Duetto’s services and the ongoing development of its customer success teams throughout the region. He also feels strongly about the interactions between hotel companies and OTAs, and the title of his panel at AHC says it all: "Make Love Not War - Embrace OTAs for a Brighter Future." The panel will be attended by Thomas Magnuson of Magnuson Hotels, James Osmond of Triptease, David Taylor of glh Hotels and Ryan Pearson of Booking.com.

McCartan knows all about what hoteliers think of OTAs, which is why he picked a panel with a mix of hoteliers, tech companies and an OTA itself. He isn’t looking to spark a battle royale, but a debate. “What we don’t want is to agree that the current situation is the status quo, and just throw our hands up and say ‘it is what it is,’” McCartan said.

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Ahead of the panel, here are five observations McCartan shared on the state of hotel/OTA relationships.

1. Hoteliers are warming up to OTAs

Michael McCartan

Anyone who has attended a brand conference in the hospitality industry can attest that no matter how hard executives try to steer conversations away from OTAs the topic always comes up. McCartan said that hotels by and large felt they were at the receiving end of a raw deal when it came to OTAs, as what began as a cozy relationship between hotel operators and budding technology companies feeding them bookings evolved into lopsided deals with little recourse for operators.

“Hoteliers felt they weren’t being catered to, and they despised OTAs for that,” McCartan said. “There has been a softening of their relationship recently, but that feeling still exists.”

McCartan attributes part of that “softening” to the industry’s renewed efforts to improve direct bookings, and as a result the imbalance of the relationship between OTAs and hotels has shifted to remain on the OTAs’ side. 

“Rather than moan about it, hotels have decided to act on it and compete with OTA dominance in a way more constructive than whinging at a conference,” he said.

2. Direct booking campaigns have limitations

While OTAs are willing to work on more equitable terms with hoteliers than before, McCartan said these terms are often still not to hotels’ liking in many cases. Hotels still feel like they are held hostage by the power and sway of OTAs, which is why there has been such a groundswell of support for direct booking campaigns as hoteliers feel pressured to find new avenues for guest acquisition.

McCartan said the push for direct bookings has been profitable for many operators, and particularly applauded Hilton’s “Don’t Click Around” movement for educating the market on direct bookings. However, he also said that these direct booking campaigns have serious limitations because they are almost all based on cutting prices and offering deals to acquire customers.

“Sacrificing price for direct bookings strikes me as an odd thing to do,” he said. “It’s not a sustainable methodology for ensuring repeat business, and in many cases it dilutes your existing base of customers. Hotels need to be careful that they don’t jeopardize or hurt their own business in their desire to get back at OTAs.”

3. Hyatt could have succeeded if isolated from Expedia, but it would have cost them

On the subject of risky moves, McCartan said that Hyatt’s recent decision to walk away from and then return to Expedia for distribution is not the first time such a thing has occurred, and said OTAs like Expedia and Booking.com have such breadth and depth in the market that cutting them off is a huge risk and “smacks of desperation.” In fact, every company that has tried to walk away from Expedia has had to come back eventually, according to McCartan, even a company as large as Hyatt.

“OTAs bring these companies sizable business, especially where they don’t have representation,” he said. “It’s not all or nothing.”

McCartan said Hyatt had the potential to succeed if it stuck to its guns and walked away from Expedia for good, but the move would have cost them a great deal of money to recover lost distribution.

“What [Hyatt] would have to invest in direct bookings at the end of the day would probably be equal or more than what they pay Expedia,” he said. “Maybe it wouldn’t help or improve their business, maybe it wasn’t a wise business decision in the end. The fact Hyatt went back [to Expedia] said they saw some value there, and didn’t want to sacrifice it.”

4. Hotels have one major advantage over OTAs: Access to guests

One thing OTAs like to claim is that hey don’t own the guest, just their journey, but McCartan said they don’t even own that. Despite their immense reach and the power of their distribution system, OTAs aren’t able to service guests on property, and so despite whatever they do to encourage guests to book at your hotels at the end of they day they have to hand that guest over to operators to have them fulfill the stay.

“The fact that the hotel engages the guest and has them physically on property at the same time is a huge benefit to the hotel,” McCartan said. “If hotels can enhance the quality of their relationship with guests during the stay because of what they know about the guest before and after they arrive, they can demonstrate more value than the OTAs can.”

It sounds like the life hack to end all life hacks, but McCartan said hotels drop the ball in the one area where OTAs have become masters: taking the guest stay to the digital space. The digital experience behind hotels must become more personalized to allow hotels to understand the likes and dislikes of individual guests, then translate that information into action once they are on property. Because of this, OTAs will always be at a disadvantage due to lacking the physical aspect of the hotel experience.

5. The future will be decided by cooperation, not war

Up until now, McCartan talked a lot about how hotels can react to OTAs, but he conceded that the hospitality industry is mostly static and averse to change. It is the OTAs, McCartan said, that are fluid and ever changing. They understand that to stand still is to die out, and will always be ahead of the game in terms of risk taking and innovation. For this reason, McCartan called out to hoteliers to innovate as much as OTAs do, first by strengthening online operations and tie it to the guest experience in person.

Beyond that, he also urged OTAs to react to the changing attitude of hospitality companies and extend an olive branch of cooperation, and even weather the storm of indignation that is sure to come as hoteliers gradually continue to drop their guard.

“OTA’s can’t just hold guns to hoteliers’ heads as they’ve done in the past,” McCartan said. “Threats are not a great way to have a meaningful relationship, and saying ‘Don’t do XYZ or we’ll punish you’ is no good. OTAs need to treat hotels like partners and suppliers, and hotels need to recognize there is a need for a balanced distribution strategy. The answer lies somewhere in between direct bookings and OTAs, and there needs to be some concessions made on both sides.”

The Annual Hotel Conference is October 11 and 12 at the Hilton Hotel, Deansgate, in Manchester. Follow this link to register for the show. 

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