What is OTA in the Hotel Industry?

The hotel 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’re in the right place. In this article, we will provide a comprehensive guide to OTA in the hotel industry, including its definition, benefits, and drawbacks.

So, let’s dive in and learn more about OTA and its impact on the hotel industry.

Section 1: Definition of OTA

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

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

Examples of popular OTAs include Expedia, Booking.com, and Hotels.com. These OTAs have a large customer base and provide easy access to a wide range of hotels around the world. However, it is worth mentioning that using an OTA can have drawbacks such as hidden fees, limited room options, and less flexibility with changes or cancellations.

Section 2: Benefits of OTA for Hotels

Online Travel Agencies (OTAs) have revolutionized the way travelers book their accommodations. In recent years, hotels have also benefited from partnering with OTAs. Here are some of the benefits of OTA for hotels:

• Increased Visibility: Partnering with OTAs allows hotels to increase their online visibility. OTAs invest heavily in their online presence and marketing, which can help hotels gain more exposure and attract more guests.
• Increased Bookings: OTAs can also help hotels increase their bookings. By listing their rooms on multiple OTAs, hotels can reach a wider audience and increase their chances of getting booked.
• Diversification of Distribution Channels: Partnering with OTAs allows hotels to diversify their distribution channels. Instead of relying solely on direct bookings or traditional travel agents, hotels can leverage the reach and popularity of OTAs to attract more guests.
• Access to a Global Market: OTAs have a global reach, which can help hotels attract international guests. By partnering with OTAs, hotels can tap into a wider market and expand their customer base.

According to a survey conducted by Statista, in 2019, the global online travel booking market was valued at approximately 755 billion U.S. dollars. This market is expected to reach almost 817 billion U.S. dollars by 2020. This indicates that partnering with OTAs can help hotels tap into a large and growing market.

However, it is worth mentioning that partnering with OTAs comes with some drawbacks. Hotels may have to pay commission fees to OTAs for each booking, which can eat into their profits. Additionally, hotels may have less control over their online presence and branding when partnering with OTAs.

Despite these drawbacks, partnering with OTAs can be a valuable strategy for hotels looking to increase their bookings and reach a wider audience.

Section 3: Drawbacks of OTA for Hotels

While OTAs provide a convenient way for hotels to reach a wider audience and increase bookings, there are also some drawbacks that come with using these platforms.

High Commission Fees

One of the biggest drawbacks of using OTAs is the high commission fees they charge hotels for each booking made through their platform. These fees can range from 15% to 30% of the booking value, cutting into the hotel’s profit margins. For small hotels with limited resources, this can be a significant expense.

Lack of Control over Pricing and Availability

Hotels that use OTAs have less control over their pricing and availability, as these are often dictated by the OTA. This can lead to price disparities between OTAs and the hotel’s own website, which can confuse customers and damage the hotel’s brand image. It can also lead to overbooking or underbooking, which can result in unhappy guests and lost revenue.

Increased Competition

By using OTAs, hotels are also exposed to increased competition from other properties in their area. OTAs often display multiple hotels in a given search, making it easier for customers to compare prices and amenities. This can lead to price wars between hotels, reducing profit margins and making it harder for hotels to differentiate themselves from their competitors.

Dependency on OTAs

Finally, hotels that rely too heavily on OTAs for bookings can become overly dependent on these platforms. This can be risky, as changes to OTA policies or algorithms can have a significant impact on the hotel’s business. If an OTA decides to raise its commission fees or prioritize other hotels over yours, it can lead to a sudden drop in bookings and revenue.

It is worth mentioning that hotels should not completely abandon OTAs, as they can still provide valuable exposure and bookings. However, it is important to keep in mind these drawbacks and find ways to mitigate their impact on the hotel’s business. One way to do this is by investing in direct booking strategies, such as loyalty programs or special offers on the hotel’s own website. By doing so, hotels can reduce their dependence on OTAs and take control of their own bookings and revenue.

Section 4: OTA vs Direct Bookings

Online Travel Agencies (OTA) have revolutionized the way travelers search and book hotels. However, hoteliers have mixed feelings about OTA bookings as they offer advantages and disadvantages. On the other hand, direct bookings have their own set of pros and cons. Here are some of the advantages and disadvantages of OTA and direct bookings:

Pros and Cons of OTA Bookings

Pros:

• OTA bookings can increase a hotel’s visibility and reach to a wider audience.
• OTA bookings can provide a steady stream of bookings during off-seasons.
• OTA bookings can offer valuable guest data and insights to improve marketing strategies.

Cons:

• OTA bookings can result in high commission fees, which can cut into a hotel’s profit margins.
• OTA bookings can lead to price undercutting and a decrease in direct bookings.
• OTA bookings can result in a lack of control over the guest experience and brand image.

Pros and Cons of Direct Bookings

Pros:

• Direct bookings can result in higher profit margins as there are no commission fees to pay.
• Direct bookings can provide a better chance to upsell and cross-sell additional services and packages.
• Direct bookings can help hotels build a loyal customer base and provide a personalized guest experience.

Cons:

• Direct bookings can be more challenging to obtain due to the competition from OTAs.
• Direct bookings can require significant investments in marketing and advertising.
• Direct bookings can result in a lack of guest data and insights compared to OTA bookings.

Strategies for Balancing OTA and Direct Bookings

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

Keep in mind that finding the right balance between OTA and direct bookings is a continuous process that requires analysis and adaptation over time. Unfortunately, there is no one-size-fits-all solution.

Section 5: How to Maximize the Benefits of OTA for Hotels

OTA, or Online Travel Agency, is a popular platform for travelers to book their accommodation. For hotels, partnering with OTA can bring numerous benefits, such as increased exposure and revenue. However, to reap the maximum benefits, hotels need to optimize their OTA profile and strategies. Here are some tips on how to do it:

• Optimize Your Hotel’s OTA Profile: Make sure to provide accurate and detailed information about your hotel, such as amenities, room types, and photos. This will help potential guests to make an informed decision and increase the chances of them booking your hotel. Additionally, regularly update your OTA profile to reflect any changes or upgrades to your hotel.
• Offer Competitive Pricing: Price is a significant factor for many travelers when choosing their accommodation. Therefore, it is crucial to offer competitive pricing on OTA platforms. Keep in mind that OTA charges a commission fee for each booking, so factor that into your pricing strategy.
• Provide Quality Customer Service: A positive guest experience is essential for building loyalty and getting good reviews. Make sure to provide quality customer service to guests who book through OTA platforms. Respond promptly to guest inquiries and complaints, and go the extra mile to make their stay comfortable.
• Use OTA Data to Improve Your Hotel’s Operations: OTA platforms provide valuable data insights 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 inventory. Additionally, hotels can identify areas of improvement based on guest reviews and feedback.

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

Conclusion

In conclusion, OTA has revolutionized the hotel industry by providing hotels with an additional distribution channel for their rooms. While there are benefits to using OTA, hotels should also be aware of the drawbacks and work to find a balance between OTA and direct bookings. By optimizing their OTA profile, offering competitive pricing, and providing quality customer service, hotels can maximize the benefits of OTA and improve their operations. We hope this article has provided a comprehensive guide to OTA in the hotel industry.