29 Jun Have Hotels and OTAs Reached Equilibrium?
Hotels and OTAs: Equilibrium or the end of an era?
Surveying the booking landscape, it would appear that hotels and Online Travel Agencies (OTAs)—most of which are owned by just two major players (Expedia, Inc., and Priceline Group)—have found a point of equilibrium. Once welcomed by hotels to fill vacant rooms, OTAs’ commission structure turned Shangri-La into paradise lost. Hotels retaliated with booking rate parities, brand-based booking apps, and loyalty programs that steer guests to brand-based websites and discourage OTA use. Despite the salvos, hotels appear to have learned to live with the situation.
From my perspective, however, our current situation is less of a static relationship and more like the anticipation before the next chess move. Marriott’s Starwood acquisition is a good example. I believe there will be a continuation of hotel consolidations and mergers, increasing the volume of rooms a brand or franchise controls, thereby strengthening rewards programs, broadening marketing efforts, and further expanding brand awareness and loyalty into a stronger, direct-booking source. This, in turn, will dilute the use of and gravitation toward OTA sites by consumers.
I believe one reason Marriott acquired Starwood was for leverage. OTAs have already consolidated and, with the travel market valued at $1.3 trillion, guestrooms are the resource that fuels the fire. As more brands consolidate, control over how rooms are made available is key in determining how they are ultimately booked. By making a strategic move, hoteliers might end a lopsided era of dominance.