What is OTA in the hotel industry? - Hotel Chantelle (2023)

The hospitality industry has undergone significant changes in recent years with the advent of technology and the internet. One of the most significant changes is the emergence of online travel agencies (OTAs).

If you're wondering what OTA is and how it works, you've come to the right place. In this article, we provide a comprehensive guide to OTA in hospitality, including its definition, pros and cons.

So let's dive in and learn more about OTA and its impact on the hospitality industry.

Section 1: Definition of OTA

OTA stands for Online Travel Agency and is a third-party platform that allows customers to book online travel services. This includes flights, car rentals and hotel bookings. In the hotel industry, OTAs are used to increase hotel visibility and booking.

OTAs work by listing hotels on their websites and promoting them to potential guests. When a customer makes a booking through OTA, the hotel pays the OTA a commission for the booking. This commission can range from 10% to 30% of the booking cost.

Examples of popular OTAs are Expedia, Booking.com, and Hotels.com. These OTAs have a large customer base and offer easy access to a variety of hotels around the world. However, it's worth noting that using OTA can come with downsides like hidden fees, limited room options, and less flexibility when making changes or cancellations.

Section 2: OTA Benefits for Hotels

Online travel agencies (OTAs) have revolutionized the way travelers book accommodation. In recent years, hotels have also benefited from working with OTAs. Here are some OTA benefits for hotels:

• Increased visibility:By working with OTA, hotels can increase their visibility on the internet. OTAs invest heavily in their online presence and marketing, which can help hotels gain more visibility and attract more guests.
• Increased bookings:OTAs can also help hotels increase their bookings. By making their rooms available on multiple OTAs, hotels can reach a wider audience and increase their booking chances.
• Diversification of sales channels:By working with OTA, hotels can diversify their distribution channels. Rather than relying solely on direct bookings or traditional travel agencies, hotels can leverage the reach and popularity of OTAs to attract more guests.
• Access to the world market:OTAs have a global reach, which can help hotels attract international guests. By partnering with OTAs, hotels can reach a larger market and expand their customer base.

According to a Statista study, the global online travel booking market was valued at around US$755 billion in 2019. By 2020, the value of this market is expected to reach nearly $817 billion. This means that working with OTAs can help hotels tap into a large and growing market.

However, it is worth noting that working with OTA comes with some downsides. Hotels may have to pay commissions to OTAs for each booking, which could eat into their profits. Additionally, hotels may have less control over their online presence and brand when partnering with OTAs.

Despite these drawbacks, working with an OTA can be a valuable strategy for hotels looking to increase bookings and reach a wider audience.

Section 3: Disadvantages of OTAs for hotels

While OTAs offer hotels a convenient way to reach a wider audience and increase bookings, there are also some downsides to using these platforms.

High commissions

One of the biggest downsides to using OTAs is the high commissions hotels charge for every booking made through their platform. These fees can range from 15% to 30% of the booking value and reduce the hotel's margin. For small hotels with limited resources, this can be a significant expense.

No control over prices and availability

Hotels using OTA have less control over their rates and availability as these are often dictated by the OTA. This can lead to price differences between the OTA and the hotel website, which can confuse customers and damage the hotel's brand image. This can also lead to over- or under-booking, which can result in dissatisfied guests and lost revenue.

Increased competition

OTA also exposes hotels to increased competition from other hotels in their area. OTAs often display multiple hotels within a given search, making it easier for customers to compare prices and amenities. This can lead to price wars between hotels that reduce profit margins and make it harder for hotels to differentiate themselves from their competitors.

OTA addiction

Finally, hotels that over-rely on OTAs for bookings could become over-reliant on these platforms. This can be risky as changes to OTA policies or algorithms can have a significant impact on hotel operations. When an OTA decides to increase its commissions or prioritize other hotels over your own, it can cause a sudden drop in bookings and revenue.

