Hospitality is the most dependent on the OTAs, compared to all other travel sectors: airlines, car rental companies and cruise lines.

According to PhocusWright, over 52% of all hotel online reservations this year will come from the OTAs. Compared this to the airlines, which “delegate” less than 15% of online reservations to the OTAs.

The situation with independent hotels is especially dire: their direct vs indirect (OTAs, bedbanks and other intermediaries) online booking ratio is negative — 1:3 to 1:4 and even 1:5 (i.e., only 20% of online bookings are direct). Compare this to major hotel chains’ positive 3:1 to 4:1 ratio.

Why do hotels, and especially independents, have such an over-dependence on the OTAs? Systemic underinvestments in talent, technology, and marketing are the main reasons.

• Systemic underinvestment in technology: Normally, hoteliers spend 2.75% of net room revenue on technology, including payroll for IT personnel, STR). Compare this to 15% to 17% of revenue for Expedia or Booking.

• Systemic underinvestment in marketing: Hotels spend less than 2.5% of net room revenue on marketing, including payroll for the sales and marketing teams. Compare this to 36% of revenue for Booking and 54% for Expedia.

Unlike OTA customers, direct customers are a source of first-party data, which is more valuable than gold today. First-party data is the foundation of repeat business, excellent customer service, and personalized service delivery.

Through CDP, CRM technology, and loyalty programs, the first-party and zero-party data allows hoteliers to “own” the digital customer journey and to increase direct bookings in a geometric progression.

This year, hoteliers will pay the top three OTAs a staggering amount of $50 billion in commissions. Just imagine if 10%, 20%, 30% or even 50% of these commissions are saved by direct bookings via the hotel website and used to increase salaries of the property associates, for professional development, property product and infrastructure improvements, technology innovations and digital marketing.

Some say the OTAs have the marketing muscle that individual hotels often can’t match and can open doors to new markets and customer segments. The issue is that the OTAs are now taking over bigger and bigger percentages of the property’s traditional feeder markets and customer segments, taking advantage of hoteliers’ systemic underinvestments in technology, marketing and talent.

Many hotels do not need new feeder markets the OTAs claim to be able to provide. Hoteliers can achieve desired occupancies from their traditional feeder markets and customer segments.

Using the Pareto Principle, hoteliers must invest adequately in their feeder markets that generate 80% of the property business and do not allow the OTAs to encroach in these markets. The remaining 20% of the markets that generate only occasional bookings? Leave them to the OTAs.

Max Starkov
Hospitality & Online Travel Tech Consultant & Strategist

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