Are the New 'Anti-OTA' Sites Ready to Take the Spotlight?
By Max Starkov
Wednesday, 8th February 2012
On January 11, 2012 six of the top hotel brands in the world launched RoomKey, a 'hotel search engine website that facilitates booking on better terms than most online travel agencies.'

RoomKey.com offers "meta search" for 23,000 properties spread among the six brands. The founding hotel chains include: Choice Hotels, Hilton, Hyatt, IHG, Marriott and Wyndham, which are equal shareholders in the new venture. Later in the week Best Western announced that their 4,000 properties will be joining RoomKey.com. More hotel chains are expected to join in the future.

The "direct connect" technology platform, similar to Jack Rabbit Systems, was acquired from Hotelicopter.com in an asset deal that closed last year.

"The intent all along was to drive down the cost of distribution and provide consumers with a better experience," said John Davis III, RoomKey.com CEO. "Allowing them to book directly and become a direct guest of the hotel is a game-changer."

RoomKey.com is Not the Only New Kid on the Block

In late 2011, several other organizations and entities announced the launch of hotel meta-search and direct booking sites meant to circumvent the OTAs:
  • mybesthotelrate.com – Launched by the Asian American Hotel Owners Association (AAHOA), an organization which has over 10,000 members owning 20,000 hotels. The CRS is powered by Citibreak, a reservation technology vendor focused on destinations. The site's proclaimed objective is to help lessen its member hotels' dependency on the OTAs. The site will charge participating hotels an undisclosed commission for every booking.
  • globalhotelexchange.com – Launched by Magnuson Hotels, "the world's largest independent hotel group" with 2000 member hotels. The site will charge a small pass-through fee to the consumer, in the range of $3, to "underwrite the marketing and technology necessary to market and sell rooms without charging hotels a fee. There's no commission fee charged to the hotel."
What Would It Take For the New "Anti-OTA" Sites to Become Viable Industry Players

Last year over 30% of Internet bookings for the top hotel brands came from OTAs. Overall, 40% of all hotel bookings in North America came from the OTAs. STR estimated that the industry has lost over $2.5 billion in OTA commissions last year alone.

I have been the most outspoken direct online channel advocate for 16 plus years now.  I can only applaud these and any new "direct connect" initiatives by the major hotel brands and other hotel organizations to circumvent the OTA channel and lessen their franchisees' and members' dependence on the OTAs. I am rooting wholeheartedly for their success. And yet, I have serious questions and concerns about the viability of these new "anti-OTA" players.

What would it take for the new "anti-OTA" players like RoomKey.com to become viable industry players? In my view there are three main challenges new travel consumer sites like RoomKey.com have to overcome in order to secure sustainability and become real players in the industry:

1.    Establishing a Unique Value Proposition in the Marketplace

Let's talk about the unique value proposition provided by these new anti-OTA players like RoomKey.com. I can clearly see what the value is from hotelier's perspective: direct connect to the member hotels' own booking engines at a comparatively "palatable" success fee (commission).

For these anti-OTA players to survive, they have to offer a powerful value proposition from a travel consumer perspective. Obviously, due to contractual obligations with the OTAs for rate parity and the best rate guarantees on the major brand websites, the value proposition cannot come in the form of lower or unique rates.

