A complicated relationship

What happens when OTAs turn into jealous lovers, seeking to control whom hotels work with and the rates that surface online?

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OTAs have grown to become a significant distribution channel for many Asian hotels, but it’s a precarious relationship that can require a lot of tiptoeing around.

An allegation circulating is that some OTAs use their market dominance to prohibit hotels from working with competitors.

A Bangkok-based distribution director, who requested for anonymity, said: “Among the OTAs, it’s pretty much Agoda who’s more upset about hotels working with alternative booking channels whereas the others are not too concerned.

“The main challenge with Agoda is also maintaining rate parity. This has been going on for many years; it’s not unusual for Agoda to call, email or Skype us to seek an explanation. We try to solve rate parity on a regular basis.”

Rate parity agreements, which require hotels to guarantee that room rates on their own websites are not below that offered by OTAs, remain a divisive issue.

Chetan Patel, vice president, strategic marketing & e-commerce, Onyx Hospitality Group, said: “At times it is quite difficult to manage (OTAs’) expectations on rate parity as some wholesale rates inevitably end up on online channels where they are not supposed to. OTA partners therefore expect us to resolve such issues immediately, but identifying the intermediaries is not always that easy.”

The same director who did not want to be named explained: “Sometimes due to factors out of our control like time differences or currency fluctuations, there will be a bit of rate difference, say, five to 10 baht, between our own website and OTAs.”

On the other hand, hotels have unwittingly ended up in OTAs’ all-inclusive promotions, which, as the result of bundling various travel components, could make rooms appear cheaper than was supplied, ruffling the feathers of other intermediaries, added the director.

“(If OTAs) purchase the rooms at wholesale price and then make a mark-up, the prices will be lower than our website – this has happened before and we stopped working with such partners,” said Kiatiphong Phatarakulbaramee, director of sales at Rembrandt Hotel & Towers Bangkok, which also does not offer inventory on bed banks.

“We try to be friends with everyone. We will marry people who want to be married with us – it must be a win-win relationship for everyone,” he remarked, while at the same time reminding all hotels to be “careful” of OTAs. “You have to keep monitoring what’s being posted on these sites, whether they are promoting your hotels according to agreements, for instance.”

When asked to comment, an Agoda.com spokesperson insisted there is no problem with the relationship between OTAs and hotels. He stated: “We work very hard to make sure the rate (customers) pay is the best rate we can get from the hotel. Our hotel partners understand this and value the material production they get.

OTAs clearly use hoteliers’ lack of understanding and usage of digital media to their advantage…However, if you have the leverage of scale, brand and your own marketing prowess, it is easier to deal with them.
Chetan Patel
Vice president, strategic marketing & e-commerce, Onyx Hospitality Group

“They also work very hard, and they support us with great deals and access to hard-to-find rooms, which helps us keep our large customer base happy. We are extremely thankful for the unique support we get from hotels in our region.”

The broad sentiment is that the onus is on hotels to manage their relationships with OTAs or take active steps to prevent any bullying.

Enrico Wibawa, director of e-commerce, Compass Hospitality, said: “Getting online or being listed online is becoming more expensive. If a hotel has enough budget, it is less likely to be less dependent on OTAs; but for smaller properties, OTAs offers a conducive partnership for global marketing.”

Onyx’s Patel opined that hotels are largely to blame for their dependency on OTAs. “OTAs clearly used hoteliers’ lack of understanding and usage of digital media to their advantage. Hotels tend to see OTAs as a channel that does not charge fees upfront and therefore ignore the distribution costs that add up in the long run,” he said.

“Furthermore, many hotels do not focus on building their presence online, often disregarding digital marketing completely as a complicated and expensive endeavour. In our experience, the cost of digital marketing is far lower than the distribution costs paid out to third parties. If hotels do not want to pay for these then dependency on OTAs is the result.”

Recognising this, Rembrandt Hotel & Towers Bangkok recently changed its hotel booking engine to SiteMinder to allow for more efficient rate updates across distribution channels, shared Kiatiphong.

Said Patel: “We acknowledge the role (of OTAs) and therefore spread our business among several channels while maintaining good relationships. That is not to say that we do not have our challenges with them. However, if you have the leverage of scale, brand and your own marketing prowess, it is easier to deal with them.”

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