Why hotel company complaints over OTAs are thin and ineffectual

"Billions” is a Showtime series about people who make gargantuan amounts of money and the people who try and throw a wrench in that pursuit. Some of the main characters are roguish, unscrupulous—those whose behavior we are taught to disapprove of. (Deep down, we wouldn’t mind being them, at least for a fleeting moment in our heads and not out loud.)

In the world of “Billions,” there is no hemming and hawing: you choose a path and move down it; you do not stray. There is another lesson to be learned, too: money is war. And to make a billion means to never leave a single dollar on the table.

“Billions” is a fictional series, but based on a factual premise. And I do know this, if Bobby Axelrod, the rakish main character, ran a hotel company, there is no way he’d be letting any middleman take a piece of what is rightfully his. He’d find another way.

When it comes to the peculiar relationship between hotel companies and online travel agencies, no Bobby Axelrod exists on the hotel side of the relationship. If he does exist, he may very well be running Expedia, whose CEO in 2015 made close to $100 million, according to reports. Not a billion, but not too shabby.

Meanwhile, hotel leaders continue to bellyache about OTAs without taking real action. They rail against what they call inequitable commissions that can reach as high as 30 percent per reservation, yet I haven’t seen one of the major global hotel companies pull inventory from the likes of Expedia or Priceline. And still I attend brand conferences and speak to hotel officials who assail OTAs, call them out for creating a duplicitous environment where the consuming public believes they offer the lowest prices. You think Expedia and Priceline don’t know that? Their marketing should be commended for cultivating this—though specious notion—consumer climate.

And what do the hotel companies do in response? What is their cri de coeur? They complain about high commissions on one side, then on the other deliver the OTAs continued inventory and extend their relationship via marketing partnerships. Their only consumer-facing response is to create ads that try and cajole customers to book direct by offering the lowest rate through their rewards programs. Never have I seen a brand ad call out an OTA, like Burger King will McDonald’s, or vice versa. 

In many ways, they are missing the point. While price matters, customers, especially the coveted millennial set, like to comparison shop. You can do this on Expedia; you can’t at Hilton.com. And that’s a weakness OTAs can exploit.

There are other disturbing trends that the hotel industry needs to wake up to. Beyond the notion that the millennial cohort is less brand loyal are hard numbers: 1) According to Phocuswright, hotel websites and apps bested or matched OTAs in total U.S. gross bookings from 2010 to 2015. That has now flipped. In 2016 and projected 2017, OTAs have and will have obtained a higher number of gross bookings through their channels than brand.com, to the tune of $32.4 billion last year; 2) Commissions associated with OTAs amounted to an estimated $4.5 billion for the 12 months ending last June, according to Kalibri Labs.

It’s time to wake up. OTAs exist and profit off the real estate and toil of the hospitality industry. They know it and you know it. And if the collective hotel industry—brands, owners, franchisees—is fine with that, then carry on, concede, but stop moaning about fairness. If not, gird your loins and protect your house. Control your inventory and disallow it from being booked on intermediary sites.  

You can’t have it both ways. Will a Bobby Axelrod stand up?

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Sam Schwartz has spent more than four years with First Hospitality, including most recently as a general manager.

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