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Posted July 1, 2019

Hotel Lobby

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In the distribution battle between OTAs and hotels, a shift in mindset is starting occur. While hotels continue to encourage direct bookings, many are realizing that a strategic mix of various channels is the better answer to gain customers and maximize their profits.

Who’s Winning The Distribution ‘War’ Anyway?

A recent whitepaper from D-EDGE analyzed bookings for European hoteliers in the period from 2014 to 2018 and found an overall decline in online direct bookings of more than 6%. OTAs have picked up the difference, Booking Group saw the most growth with 4.7% during the same period. 2018 did, however, see a 1% jump in share for bookings direct with hotels.

So why the drop off when hotels are putting more effort into gaining direct bookings. It’s true that some chains are seeing success in increasing direct bookings, such as Hilton with first its “Stop clicking around” campaign, and currently its “Expect Better. Expect Hilton.” campaign. However, if you focus in on the European hotel market, the story is different.

Europe’s Fragmented Hotel Market Poses Challenges For Direct Bookings

The D-EDGE report shows just how entrenched OTAs are in the European market. When it comes to the independent hotel market, OTAs pull in 71% of online distribution, with big players such as Expedia Group and Booking Group taking a large proportion of bookings. Direct bookings rank in second place getting only 21% market share.

Why is this? There are fewer chains in Europe and many more independent hotels, who may not even have online booking facilities, let alone have the resources or revenue to pursue expensive advertising and acquisition campaigns. Though many hotels are making investments in better digital customer experiences, they will likely always rely on OTAs for a large portion of bookings.

The advice for hotel executives from the D-EDGE report is to acknowledge the usefulness of multiple channels, continue to diversify these channels, and then use them strategically to achieve an optimal revenue strategy.

Hotel Leaders Taking A New View Of Distribution Mix

A number of sources in the hotel industry have recently shared their thoughts on the OTA question. OTAs are not the enemy; they’re just not the end-all-and-be-all of hotels’ distribution mix. As the OTA-hotel relationship continues to mature, hotels are now thinking strategically about how OTAs fit into a smart distribution strategy in a growing global market.

Reporting on an executive roundtable, Hotel News Now shared the thoughts of Dan Fernandez, VP of Digital Marketing for Concord Hospitality Enterprises. Fernandez said that OTA bookings were up at Concord’s hotels and that wasn’t a bad thing: “I wouldn’t say that channel mix was taken from direct. It likely came from other segments. We’ve seen both our OTA reliance and direct booking contributions increase at a good rate.”

Other executives at the roundtable talked about using OTAs strategically for new customer acquisition and discussed the conundrum of OTAs being both competitors as well as partners. Bob Gilbert, HSMAI President and CEO, explained how the relationship with OTAs continues to evolve. He said, “The hotel industry is managing the OTA relationship more smartly than five years ago. Now (companies) are laser focused on optimizing channels and are creating positions and doing data science around the convergence of revenue management and digital marketing.”

Additionally, Phocuswire recently quoted Jennifer Kim, Director of Revenue Management for Cycas Hospitality as saying something very similar: “OTAs are not always the bad guys. They have a really important place in our distribution. We just need to be smarter in how we leverage these channels now.”

Does this mean the distribution wars are ending? Maybe. Maybe not. But hotels are certainly looking at all distribution channels more closely and choosing the ones that prove the most effective.


Dan McCollins

Dan McCollins

Dan McCollins brought over 20 years of payments industry experience to WEX when he joined in 2015. Dan enjoys immersing himself in the inner-workings of organizations to help them scale operations and increase security through payment process automation. Dan has a bachelor’s degree from SUNY Potsdam.


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