AT 10-15% OF A HOTEL’S BUSINESS, DO OTAS REALLY MATTER?

Having recently come from HITEC the last week of June in Baltimore, and attended the concurrent HSMAI Revenue Optimization Conference and the by-invitation-only HSMAI Chief Revenue Officer Roundtable, my head was spinning with discussions about distribution strategy. Admittedly, there are many new channels emerging and lots more to talk about than the OTAs which almost seems like old news at this point. But, in the course of the dialogue, most participants agreed there is a burgeoning need to understand optimal channel mix and to delve into each channel to understand its contribution to a hotel’s profit and, specifically, the costs associated with using it. So, when asked why we insist on spending so much time on the OTAs, my response is that, as long as there are conditions of rate parity and last room availability (or its cousin, base allocations), the other channels and segments are tethered to the decisions made for OTAs. Groups, meetings, conventions, corporate accounts–you name it–they are affected by the deals made with OTAs whether its a one-time promotional offer, or a rate level that is in widespread use over time.

Used to be that rates were pegged at a “rack rate” and cascaded down from that depending on the market segment and demand for each. Now, the rates are set with the OTA conditions in mind and its tough to go up from that (given how prominent these rates are in the transparent online world) and cascading down is the wrong direction in many cases. Use of each channel should be by design, not by default. Hotel management, representing its owners, should give a lot of thought to the rates and inventory for each channel, starting with the OTA. There will be many new channels, all of which will be highly visible to the consumer. So when someone asks me, “do OTAs really matter?,” I have to reply, they sure do. Make decisions by design and consider each channel with great thought and care.