Bringing back the power to the hotels
The OTAs have gained more power during the past years making it more challenging for the hotels to create the strong and loyal bonds with their guests. In this article, we try to create an overview and provide some inputs on the important questions to ask to bring back the power to the hotels.
During the past years, the hospitality sector has developed tremendously. Some of the largest enablers for this sort of development are technology, easier access to travel due to numerous budget providers, more open country borders and less strict travel regulations.
Such changes have largely impacted the modern, affluent travellers’ patterns and behaviours and left them with a need for and expectation of a more personalised, convenient and fast service.
All of the above has resulted in many travel market gaps and consequently created a very positive business environment and demand for new travel services and complex online travel distribution models. In just two decades, the travel booking landscape has been completely upended.
The development and the power of the OTAs
The main online travel services are the OTAs. The biggest market players are Priceline and Expedia. Priceline earns its revenue with an agent-based model where websites such as booking.com or kayak.com list the inventory and make the cut of each transaction. OTA merchant models such as Expedia buys different inventories – hotel, flight, etc. and re-packages them.
Prior to 1996, travellers had two choices: book direct or speak to a travel agent. But that all changed with the emergence of Expedia and Priceline. These OTAs are formed to give consumers another channel to book a hotel – today they can help travellers book a cruise, rent a car, or find a flight.
For many years, OTAs and hotels have co-existed harmoniously. OTA commissions typically averaged 5%, which sort of levelled overhead cost of hotels while providing hotels the opportunity to sell unsold inventory.
Today, OTA commissions have risen up to 30% which drastically slowed hotel revenue growth and have eaten the hotel bottom lines.
The consequence for hotels: Loss of direct relationship with guests. What to do?
Hotels seem to have lost direct connection with their guests as they often come in as third, fourth in the guest’s travel decision-making and travel arrangement booking process (starting from flight meta search to hotel meta search or OTA platforms).
So, some of the important questions to ask are:
- How can hotels regain the relationship with and their connection to their guests?
- Can a hotel be proactive and be the trigger for a guest to re-book and plan next trip?
- How can hotels anticipate guest needs and be relevant and personal?
Right now we experience a lot of “buzz” and “noise” around questions like these. Thus, we also ask: Can hotels really get down to business and take action? And we continue: Is being reactive really the solution or is there a space for proactivity?
At AeroGuest, we believe that hotels should own hospitality and the relationship with their guests. As per definition, hospitality refers to the relationship between a guest and a host wherein the host receives the guest with goodwill, including the reception and entertainment of guests, visitors or strangers. Digitalisation is the answer to create a new reality for the hotels: A reality where the hotel “owns” the relationship with the guest and succeeds in creating a strong and loyal bond.
If you want to learn more about how we approach the digitalisation of the guest journey, we welcome you to click here