It's worth noting that hotels shouldn't abandon OTA entirely, as they can still provide valuable exposure and bookings. However, you should be aware of these downsides and find ways to mitigate their impact on hotel operations. One way to achieve this is to invest in direct booking strategies such as loyalty programs or special offers on the hotel website. This allows hotels to reduce their reliance on OTAs and take control of their own bookings and revenue.

Section 4: OTA vs Direct Bookings

Online travel agencies (OTAs) have revolutionized the way travelers search and book hotels. However, hoteliers have mixed feelings about OTA bookings as there are pros and cons to it. Direct bookings, on the other hand, have their own pros and cons. Here are some pros and cons of OTA and direct bookings:

Pros and cons of OTA bookings

Advantages:

• OTA bookings can increase your hotel's visibility and reach a wider audience.
• OTA bookings can ensure a steady flow of bookings in the off-season.
• OTA bookings can provide guests with valuable data and insights that help them improve their marketing strategies.

Disadvantages:

• OTA bookings can incur high commission fees, which can eat into the hotel's margin.
• OTA bookings can lead to undercutting and a drop in direct bookings.
• OTA bookings can lead to a lack of control over guest experience and brand image.

Pros and cons of direct bookings

Advantages:

• Direct bookings can result in a higher profit margin as there are no commissions to pay.
• Direct bookings can offer a greater chance of upselling and cross-selling additional services and packages.
• Direct bookings can help hotels build a loyal customer base and provide guests with a personalized experience.

Disadvantages:

• Due to competition from OTAs, it can be harder to get direct bookings.
• Direct bookings can require significant marketing and advertising investments.
• Direct bookings can experience a lack of guest data and insights compared to OTA bookings.

Strategies for balancing OTA bookings and direct bookings

It's worth noting that relying solely on OTAs or direct bookings can be detrimental to a hotel's success. To balance OTA and direct bookings, hoteliers can implement the following strategies:

Please note that finding the right balance between OTA bookings and direct bookings is an ongoing process that requires analysis and adjustment over time. Unfortunately, there is no universal solution.

Section 5: How to Maximize OTA Benefits for Hotels

OTA (Internet Travel Agency) is a popular platform that allows travelers to book accommodation. For hotels, working with OTA can bring numerous benefits, such as increased exposure and revenue. However, to get the most value, hotels need to optimize their OTA profile and strategies. Here are some tips on how to do this:

• Optimize your hotel's OTA profile:Be sure to provide accurate and detailed hotel information such as amenities, room types, and photos. This helps potential guests make an informed decision and increases the chances of booking at your hotel. Also, regularly update your OTA profile to reflect any changes or improvements to your hotel.
• Offer competitive prices:Price is an important factor for many travelers when choosing accommodation. This is why it is so important to offer competitive prices on OTA platforms. Remember that OTA charges a commission for every booking. So take this into account in your pricing strategy.
• Provide quality customer service:Positive guest experiences are critical to building loyalty and getting good reviews. Ensure high quality of service for guests booking through OTA platforms. Respond promptly to guest inquiries and complaints, and do your best to ensure a comfortable stay.
• Leverage OTA data to improve your hotel operations:OTA platforms provide valuable information that can help hotels improve their operations. For example, hotels can use data on booking patterns and guest preferences to optimize their pricing strategy and room amenities. In addition, hotels can use guest ratings and feedback to identify opportunities for improvement.

By implementing these strategies, hotels can maximize the benefits of OTA and attract more guests to book accommodation through the platform. Keep in mind that OTA is just one of the many distribution channels available. Therefore, a balanced distribution strategy that includes direct bookings and other channels is important.

Application

In summary, OTA has revolutionized the hospitality industry by providing hotels with an additional distribution channel for their rooms. While there are advantages to using OTA, hotels should also be aware of the disadvantages and work to find a balance between OTA and direct bookings. By optimizing their OTA profile, offering competitive prices and delivering a quality customer experience, hotels can maximize the benefits of OTA and streamline their operations. We hope this article provides a comprehensive guide to OTA in the hospitality industry.