WARY of escalating commission rates that OTAs command, hoteliers are aggressively building their own direct platforms, with many of them noting phenomenal year-on-year gains in online sales.
Giving the keynote address on Asia’s travel trends, Minor Hotel Group senior vice president, commercial operations, Michael Marshall, pointed out that while hotels paid around 10 per cent of commission to OTAs back in 2009, this figure could be as high as 27 per cent now.
“(OTAs) are a great partner. They give you much wider distribution, but you need to manage them and you need to drive your own website,” he said, adding that his company chalked up an additional US$1.5 million from web bookings last year following a revamp of its website, which now features a new booking engine.
Dusit International COO, David Shackleton, took a similar view. “Based on my experience, larger hotel companies I’ve worked with are (also) desperately trying to move away from OTAs and move business onto their own websites and applications,” he said. “I don’t think OTAs are going to go away…but when you look at 40 per cent commission in five years’ time, nobody wants to pay that kind of price.”
He told TTG Asia e-Daily that Dusit was currently redesigning its website as well as mobile and tablet offerings, the first time after some four years. Less than 10 per cent of the company’s sales now comes directly from the website, a figure he is hoping to push to double digits.
Centara Hotels & Resorts has also recently revamped its website. Its director, online distribution, Phensiri Charoensuk, revealed that the group saw a 25 per cent increase in direct sales in 2012.
While recording good growth from third-party online bookings, she warned hotels about diving into tactical promotions with their OTA partners.
“Be careful because a lot of them are asking for deeper discounts. On top of the 25 per cent commission, if you lower your price by 20, 30 or 40 per cent, you can calculate how much you have in your pocket by the time you put all this together.”
OTAs, however, were unruffled.
HotelTravel.com, chief information officer, Olivier Dombey, believed that there would still be a role for the middleman. “Although you can aim for 100 per cent direct, it is never advisable because in any business, you’ve got to spread your risk. If you have a boutique hotel with a limited number of rooms, it’s possible. But for the vast majority of hotels to have such a strategy, it’s probably costly and damaging.”
As for commissions climbing further, he said: “This is rubbish. A hotel will never ever pay 35 or 40 per cent to OTAs…Commission levels are settling down. Those that are too expensive are starting to reduce their claims. (Across OTAs), we have the same hotels and same rates, so the commission level will have to adjust.”
– Read more in TTG Asia February 22 issue’s Travel Distribution report
