From blurring distribution channels to rising commissions and defensive pricing, it is a challenging environment but hotels are fighting back, finds a recent white paper

Hotels are on a mission to better understand and manage the competitive distribution landscape. In a recent white paper from EyeforTravel, experts from Highgate Hotels, Wyndham Hotels & Resorts and Spanish-based NH Hotel Group share their insights. Among challenges, says Maite Aguilar, VP of Distribution, NH Hotels, is that in the last year more and more distribution channels are popping up all over the place. While on the one hand that can give hotels more visibility, on the other it is difficult to control how rates are being distributed. Other challenges include:

1.       Blurring distribution channels: The big issue is that previously there were clear and distinct channels to distribute inventory on – OTA, wholesale, metasearch, corporate travel agents et al – but these are now blurring. One example of this is the practice of onward distribution, in particular by Expedia, which operates a merchant model. In other words, hotels supply inventory to Expedia to sell on to the traveller, but this somehow ends up on B2B channels, and even other B2C metasearch channels like Google, HotelFinder, Trivago, Agoda and so on. As an example, an airline could take a room from Expedia and sell it on the airline website. And the result is that hotels that don’t have a handle on rate parity or their partners could see rates devastatingly diluted. 

2.      Wholesaler shenanigans: In the wholesale space, which like the OTA landscape has seen the consolidation of major players – Tourico, GTA and HotelBeds – under one umbrella, firms are doing something similar. Often wholesalers secure heavily discounted hotel net rates. If that rate which is sold on to other channels is then marked up to the hotel’s best available rate, that’s all good but very often this is not the case. Often these rates are published on any channel that will take them and this too disrupts hotels’ direct strategy.

3.      Rising commissions: Still, one of biggest headaches remains rising costs of OTA and other intermediary commissions which, according to Gopakumar Menon, VP – Distribution & Revenue Management, Highgate Hotels, used to be around 10% but that is creeping up to around 20%. In Europe, and especially London, this is particularly onerous. Unlike in the US, where published customer rates exclude taxes, in Europe hotels often pay commission on the other elements – such as breakfast so on - that are increasingly bundled into the final rate.

4.      Covert bidding of branded keywords: Previously pay-per-click was a powerful way to spend marketing dollars but thanks to Google this is no longer the case. Whereas OTAs used to only be able to bid on the destination city, now they can even ring fence the hotel name. So, bidding on branded keywords by the OTAs on Google and Bing has made ecommerce or PPC initiatives far too expensive. What is more, this is a double whammy to the direct drive, because if a customer arrives on a hotel site via an OTA, it also immediately has the choice of hundreds of others if there is no availability. This means that the hotel brand is further diluted.

5.      Defensive pricing: Even when contracts have been renegotiated with OTAs and wholesalers, some intermediaries are still working their own margins to undercut the hotel’s best available rate. So, for example, if a partner is taking a 20% commission from the hotel they might pass on a 5% discount to the end user in order to secure the booking. Partnerships like this are problematic and savvy hotels, like NH, are addressing this challenge by working with technology companies like OTA Insight to understand exactly who the culprits are.

Read the full whitepaper which includes insights from Highgate Hotels, NH Hotels, Wyndham Hotels & Resorts, Rough Guides, Civitatis and CarTrawler