Tourism boom gives hotels fuel to fight online booking commissions

By On August 15, 2017

The tourism boom is spurring bigger hotel chains to get savvier about avoiding online travel agent commissions. Senior hotel management consultant with Horwath HTL John Farrell said the growth in visitor numbers and high occupancy rates made it a good time to try and claw back customers through loyalty schemes and discounts.The hospitality sector feared the impact of market dominance when the Commerce Commission okayed Expedia’s purchase of accommodation and travel booking company Wotif in 2015.

Typically online travel agent (OTA) commissions were between 13 and 15 per cent, Farrell said, but they could be as high as 25 per cent for small operators who lacked the financial clout of larger hotel chains.

“For independent hotels it’s a bit like a drug …they need it and can’t get off it.”

Booking site terms and conditions usually prevent commercial accommodation providers from advertising cheaper rates on their own websites.

But Farrell said that as contracts came up for renewal, some big chains resisted that clause and now openly offered discount prices that were lower than OTAs.

Another tactic was to limit the number of rooms available to online travel agents.”People go to the OTA and it shows [a hotel is] full, but if you go direct to the hotel, there’s a room.” Loyalty rewards for repeat customers who booked direct ranged from price discounts to free meals and early bird specials, said Farrell.

However, size mattered and he said chains with 30 or 40 properties had the marketing budgets and digital expertise to up their online  profile through google adwords, and to counter OTAs’ loyalty programmes with their own rewards.

​AccorHotels, which has 32 hotels across New Zealand, has put a lot of effort into making returning clients feel special, according to area vice president Gillian Millar.

She said some hotels were generating more than 30 per cent of revenue from guest loyalty, but it was highly competitive because OTAs had large marketing budgets and did not face costs associated with building and refurbishing hotels.

“We know the OTAs are not going away and we do partner with them, but we want to make sure that our guests come back to us direct for bookings because it’s much more cost effective. Generally larger chains have a better commission deal because of the volume, but the ticket gets clipped quite a lot along the way.”

Bob Pringle runs a 23-room Christchurch motel and a sizeable corporate clientele made it easier to give regulars direct booking discounts. He said a lot of operators in rural areas or holiday spots, where guests did not return, would rely on OTAs for more than half their business. At the Villa del Largo in Queenstown, owner Nik Kiddle spent $3000 setting up an online loyalty programme.

“It’s our only defence against having to advertise the same prices on Expedia and,” and the possibility of a rise in OTA commissions was a constant worry, he said.

“We’re always holding our breaths to see how long it will be held at 15 per cent.”

For Dunedin motel owner Neville Butcher the huge international reach of OTAs is a big plus.

“People say how easy it is to make a booking and we’d struggle to have a booking engine that’s as good as theirs.

“Since we started using OTAs five years ago for our own business we’ve been better off.”

Hospitality New Zealand’s accommodation spokesperson Rachael Shadbolt said OTAs certainly had advantages.

“You only pay the commission when you have that bum in the bed, it’s not like you’re putting an ad on TV or the radio and hoping the guest turns up.”

But it was unwise to rely solely on one promotional channel.

“The dependency on OTAs has grown and grown over the years, but to a certain extent the market has allowed that to happen by giving them more and more inventory.”

This article originally appeared in Stuff online

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