Exclusive: With increasing reliance on online travel agencies in the marketplace, it is critical for hotels to assess how their relationship with such intermediaries is shaping up especially in these challenging times.

Published: 01 Apr 2009

Exclusive: With increasing reliance on online travel agencies in the marketplace, it is critical for hotels to assess how their relationship with such intermediaries is shaping up especially in these challenging times.

Considering that increasing reach is essential when times are tough, will OTAs demand higher commissions?

From an OTA’s perspective, Agoda.com acknowledges that the online travel agencies have to be sensitve to hotels needs about increasing distribution costs.

“If there’s a reason for a hotel to pay a higher commission and it makes economic sense to the hotel, then higher commissions will be negotiated. In most hotels, even in the worst of times, there are periods of high occupancy. And we’ve all seen how fast things can turn around. Commission is just one factor of yield and its something that a hotel and OTA should discuss and plan for a dynamic environment,” says Rob Rosenstein, COO, Agoda, who is scheduled to speak during the Distribution and Sales Conference, being held as a part of EyeforTravel’s Travel Distribution Summit Asia 2009 in Singapore.

Rosenstein spoke in detail about the role of OTA in today’s environment in an interview with EyeforTravel.com’s Ritesh Gupta. Excerpts:

The role of OTAs in today’s environment: The key factor is that prices and promotions can be created, adapted, in real-time for real customers. Rates are not set seasonally, but rather daily. They are shown only to willing customers who are often booking last minute and are more likely to respond to rate adjustments. They are not published in brochures or connected to fixed allotments that cannot be closed.

This give the hotel the ability to have flexibility to adapt to changing demand, which can happen day by day at a hotel. And most importantly, OTA’s like Agoda provide data to hotels in real-time on what is working, what is not and what customers are saying. Hotels who really focus their efforts on, commit resources to the online channel work can change behaviour, increase revenue immediately – this is the key to the online channel.

On how OTAs are contributing to a hotel's distribution strategy: Creating a fair rate environment for customers is one of the main missions of Agoda.com and it is something that we share with our hotel partners. There is nothing more frustrating for customers when they find confusing and sometimes fake rates online at sites that are not authorised partners of the hotels.

Often customers are enticed to give their credit card data or email address before even being shown the tax and service fees. On some sites, customers are encourage to make a booking on a site where that hotel is not even available and then the site tries to switch the customer into another hotels. Even more often rates that are not meant for online distribution or room-only are being sold online.

One of our main focuses is sharing our rate research with our partners so that hotels can be aware of how their rates are being sold online. We work closely with hotels to ensure that our customers receive the best rate and all of the Agoda partners share this mission. The online experience is about saving time, providing easy-to-access information, and booking at a fair price. This experience, even in an environmnet of rate parity, is never a commodity.

On tailoring promotions according to the type of OTA being used: In all cases, you need to try various approaches across all your OTA partners. A good OTA can advise you on what you think will work. But, only real data will work. Discuss your various promotion ideas or ideas others have suggested with your OTA partner regularly. At Agoda, we make sure we are in regular contact with the revenue managers at the hotel level. We are always willing to consider a special promotion. We are always surprised at the benefits of close coordination at the hotel level.

On compromising on price integrity during an economic downturn: Fortunately, the online channel allows hotels to be very compromising with rate integrity because the rates are online shown for a brief moment to real customers, who tend to book very last minute.

Customers know that online rates can change minute to minute, so hotels can afford to be aggressive and dynamic on the online channel. My advice is to be very aggressive with online rate to see what kind of response you can get and what kind of impact you can get. If your hotel is on the first page of Agoda.com, it might be interesting to see what kind of a response you would get with a substantial price reduction. You can even learn more about optimal selling rates. Since you control it in real-time, it is valuable data and it is in your control.

On transaction fees and media value proposition: As long as a hotel can clearly measure the results of their investment and their time and effort, I think various business models will co-exist between suppliers and OTAs. It will likely greatly vary by the type of supplier, OTA and the market in which they operate. The successful hotels/suppliers will be the ones that committ their best staff to figure it out and give then the resources and power to optimise relationships, particularly at the property level.

Related links: Commission, Rate Parity, Pricing, Commoditisation, Yield

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