The Impact of online travel agencies on the hotel Industry: a double edged sword

In recent years, the rise of online travel agencies (OTAs) has transformed the way people book their hotel accommodations. They have been undeniably helpful for travellers, but in many ways, they have also become roses whose thorns have grown too long. While OTAs have helped drive bookings and increase exposure for hotels, they have also taken a significant cut of hotel revenue, which in turn has hindered revenue growth. In a world where hotels are still rebounding from the effects of the pandemic, the hefty commissions that OTAs charge can severely stunt growth opportunities and potentially scupper the gains the sector looks set to achieve.

Positive impact: driving bookings and increasing exposure

One of the benefits of OTAs is their ability to connect hotels with a vast pool of potential clients. This increased exposure has allowed hotels to reach a broader audience, attracting more bookings and revenue.

Furthermore, OTAs often provide valuable features such as customer reviews and ratings, which can enhance a hotel's reputation and credibility.

Negative impact: commission fees and limited pricing control

Unfortunately, the positive aspects of OTAs come at a price. Typically, these platforms charge hotels a commission ranging from 10% to 30% of the booking price. For smaller hotels, this commission can be a significant burden, eating into their already limited revenue streams. This in turn makes it difficult for them to invest in infrastructure improvements or other areas that could enhance the guest experience.

Adding to that is the fact that OTAs often dictate the pricing of hotel rooms on their platforms, leaving hotels with limited control over their own pricing strategies. This lack of autonomy cuts even further into profit margins for hotels.

Improved efficiency

Moving away from OTAs boosts efficiency. It does this by helping build better relationships with guests, and equipping hoteliers with data to improve and enhance their service offerings. Through direct bookings for example, hotels are able to offer guests bespoke packages, promote unique experiences and include extras and add ons. This would not be possible through OTAs. By implementing hotel management software like marketing automation, channel managers, website design, digital marketing services and a 360 degree booking engine, hoteliers can streamline their operations, automate tasks, and upsell relevant extras. With platforms like Profitroom for example, the connections between the website, booking engine and other tools are seamless which means hotel teams do not have to waste time uploading data to multiple different platforms. They can prepare the information in the suite and it will update frictionlessly, thus saving time and money. This allows staff to focus on delivering guest experiences. Furthermore, leveraging customer relationship management (CRM) systems helps hotels gather guest data, preferences, and feedback, enabling personalised and tailored interactions. With access to comprehensive data, hotels can analyse trends, identify areas for improvement, and make informed decisions to enhance their service offerings and exceed guest expectations.

Driving direct bookings to bolster bottom lines

Tech-forward booking platforms can offer hoteliers more control and the opportunity to increase their revenue. Their booking engines are designed to attract visitors and then convert more of them into paying guests by providing a user-friendly and seamless booking experience directly on the hotel's website. As opposed to OTAs, they allow hotels to retain a greater portion of their revenue, they empower hotels to capitalise on the current market boom by eliminating hidden fees and providing transparent pricing structures.

Booking directly allows much greater flexibility when it comes to availability. The majority of OTAs operate on a take-it-or-leave-it basis when it comes to date/room option availability. Using a premium booking platform means hotels can immediately offer lookers an alternative if the option they are looking for is not available. 

Platforms like Profitroom, enable hotels to set their own prices and tailor promotional offers according to their unique business needs. This level of flexibility allows hotels to optimise revenue strategies and adapt to market conditions more effectively. By embracing booking engines, hotels can reduce their dependence on OTAs and regain control over their pricing and profitability.

For hotels who embrace these booking engines, the results have more often than not seen the properties enjoy  double digit growth or more in their direct bookings. This in turn has allowed them to reinvest those profits into guest experiences and continue creating memories for their guests.

By moving away from OTAs hoteliers can take full advantage of direct bookings, improved efficiency, and enhanced guest relationships. This happens because properties are able to build loyalty and customer relationships through tailored pre and post-stay offers, seamless booking experiences, and flexible availability calendars. These tools will be crucial for hotels to thrive in the competitive market. Fortunately, having award-winning and experienced booking platforms will put hoteliers in the best possible position to prioritise growth. As we have seen time and time again, this can have tangible benefits for the broader economy.