Do OTA's Suck?
I recently spoke at the HSMAI Digital Marketing Strategy Conference in NYC, and it seems that my presentation got a lot of people talking, which is great because that was my intention. Since my presentation was very brief (7 minutes to be exact) and some of the conversation (or more accurately stated, social media posts) is from people who were not present I thought I would create my first ever LinkedIn article about this. I have been meaning to create a LinkedIn article for a while now, so here goes...
I often speak at industry events and I find in this age of short attention spans and the allure of nearby devices it is important to capture people’s attention. I always keep this in mind when preparing my presentations, I try to make them a little controversial, very visual and, I hope, with clear and concise points. My presentation this day had 20 slides with pictures (almost no words) and a few pretty good punchlines (if I say so myself).
As I addressed the audience I talked about the about the need to ask big and difficult questions and my second slide then posed the question “Do OTAs Suck?” I very well could have put up a slide that said “Benefits and Drawbacks for Hotels in Working with OTAs”, had I gone this route I am quite certain I would have been looking at an audience whose faces were basked in the glow of their phones, so I opted for something that I knew would get their attention.
Through the remaining presentation I laid out the case (from my perspective).
So what was my conclusion, Do OTAs Suck? Well, my answer was, “it is complicated.” The points I mentioned in the presentation were:
Why OTA’s don’t suck
OTAs do an amazing job helping hotels fill their roomsOTAs have a tremendous reachOTAs have a global footprintOTAs offer small brands (like mine) the ability to compete with big brands (literally side by side)OTAs are really good at selling online, and Hotels often are not
As an example the last point I showed an Expedia rate display which is both simple and elegant, driving people seamlessly down the conversion path. I followed up by showing a picture of a hotel display, which would drive most consumers right to the OTAs, because:
Paradox of Choice – Giving too many choices to the customers. I talked a little about the book of the same name that makes the case that too much choice causes anxiety and reduces chance of decision/conversion. The often cited example of this is the “jam study” where a supermarket set up tastings of jam. On the first day they tested 24 jams and on the second 6 and while the number of tastings was the same, sales increased by eight times when given less choice. The example of this that I showed for hotels was a display having dozens of room types (without any filtering)Paradox of WTF - Created (not yet trademarked) by me, this states that if you confuse the shit out of your customer you are likely to lose the sale. The example of this that I showed for hotels was a display having many different packages and rates that takes an inordinate amount of time to decipher, if it is even decipherable (is that a word?)
I went on to point out, what I think is an extremely important perspective for hoteliers to remember; the OTA relationship with the customer is transactional, but the guests have an intimate relationship with our hotels, they literally sleep with us. This allows us to create a deeper relationship with the guests, and it is our responsibility to give the guest a great experience online and on property and build that relationship with them before and after their stay, through website, social, email loyalty programs and so on. This will not only allow you us to get repeat guests but also direct booking guests.
Why OTAs sometimes suck
They buy our brand terms thus driving up our acquisition cost and “hijacking” potential guests who are looking for our hotelThey market in ways that sometimes have negative impact on hotels, an example of this is their pushing of “Free Cancellation,” which at its best is misrepresentationSome OTA’s violate rate parity, by acquiring inventory through wholesalers and reducing below brand.com sell rate, or show package rates to customers when they made a separate purchase of airThey compete directly against us in various marketing channels, driving up our cost of acquisitionWhile I have no problem paying to play by paying commission it has now become, in some cases; pay, pay, pay to play with OTAs extracting additional cost through things like paying for page rank
Sometimes we have no one to blame but ourselves, as hotels often don’t look at the strategic implications of certain decisions
LRA- hotels started allowing this in the early days of OTAs, and once a critical mass of hotels agreed to this, bolstered by consolidation in the OTA space, it became difficult for Hotels to say no to this provision, this was the first step in hotels giving up control of their own inventoryMember Pricing- Many hotels will offer member pricing on an OTA but not match the price on their own sites or put it behind a difficult “gate” when the OTA “gate” is simple. In my opinion this (in almost all cases) is not wise move for hotelsImagery- Some hotels have fallen into the trap of allowing OTAs (and others) to have imagery of their own products that they do not have access to (thus giving away arguably our last defensible perimeter, our product)Recently booking.com started testing, “risk free reservations”, which in essence gives inventory control to themTech Stack- more recently some OTAs have offerings that would give them control of aspects of the hotels technology.
Of course there are many nuances to all this and a lot more I can say, but this was what I covered in my 7 Minutes (pretty impressive, right?). In the end, my advice to hoteliers was that OTAs can be fantastic distribution partners but they always need to think about the implications of the decisions they make, as once they give up control of certain aspects of their business, they may never get it back because as an industry we tend to follow each other off a cliff (I even had a lemming reference).
As I said, it’s complicated…