A seismic event sends the global economy into meltdown almost overnight. Hotels suffer as reservations, conferences and business trips are cancelled. Hotels struggle to retain occupancy and rates in the face of a worldwide crisis.
Sound familiar?
You may assume that I am referencing the COVID-19 pandemic of 2020 but I could just as easily be describing the financial crisis of 2008, yet the response to the two above crises by the hotel industry could not be more different.
During the 2008 financial crisis, online travel agencies grew their market share exponentially by offering easy comparison shopping, promises of the lowest and best rates and easy online payment and confirmation. Meanwhile, hotels at the time were desperate for new business and readily signed agreements with multiple OTAs to try and increase new business during a time of falling rates and occupancy.
However, between the 2008 financial crisis and the 2020 COVID crisis the relationship between OTAs and hotels became more complicated. Over that 12-year span, OTAs consolidated and became huge multinational conglomerates with multiple brands spread across different markets. By 2018, OTAs accounted for 51 percent of all U.S. hotel and lodging online gross bookings and similar patterns were established worldwide.
At the same time, hotels, while acknowledging the importance of OTAs as a sales and booking channel, were increasingly concerned about erosion of their own direct business and a lack of guest loyalty and relationship building due to third-party influence. In addition, the OTA’s increasingly high commissions as well as their insistence on rate parity led to an increasing belief that more effort would need to be made to rein in these third parties and increase direct business.
Between 2015 and 2019 the hotel industry began a concerted fightback against OTAs through several efforts: legal and regulatory action, advertising and marketing campaigns to promote direct booking as well as using search engine optimization and pay per click advertising. Hotels made large investments in modernizing their websites, making booking and payment easier and paying a lot more attention to the growing influence of social media and influencers to drive business direct. These efforts slowly but surely paid off.
These changes to the hotel industry combined with other market forces led to challenging times for the OTAs between 2017 and 2019, and 2020 brought a perfect storm like no other.
Hotels faced their own disastrous 2020 with revenue and occupancy vanishing overnight and many properties closing temporarily and furloughing staff, but in contrast to the financial crisis of 2008 hotels reacted very differently to this crisis. Instead of relying on OTAs for assistance with finding new clients and bookings hotels turned inward - spending what little sales and marketing budget that remained toward their own website, social media and direct guest engagement. While it is too early and too volatile a period to see how these efforts are affecting long-term consumer behavior some early indicators show that this investment is paying off.
Read the full article on our sister publication Hotel Management