So what it is the value proposition that RoomKey.com or MyBestHotelRate.com can offer to the traveling public that is above and beyond a typical OTA site?
  • Last Room Availability: HotelChatter reported earlier this week that while RoomKey.com and Expedia offered the same rates (rate parity), RoomKey.com showed availability for some hotels which were not available on Expedia. With rising travel demand, this could turn into a serious advantage as long as it is not in breach of existing contracts with the OTAs.
  • Earning Reward Points: Currently merchant reservations via the OTAs do not qualify travel bookers to earn points from the major hotel brands. Since booking through RoomKey.com is booking via the major hotel chain's CRS, travel consumers will be earning reward points, which is another serious advantage.
  • Usability: RoomKey.com counts on its easy-to-use search functionality and a clean & elegant look. In addition, the site plans to have independent customer reviews, and the ability to compare, plan and share with friends and family. Would that be sufficient? Travel planning is a very complex process. Hotel bookers need more than hotel location, availability and rate, and peer reviews. Hotels are an integral part of the destination experience hence any hotel booking site needs to offer rich destination information, local activities, events, mapping, etc. In other words it is questionable whether the "clean and elegant" look of these new players will win travelers over the information-rich OTA sites.
  • Social Media and WOM: Any new travel consumer site needs to appeal to today's hyper-interactive travel consumers. Is RoomKey.com or MyBestHotelRate.com ready for these new breed of travel consumers? Only time will tell.
  • Lots of Luck: Any new industry player in the current economic environment needs a ton of "economic luck" in the form of good timing, a business model that is in tune with the times, quick adoption by consumers, ability to take advantage of social media and word-of-mouth (WOM), etc.
2.    Securing Serious Ongoing Revenues Needed to Establish a New Travel Consumer Brand

It is prohibitively expensive to establish a new travel consumer brand. The last two major travel brands to be successfully established were Orbitz (2003) and Kayak.com (2004). In addition to the initial investments for technology, website design and architecture, hosting and analytics, there is a serious need for ongoing operational and promotional expenses.

I doubt any RoomKey.com founding member is going to promote RoomKey.com on their own since this site features 5 of their biggest competitors.  No AAHOA member hotel will promote MyBestHotelRate.com wholeheartedly, since this site features concrete competitors to the member's own properties.

RoomKey.com and the other "anti-OTA" players need to promote themselves – in other words, they need to generate revenue in the form of commissions or "success fees" in order to pay for the sites' operational expenses, advertising, etc.

How much of a commission would suffice? RoomKey.com earns a commission from the booking, which as described by the company "is at a more supplier-friendly rate than what third party OTAs are offering, as it redirects users to the hotel company's website for a direct booking." Magnuson's Global Hotel Exchange will be offered "at no cost to hotels struggling with economic instability" and will charge travel consumers a small "pass-through fee in the range of $3."

In my view, any commission below 10%-15% would generate too small of a revenue stream for a site that is making baby steps and is trying to divert bookings from well-entrenched OTAs.

3.    Overcoming the Reaction and Legal Challenges by the OTAs

If history is any indicator (remember Orbitz?) as to how the OTAs would react to the launch of RoomKey.com and similar industry sites, I believe the OTAs will ask the Justice Dept to look into these new services because they  "smell of collusion" by and among major industry players.

A Word About MyBestHotelRate.com Initiative by AAHOA

I am fully aware of what AAHOA stands for as an organization and respect AAHOA's objective to help lessen its member hotels' dependency on the OTAs.  In my humble opinion, creating a new AAHOA consumer brand website does not solve the main underlying issue: lack of understanding among AAHOA member hoteliers about how to take full advantage of the direct online channel, what are the best practices, and ROI-centric initiatives. How to make sense of this very convoluted online travel marketplace?  Is Google Hotel Finder good or bad for me? Are flash sales sites like Groupon and Living Social good or bad for my hotel? Why is it detrimental for my hotel to use open-discount last-minute sales sites like HotelTonight.com?  What is the correct use of social media – is it a distribution channel or a customer engagement channel? How to take advantage of Google Places?

This is where AAHOA can play a crucial role by educating its members on direct online channel strategies, vanity website best practices, SEO, SEM, social and mobile marketing, online media and re-targeting, email marketing, etc.

Diverting online travel consumers from the OTAs to a new consumer website MyBestHotelRate.com is not only prohibitively expensive, but it does not help AAHOA members help themselves fight their addiction to the OTA distribution channel.  Instead, AAHOA should spend its organizational funds to develop robust educational and professional development programs for its member hotels, focused on the direct online channel, hotel digital marketing, and industry best practices and notable trends.


The following article is Max Starkov's latest contribution to the "Successful eMarketing" blog on HOTELS magazine's website.

About the Author:

Max Starkov is President & CEO of HeBS Digital (Hospitality eBusiness Strategies), the hospitality industry's leading direct online channel strategy, full-service digital marketing and website design firm.
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