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OTAs are a heavy burden on hotel profits, says HVS

Hotels have become increasingly reliant on bookings from online travel agents (OTAs) and might soon be forced to work with just two main companies. 

This is according to a new report from hotel consultancy firm HVS which said despite OTAs offering a number of advantages to hoteliers including a wide, multi-national reach and big marketing budgets, the commission rates of anything from 15% up to 30% are a heavy burden on hotel profit margins.

The report cited Priceline and Expedia as “ever-more powerful” companies due to strategic acquisitions of smaller, regional players, leaving hoteliers limited options for negotiating on commissions.

Priceline, which owns Booking.com, OpenTable, Agoda.com, Kayak, Ctrip and Rentalcars.com, controls 62% of the European market, while Expedia holds around 70% of the US market.

The report warned that there is a growing trend for OTAs to launch their own loyalty programmes, which takes them into a head-to-head battle with hotel group loyalty schemes and threatens a unique selling point for the hotel owner.

HVS also said that rate parity agreements – which have recently come under scrutiny – are holding hoteliers back.

Jill Barthel, report author and analyst at HVS, said: “Another limitation imposed by OTAs is their insistence on best price guarantee and rate parity amongst all channels, leaving limited manoeuvrability for hotels to make their offer more attractive.

“However, over the past few weeks there has been some movement towards more lenient regulations as imposed by anti-cartel authorities, mainly in Europe.”

The report concluded that hotels should aim for a healthy balance between OTA bookings and bookings from their own website, making sure they maximise their website bookings by making their site as up-to-date, attractive and easy-to-use as possible.

Sophie Perret, report co-author and HVS director, said: “It might come down to the small details that make guests decide which channel to book through. Search engine optimisation is worth exploring and while not cost-free, is comparatively cheaper than the cost of rooms sold via OTAs.”

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